May 7, 2007 4:01 AM PDT

Keeping up with the (Dow) Joneses

In a flurry of activity last week that some would say defied good business sense, media and entertainment companies and a few troubled Internet portals suddenly became hot acquisition targets.

The financial news service Reuters Group was approached about a takeover by an unnamed company, The Wall Street Journal reported Friday. British music group EMI said it had received a number of takeover inquiries, Reuters reported that same day.

Back in the States, Time Warner Chief Executive Richard Parsons told the Associated Press Friday that several private-equity firms told him they were interested in buying his company's problem child, AOL. To top it all off, rumors that Microsoft was in talks to buy beleaguered Internet portal Yahoo briefly resurfaced.

Of course, earlier in the week, in a move that probably set off all this activity, Dow Jones, which publishes the Journal and a number of other online and print news outlets, said it received a takeover offer from Rupert Murdoch's News Corp. Dow Jones ownership rebuffed the $60-per-share offer.

So why all this takeover talk? Isn't Yahoo supposed to be a sinking ship, AOL a has-been, and traditional music sales a dead-ender? Isn't buying a big media property supposed to be a bad idea in the age of social-networking Web sites and so-called citizen journalism?

Maybe not, if all this wheeling and dealing is any indication. An historic rally on Wall Street has given a number of profitable but slow-growing companies a valuable stock "currency" to make acquisitions and expand their businesses. And the bigger a company is, so the theory goes, the easier it is to squeeze out expenses and compete in a tough market.

In the software industry, it's the rationale Oracle CEO Larry Ellison used to justify his multibillion-dollar spending spree on competitors such as PeopleSoft and Siebel Systems. To Ellison's credit, the high-risk gambit is so far paying off.

Now that bigger-is-better theory is being taken for a spin by media moguls eager to increase their stake on the Internet. And make no mistake, this isn't about print media. With the exception of Dow Jones (which has several successful Web properties), traditional newspaper and magazine companies have been noticeably left out of the hubbub.

Barry Parr, media analyst at Jupiter Research, said the time is ripe for media consolidation as the online market matures and the user growth rate slows, slimming the possibilities for so-called organic growth. "If you are looking for a way to recapture your traditional growth rates in the context of the Internet, acquisitions look mighty attractive," Parr said. "It's also a phenomenon of the booming stock market right now."

"We're going to see more of this. It's the right moment," he added. "Companies whose stock is doing better than the market are going to be in a position to do more acquisitions."

Quick-growth opportunities
Ironically, it wasn't that long ago that many industry experts were arguing that media conglomerates were big, unwieldy entities to be avoided. But most industries careen from consolidation to breakups as market conditions change, said Charles Moldow, a general partner at Foundation Capital and a former mergers and acquisitions banker at Merrill Lynch.

"Companies believe they need scale to compete and they aggregate, and then they conclude that they have locked value that the market doesn't appreciate and they break them apart," Moldow said.

At the moment, companies are looking to buy in order to quickly grow their businesses in a booming Internet market, said Ellen Siminoff, chief executive of search marketing firm Efficient Frontier and a former Yahoo senior vice president of entertainment and small business. "Digital media is real; people are active in it and companies want to have scale," she said. Plus, "transactions usually happen all at the same time...The Google acquisition of DoubleClick may have begot Yahoo's Right Media purchase."

The biggest takeover buzz was over a deal that's least likely to happen. The New York Post and the Journal published articles Friday morning citing anonymous sources saying that Microsoft and Yahoo were in talks to either merge or somehow combine their online assets.

However, the Journal backpedaled in a story hours later, reporting that sources were saying the merger discussions were "no longer active" and that Yahoo was not interested in merging with Microsoft. Representatives from Microsoft and Yahoo declined to comment on the reports.

See more CNET content tagged:
takeover, Internet portal, Dow Chemical Co., acquisition, merger

5 comments

Join the conversation!
Add your comment
I use Yahoo for my portal and email
If MS buys them I will dump them immediately. I have never seen anything good come out of Redmond.

As for all these mergers and buy outs, this is just typical of what the U.S. has become. Fake money creating fake capital creating fake wealth. I love the headlines touting the Dow's "record highs". What a sham.

Read the truth about the U.S. economy for yourself.

<a class="jive-link-external" href="http://www.financialsense.com/fsu/editorials/2007/0416.html" target="_newWindow">http://www.financialsense.com/fsu/editorials/2007/0416.html</a>
<a class="jive-link-external" href="http://www.informationclearinghouse.info/article17627.htm" target="_newWindow">http://www.informationclearinghouse.info/article17627.htm</a>
Posted by expatincebu (156 comments )
Reply Link Flag
yep, fake - paper money
Yep, I agree, we have all been through this in 2000, remember
the .dot .com bust ? that was only like 7 years ago ?

Does anyone remember ?

I bought a Condo in Everett, WA for $100K 3 years ago, I just
sold it for $190,000 in 4 days I got an offer. Homes are going
up very slowly but anything that has the label Condo on it, very
fast.

While maybe not in the next 3-6 months, I forsee a bubble, so
might as well move the paper profit into a real profit, pay off all
my debt and rent for the next year and see how the market for
homes does.

Microsoft does make crappy products, with their crappy
behavior not just to the outside world but internally towards
their employees. MS employs a lot of Vendors, what they refer
to as v-dash trash, I have worked there, not any more, have
many friends that work there both v-dash and blue badges and
they all hate their inability to humainly behave.

I used to use hotmail before MS got them, then I switched to
yahoo after they got bought out, I already forsee MS buying
yahoo, so I already got out and switched to gmail.com

And if that fails, there is plently of smaller mom and pop
operators that can manage a Mail Exchanger very well and as
long as I get my email, who cares. I already wrote off hotmail
and aol as well and their live BS push.
Posted by RompStar_420 (772 comments )
Link Flag
Boggles the Mind
It appears we'll see more of this activity in coming months, as audiences consolidate and slower growth entities realize they need to add properties that are positioned for growth in the future.

<a class="jive-link-external" href="http://brain.com" target="_newWindow">http://brain.com</a>
Posted by azareus (31 comments )
Reply Link Flag
Microsoft-Yahoo Cooperation
Here's what I would do if I were an executive working for Microsoft or Yahoo: First of all, merging the two corporations is dumb. Both companies overlap considerably for many services, and merging them would stifle competition and maybe even give Google a bigger advantage in innovation. So Microsoft should not buyout Yahoo right now. The best way would be for Microsoft to invest in Yahoo, and for Yahoo to invest in Microsoft. For example, Microsoft could buy 30 percent of Yahoo stock, or 40 percent. Yahoo can do the same, with buying a percentage of Microsoft stock, like 30 percent too. This way, both corporations' future are strongly tied together. Yahoo and Microsoft shareholders would have intertwined visions and goals. Two heads are better than one. If for some reason, in the future, you two want to go separate ways, then just sell off your stocks.

Microsoft has its strengths in their operating system and office/productivity applications. Those are mainly two cash cows among many others. Google is trying to force its way into the market for office applications by offering free usage over the Internet. The "free" part is misleading; Google will probably pay for the expenses of the office applications through ads. So the best thing for Microsoft to establish an early lead in this market and to eventually dominate the market is to offer "Microsoft Office Live" over the Internet FOR "FREE." Make a deal with Yahoo to put Microsoft Word, Microsoft Excel, and Microsoft PowerPoint on the Yahoo homepage. Of course, these online apps would be on the MSN homepage too. Display ads to get revenues out of this, I would use the similar system that Google uses for Google Gmail. They scan the words that are in emails that people write, and then use that consumer data to display the relevant ads. I would guarantee user privacy by promising to only words and not link the words to any personal data. Such as, label people as numbers and letters, and NOT their real personal names. Or maybe guarantee that the info won't be sold or given out.

Now for the search engines, Microsoft and Yahoo should definitely combine their efforts to develop a better and more accurate search engine that gives results that people want. Do not combine your homepages; leave MSN and Yahoo homepages separate. Maybe do a little bit of combining News websites of MSN and Yahoo, or Autos websites like Yahoo Autos and MSN Autos/Cars. But it's better to leave your respective brands and brand names intact (like MSN and Yahoo properties should stay separate). The only thing that you guys should do is to start a combined effort by Yahoo and Microsoft engineers to develop and improve your search engines. I personally think Yahoo and MSN have good search engines, but just not as good as Google. I would rank them from best to worst, 1) Google, 2) Yahoo, 3) MSN. So MSN maybe should work out a deal with Yahoo to use Yahoo's search engine technology AND to work on a joint project to improve and create a new search engine that both MSN and Yahoo can use. Yahoo and MSN should develop and or improve the advertiser programs for people who want to advertise on the Internet, especially on MSN and Yahoo properties. These things are ideal for Microsoft-Yahoo cooperation in order to compete with Google.

If you do these things, you'll be able to smash Google or at least put Google under pressure. To summarize what Microsoft and Yahoo should do: 1) Do not merge together but maybe both invest in each other, 2) Offer Microsoft Office Live for free over the Internet, 3) Work together on search engine and web/search advertising.
Posted by Millerboy (104 comments )
Reply Link Flag
 

Join the conversation

Add your comment

The posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.

What's Hot

Discussions

Shared

RSS Feeds

Add headlines from CNET News to your homepage or feedreader.