16 ms·
Mozilla could walk away from Yahoo deal and get more than $1B
- chollida1 10y agoWow, I'm really surprised that I've never heard of this before, not because I'm some sort of all knowing cyborg, but because its not like Yahoo acquisition talk just started last week. This is a company that's essentially had multiple parts of it for sale for the better part of 4 years and this hasn't once come out. I'm running through all the Yahoo corporate filings that Bloomberg has indexed and I can't find any link to this clause. I mean this is a very material issue! If you are to be a share holder in a company that's trying to broker a 3-4 Billion sale of some of its assets, then knowing that the buyer may be on the hook for an additional 1 billion bill probably means that the asset you thought you owned is probably worth 20-25% less than you originally thought. Someone isn't going to be very happy with the yahoo leadership today:)
- whatok 10y agoYeah, I'm not seeing it either. I see this: > Affiliate Commitments. The Company is obligated to make payments, which represent TAC, to its Affiliates. As of December 31, 2014, these commitments totaled $2,087 million, of which $505 million will be payable in 2015, $401 million will be payable in 2016, $400 million will be payable in 2017, $375 million will be payable in 2018, and $375 million will be payable in 2019, and $31 million will be payable thereafter. as a $375mm reference but that's to all TAC; not just Mozilla. Not in research so def could have missed it.
- bostonpete 10y ago> Wow, I'm really surprised that I've never heard of this before Kara Swisher doesn't seem to provide any indication of where the information she's reporting came from. Furthermore, the link she provides at the end (as a well-done "warts-and-all" account of the deal) claims that Mozilla stands to lose money if a deal goes through... https://techpinions.com/is-firefox-search-worth-375myear-to-a-yahoo-buyer/45144 https://techpinions.com/is-firefox-search-worth-375myear-to-...
- rockdoe 10y agoKara Swisher doesn't seem to provide any indication of where the information she's reporting came from She claims to have seen the contract in the first line of the article.
- yuhong 10y agoI noticed that the submitter is dblohm7.
- hyperpape 10y agoAs I read it, that analysis (about Mozilla losing money from a Yahoo sale) doesn't factor in the $1 billion payment Mozilla would be owed if they walk away, and is based on the assumption that Mozilla won't be able to make another search deal to replace its revenue with Yahoo. It's probably true that they can't replace 100% of it, but if they partially replace it, and then make up for the shortfall with that billion, that probably takes care of them for many years.
- jacquesm 10y agoAnother possible scenario: Mozilla pockets $1B, several months later Yahoo goes bust and then they're free to do whatever they want because Yahoo can't perform any more.
- rockdoe 10y agoThe question is, if there's no healthy competition in the search space, isn't Mozilla (and the web) ultimately still f----ed?
- 2drew3 10y ago>...deal point has been a new and unwelcome surprise to potential buyers of the company, many said. The remaining bidders only recently got details of search deals that Yahoo has struck. Given $YHOO price hasn't moved materially this week, it seems likely that the market (including potential buyers) was aware of the Mozilla deal and priced it in.
- fauigerzigerk 10y agoIf this information wasn't public but insiders were able to price it in, then it's time for an SEC investigation.
- mathattack 10y agoPerhaps the question is "Can they really walk away and get a much better deal today?" But yes, this does look like yet another miscalculation and failure of vision.
- AdmiralAsshat 10y agoAssuming they walk away from Yahoo, though, whom would they select as their next US search partner? Return to Google?
- Aelinsaar 10y agoWith a billion in their pockets, it might not matter so much to them after all.
- rockdoe 10y agoThey could try new revenue streams such as entering the phone market with a fully open OS based on Gecko.
- tonyhb 10y agoThey already tried the phone market with FirefoxOS — it got canned shortly after its release, sadly (https://techcrunch.com/2015/12/08/mozilla-will-stop-developing-and-selling-firefox-os-smartphones/ https://techcrunch.com/2015/12/08/mozilla-will-stop-developi...)
- rockdoe 10y agoWhoosh!
- Aelinsaar 10y agoOk... I admit that made me chuckle out loud.
- Asparagirl 10y agoThey probably couldn't make a better offer than Google in monetary terms, but DuckDuckGo seems much more philosophically aligned with Mozilla.
- spullara 10y ago
- microDude 10y agoIt is very easy for the user to change the default Search Engine for the browser (to say Google or DuckDuckGo). I would think most FireFox users do this... So, $375M/year seems like a very high price for Yahoo to be paying. Is this just a price war between the few search giants trying to keep competitors priced out of the market?
- a_small_island 10y ago>I would think most FireFox users do this My inclination is that outside of the hackernews community and those like it, most FireFox users have no idea what you're even describing.
- fireworks10 10y agoExactly. I've seen people young and old have Yahoo as their default search on their PC or phone, and they usually don't even realize it's not "Google" results.
- bduerst 10y agoMy in-laws were still using browser toolbars. They thought that toolbars were how you used the web and only used websites that had them. The idea of changing the search defaults is beyond a large segment of internet users.
- jedberg 10y agoI think the assumption is that you have to be at least technically literate enough to know that you want Firefox and purposefully download it. And if you're that kind of person, you probably also know the difference between Yahoo and Google and probably actually care.
- Manishearth 10y agoFirefox is the "default" browser folks install in many countries.
- strictnein 10y agoHonest question: what in the world does Mozilla do currently with $375 million a year?
- ihnorton 10y agoAs of 2014: $212 million on software development (presumably mostly salaries?), another ~$100 million on marketing/administration/etc. They appear to put away from $10 to $70 million per year from 2010-2014, and had about $140 million in investment assets (again, 2014). https://www.mozilla.org/en-US/foundation/documents/ https://www.mozilla.org/en-US/foundation/documents/
- jordigh 10y agoBut that's the foundation, not to be confused with Mozilla Corp. I've honestly never really understood how the two are actually related and how Mozilla can be both a nonprofit and a corporation. Talking to some Mozilla employees in IRC and in person, they never seem to think too hard about this either.
- Sylos 10y agoYeah, I don't quite understand that either. What I know is that the for-profit is a subsidiary of the non-profit, and they only have it, because non-profits have some legal restrictions which they couldn't quite work with. I think, that's for example how much cash they are allowed to have on the side. And while I would like to understand it better for curiosity's sake, I'm personally okay with it being the way it is, on the basis that people who understand this stuff better than me don't seem to complain about it. Like, seriously, journalists just love to report how evil the innocent-thought Mozilla is, and often even drift off into pure nonsense to do so. So, if there really was anything to be said about their for-profit side, I figure, I would have heard of it by now.
- yeukhon 10y agoCorp was established to accept business contracts and pay taxes under business tax laws, rather than non-profit tax laws (the famous anecdote of IRS at one point in the early days tried to convince Mozilla don't worry about paying as non-profit). But as Mozilla continued to grow, they hired more people and formed a whole corporation where people are paid to work on Mozilla's core projects like FireFox and keeping Mozilla secured. The confusion often occurs at figuring out the outreach programs. Foundation does some outreach, but Mozilla Corps as a whole also do outreach program. For example, I think people who manage ambassadors are Mozilla Corp employees, but correct me if I am wrong. Furthermore, there are developers hired specifically to work on Foundation applications last. My info could be wrong by now...
- sesutton 10y agoWith a deal like that what incentive does Mozilla have to not walk away if someone buys Yahoo? They'll get $1.1 billion dollars for free.
- Sanddancer 10y agoIt means having to court a new search engine provider for a revenue stream after those three years are up. Such a deal may not be as favorable for them as an agreement to stick around partnered with yahoo.
- cdnsteve 10y agoAfter leaving Google though, what else is there for Mozilla (after Yahoo)? I seems apparent that these search deals are no longer a viable source of income for the company, future funding might become problematic. I love Mozilla, they have smart folks there so I'm sure they will work it out.
- rockdoe 10y agoBing? But yeah lack of competition in that space is an issue. Search is still hugely important.
- pachydermic 10y agoDuckduckgo? Don't know how much cash they have to throw around, though. Certainly not as much as Yahoo or Google, but maybe it'd be enough? I hope so, anyways.
- Macha 10y agoI don't know anything about the inner workings of DDG, but I'd have to assume $1m/yr would be a very large outgoing for them, never mind the $300m/yr of Google or $375m/yr of Yahoo.
- icebraining 10y agoI don't think it's anywhere near; DDG probably makes somewhere in the single digits millions per year, while Mozilla earns hundreds of millions from these deals. As a comparison, DDG is serving about 10M searches/day. Google serves that amount every 5 seconds.
- xiaoma 10y ago>"There is a lot of hair hidden at the company..." Is this a normal phrase in the enterprise world? I don't think I've ever heard it before.
- MOARDONGZPLZ 10y agoI haven't heard it in this context, but in the No Hair Theorem, the eponymous "hair" refers to "other information," so I think it makes sense. There's lots of hidden "hair," or information, at the company? https://en.wikipedia.org/wiki/No-hair_theorem https://en.wikipedia.org/wiki/No-hair_theorem
- nilved 10y agoIt's not a reference to that theorem; it refers to "hairy," used to describe something complicated or ugly.
- djrogers 10y agoIt's a common term in the context of complex deals and sales - "that deal has a lot of hair on it" means it's complicated, ugly, and might not work out the way everyone hopes. It's shorthand for a deal that needs extra attention...
- jonknee 10y agoMarissa Mayer sure makes some interesting contracts. Remember that she was the one who recruited Henrique De Castro from Google and personally got his contract approved by the board (though curiously withholding his name and exact compensation details). He worked at Yahoo for 15 months and earned a $58m severance. That is in addition to the ~$50m he made while working there. Again, in 15 months. http://www.bloomberg.com/news/articles/2016-02-02/yahoo-holders-win-bid-for-data-on-ex-operating-chief-s-ouster http://www.bloomberg.com/news/articles/2016-02-02/yahoo-hold...
- aphextron 10y agoTo be fair this is generally the last acts of any dying company. Try to buy/hire your way out of irrelevance only to burn up the last bits of liquidity your investors could hope to get back.
- BinaryIdiot 10y agoMaybe? At least anecdotely I almost always see spending cuts over and over until the workforce is dwindling with no promises of job security. This seems bizarre to me but I don't have data to say how common it is. Maybe it's different with a more media focused company?
- cscurmudgeon 10y agoWhat would you call Google's billion dollar payout to Apple to be the default search engine? Or Google's other traffic buying programs. Last acts of a dying company? Google is light years ahead of Yahoo in PR.
- SeanBoocock 10y agoI would call it roughly 5% of Alphabet's Q1 2016 revenue.
- cscurmudgeon 10y agoSo yay monopoly and cartels?
- shmerl 10y agoI hope Yahoo won't abandon search. We need more competition.
- mtmail 10y agoYahoo search is a thin layer on top of Bing these days. Yahoo only ran it's own search (crawling etc) about 2003-2009, all other years it was outsourced (to Inktomi, Overture, Google, Bing) http://news.softpedia.com/news/Yahoo-Sells-Search-Business-to-Microsoft-117845.shtml http://news.softpedia.com/news/Yahoo-Sells-Search-Business-t... (2009)
- shmerl 10y agoSo was Marissa Mayer trying to return Yahoo to do real search again?
- mtmail 10y agoI'd say after the Microsoft deal there was no turning back. Too many people, machines, IP moved. Overture bought Inktomi, Altavista, alltheweb search engines. Yahoo bought overture for 4 billion. That was 100s of engineers. Starting again would be an (in my opinion) impossible hiring task, 10miles away from the Google Campus who tend to make excellent counter offers. And at web-scale you cannot be great unless you index, well, almost all the web.
- rdtsc 10y ago> Mayer has handed out excessively generous deals to many top execs, such as its chief revenue officer Lisa Utzschneider. Right. Wonder if she honestly thought this would have fixed anything or she knew the train is headed to the final station and just wanted to be surrounded by a group she picked and the only way to get them to do that was was to buy her friends. It is always fascinating to watch a company like that, and wonder if executives still privately believe it is a salvageable situation or they just put up a face and ride the gravy train with some nice golden parachute contract clauses. They probably have to use euphemisms and hints with the board and other top level people to convey their suspicion of viability, as they don't want to be negative and just too pessimistic as it makes them look like liars in press releases, but they can't also be completely oblivious either, that looks bad as well.
- greenspot 10y agoWow, Marissa Mayer. That she agreed on Mozilla's change-of-control clause—so Mozilla can just walk away in case of a M&A deal and still get $1B—is simply disconcerting. I do not have any insights and why she gave in on this point but I know that one of her main skills and responsibilities in her position is to negotiate well and do proper deals. She had to negotiate this change-of-control clause away or to let Mozilla sacrifice on the payout if they walk away. Moreover and considering that Mozilla doesn't have that many financial potential search partner options (Google has been with Chrome rather a competitor for many years now), this should have been possible, I'd assume with my limited knowledge. I do not like if random forum guys like me are bashing CEOs, I know that this is the toughest job and I don't want to pass judgement on decisions I don't have insights on. But this is really, really weird and Marissa should have known that this bummer will pop up at the next due diligence and create distrust ('are they more time bombs at Yahoo? lets dig deeper') or just reduce the deal value or just increase deal complexity later. Maybe she didn't think about M&A at that time and she was rather in a fire-and-forget mode but a CEO is always supposed to think about what happens if new shareholders join, about the next due diligence, heck just about the future of the company and eventually, to keep the company always in a proper and clean state and not leaving time bombs for potential successors.
- jldugger 10y ago> That she agreed on Mozilla's change-of-control clause—so Mozilla can just walk away in case of a M&A deal and still get $1B—is simply disconcerting. If you assume the board offered her the position in with the expectation of negotiating a purchase by Google, then the M&A deal costs Mozilla very little -- Google was the previous contract holder, and remains so in many markets.
- venomsnake 10y agoCould that be her attempt at a poison pill? How the *7"( did the board approve that deal?
- seizethecheese 10y agoWith $1B from a breakup it seems the dominant strategy for Mozilla could be to develop it's own search engine.
- homero 10y agoPretty much, traffic is the hard part and they've got it
- Strom 10y agoTraffic is the hard part? Have you tried search engines other than Google? They're all terrible.
- gtirloni 10y agoRephrasing: getting people to switch from Google (traffic) is the hard part, but Mozilla has the means to influence that (through Firefox's default search engine) more than, say, DuckDuckGo.
- homero 10y agoWhere's this money go? I thought many developers were doing it for free. Yet they can't support thunderbird or persona
- peterjlee 10y agoMaybe with all that money they can buy DuckDuckGo and make it the default search engine? It's a risky move though. If DuckDuckGo doesn't workout, they lose the option of switching to another search partner.
- ChuckMcM 10y agoI think part of this is how much search traffic firefox can swing on the Internet. Remember that Google and Yahoo (and maybe Microsoft's Bing) were probably courting Mozilla for that contract. In the context of that negotiation I could certainly see it coming up that Yahoo! might be acquired and Mozilla wanted some assurances if they went with Yahoo!. So neither Bing nor Google has that concern, so Yahoo! is the only one exposed.
- bobsil1 10y agoMicrosoft offered $44.6B for Yahoo, was turned down and dodged a bullet.
- SubiculumCode 10y agoFirefox has a great feature where after typing a query a menu of search engines appears immediately below. Very convenient and allows me to mix up my searches across the search engines very nicely and easily. Yahoo got bilked by Mozilla..and probably the best thing Yahoo ever accomplished.
- schnevets 10y agoWow! If they received that chunk of change all at once, it could completely change the company. Imagine an endowment of that size, with the investment income being used for Mozilla's maintenance and initiatives.
- rogerdpack 10y agoThey apparently already receive 1/3rd of that each year, though, so my guess is it'd just be more of the same, as it were, though at a greater pace.
- throwaway6497 10y agoLooks like everyone gets to milk the Yahoo cash cow - board, investors, business partners, execs, friends of execs and management except engineers. Yahoo still pays engineers terribly hoping to compete with the likes of Google and Facebook. Why don't they just give up at this point and expedite selling. Why bother with all the posturing.
- rrdharan 10y agoMy information on this is secondhand/word-of-mouth but it is my understanding that at least some engineers at Yahoo have in fact been very handsomely compensated. A friend of mine involved in offer negotiation at another company who was at one point (this was perhaps 5-6 years ago) trying to poach some high level Yahoo infrastructure folks told me that a lot of senior Yahoo engineers had straight cash compensation packages that rivaled what Google or Facebook would pay in cash + RSUs. Presumably these were folks involved in directly maintaining core revenue generating ad systems who would be very expensive and painful to lose / replace.
- throwaway6497 10y agoThey may be exceptions. I can't imagine engineers at Yahoo are pulling in $400k+. Only engineers who got in through acquisitions have packages comparable to what engineers at Google and Facebook make. Majority of Yahoo engineers make 30-50% less than people of comparable levels at Goog/Fb. Check http://h1bdata.info/ http://h1bdata.info/
- geodel 10y agoI do not think they are working for yahoo out of loyalty.
- JoshTriplett 10y agoA clause like this could actually make sense for negotiation. Consider the following two hypothetical deals from Yahoo's perspective: - $375M/year to Mozilla, with the clause to keep paying for 3 more years if Mozilla doesn't want to do business with Yahoo's new owner. - $450M/year to Mozilla, with no such clause. The former seems like the smarter deal for Yahoo to make if they want to focus on being successful rather than on being bought. It only sounds problematic if you start focusing primarily on getting acquired.
- empath75 10y agoI'm not sure why they'd reject the deal if Aol buys them, given that the Mozilla foundation owes its existence to Aol.
- JoshTriplett 10y agoAOL doesn't seem any worse a choice than Yahoo, no; on the other hand, I can think of other companies they might want to reject doing business with, and they probably could too. Hence that clause had enough value to make it a point of negotiation, and it cost Yahoo less to offer that contingency clause than to offer more money.
- jMyles 10y agoEveryone here is decrying the decision-making process of the CEO - which obviously is already in question - but I'm left pondering a different perspective. Yahoo has cash. Sure, they're not Apple in terms of liquidity, but they're not a startup either. Mozilla is - and I may need to solicit your agreement here - a Good Thing for the world. I'm not convinced that being a Bil in the hole to Mozilla is so bad. By contrast, there are several companies that are, according to some legal theories that may yet prove persuasive in court, in debt this much or more to governments by dint of their offshore accounting practices. At which company do you prefer to be a shareholder? One which owes Mozilla a billion, or one which very well might owe an armed, hotheaded, unpredictable entity several billion? Ultimately, if I'm a shareholder (and I'm not), I can forgive a billion dollars to mozilla more easily than the other Yahoo mis-steps.
- LAMike 10y agoWhat companies are you talking about?
- jMyles 10y agoNo specific companies in particular; I was thinking of it more like a spectrum, from Enron / Worldcom to, say Dreamworks (implicated in Panama Papers but probably within the letter of the law). I'm just saying: being indebted to a (reasonably awesome) outfit like Mozilla is less upsetting to me than being in hot (or even warm) water with the IRS.
- ekianjo 10y agoI thought yahoo japan was a completely separate entity from yahoo global, why does the article mention softbank at all?
- kriro 10y agoIs there a reason why Mozilla shouldn't decline and take the money 100% of the time?
- paulbjensen 10y agoI could understand a break clause based on change of ownership, but the fact that Yahoo would still be obligated to pay is nuts. Would Mozilla ever want to exercise this clause? I don't know - I wonder how they would react if Verizon/AOL ends up buying them, given that Netscape was bought by them early on.