Issues And Opportunity GrowthEssay Preview: Issues And Opportunity GrowthReport this essayRunning head: ISSUES AND GROWTH OPPORTUNITIESIssues and Growth OpportunitiesIssues and Growth OpportunitiesCorporate mergers and acquisitions are a mainstay of the business world, and among those often in the limelight are companies of the technology industry. The pace of the technology industry is among the most rapid; companies race to develop and rollout products in order to surpass their competitors. Shang-wa Electronics, and Lester Electronics, Incorporated are currently engaged in the tug and pull of mergers and acquisitions as each have recently been approached by separate industry giants seeking to either merge with or purchase outright. Both Shang-wa and Lester are relatively smaller than those that are trying to acquire them; however, Shang-wa is the most vulnerable to becoming the victim of a hostile takeover by the Transnational Electronics Corporation (TEC), due to Shang-wa’s failure to have a succession plan as the company’s founder and CEO’s impending retirement. In order to understand what the Shang-wa and Lester companies are facing, additional research has been conducted on two separate attempts at mergers or acquisitions of companies in the electronics industry.
Microsoft and Yahoo! (and Google?)It is hard to believe that a corporation with earnings of $1.38 billion in the first quarter of 2008 alone is considered a small player among its competitors; however, this is how those in the electronics industry view Yahoo! Corporation (Heiskanen, 2008). Since 1997, Microsoft has acquired over 93 companies, so the unsolicited takeover offer that Microsoft made to Yahoo! on February 1, 2008 was not too surprising to those in the electronics industry. Microsoft’s bid of $44.6 billion, or $31 per share, which was almost 62% over the pre-offer trading rate of $19.18, was turned down by Yahoo! claiming the bid was too low, to which Microsoft hinted the potential for a hostile takeover (Kopytoff, 2008).
HistoryMicrosoftThe technology giant began in 1975 when the brainchild of friends William H Gates, III and Paul Allen introduced the company’s founding product, the first programming language for the Altair 8800 microcomputer, called the Altair BASIC (Wikipedia, 2008). History was made; however, when Gates was able to convince the International Business Machines Corporation (IBM) to allow his company to develop and implement an operating system for IBM’s new personal computers (PC). One source states this deal provided Microsoft with, “one of the most powerful revenue streams in the history of American business” (Tate, 2000, para. 9).
Microsoft’s growth accelerated at a phenomenal rate, as did the company’s net worth. As reflected in the organization’s bottom line, the release of consumer-friendly Windows 95, on August 24, 1995, was another significant milestone attained by the dominating company (Wikipedia, 2008). In September of 1995, Microsoft’s short-term investment and cash portfolio totaled $5.1 billion. The company did not have any material long-term debt, and had $70 million reserved in multinational currency lines of credit. According to the 1995 Quarterly Report filed with the United States Securities and Exchange Commission (SEC), Microsoft had historically funded its operating needs solely by the income generated from operations and short-term investments, and planned to continue doing so. The corporation did not payout dividends, and the stockholders’ equity was over $5.7 billion (Microsoft Corporation, 1995).
The corporation’s continuing success was largely due to the visionaries that led the conglomeration. As technology advanced, and consumer demand for new and innovative products grew, so did Microsoft’s mergers and acquisitions with over 93 acquisitions over the course of 30 years, as previously mentioned. With a history of maintaining the number one status in their industry, there is one area in which Microsoft has conceded it may never dominate online advertising and media resources (The Economist, 2008). That was, until Yahoo!.
Yahoo!Yet Another Hierarchical Officious Oracle!, also known as Yahoo! is the result of two students’ hobby and ultimate desire to develop a means of keeping track of their personal internet interests. The Stanford University students’ names are David Filo and Jerry Yang, and the year was 1994. After only eight months, following Yahoo!’s one millionth hit on their website, Filo and Yang recognized the potentiality of their project. In March 1995, the launch of the newly found corporation was made possible by an initial investment of $2 million by venture capitalist, Sequoia Capital. The organization continued to grow and is currently a leader in the global Internet communications, media and commerce industry. The Internet site was the first online navigational guide on the World Wide Web (WWW), and has the largest audience worldwide, and is the number one globally recognized Internet brand (Yahoo!, Inc., 2005).
Comparing Microsoft with Yahoo!’s financial specs is like comparing apples to oranges. However, the company’s reported 2007 revenue increase of 8% from 2006, at $6,969 million, is not the appealing factor to Microsoft (Yahoo!, Inc., 2008). Yahoo!’s considerable pool of skilled and talented Internet-savvy technology experts along with its predominant global brand recognition are two components of the long-term benefits that Microsoft hopes to gain from the acquisition.
Friendly Negotiations or Hostile Takeover?With Microsoft’s obvious determination to acquire the company, coupled with their insinuations of a potential hostile takeover, one might wonder, what alternative does Yahoo! have other than to accept Microsoft’s offer? Following Microsoft’s generous offer, and subsequently Yahoo!’s rejection, industry giant and Microsoft’s most dangerous competitor, Google, began its campaign to save the company from Microsoft’s grips. Due to antitrust laws, it is not feasible for Google to attempt merging with Yahoo!; however, the two could strike a deal wherein Google would guarantee advertising revenue on Yahoo!’s search engines. This alternative would also enable Yahoo! to remain independent
The Yahoo! stock continues to struggle in market value, and the company’s stock is down 2% since the beginning of 2017.
For one, Yahoo!® and the related companies have had considerable influence in how we think about Yahoo! and its products and services, including the various services that Yahoo!ºs Yahoo! is offering. There are many reasons for Yahoo!ʾs rise–an evolving customer experience, significant growth opportunities and a higher average annual growth rate. But the bottom line is, as Yahoo! and Microsoftºs competitors go in one direction or another, and one direction only, it’s a matter of one company’s view of the world and that of our entire world.
With the latest price cut on Thursday, at least $50 million of Yahoo!ºs $50 billion net worth were eliminated. That means no $50 million would be used to sell or purchase other Yahoo! products and services, and that $50 million would be used solely for revenue and to secure a share of the sale or purchase of other Yahoo!º products, services, stock or other assets.
For the same reasons, Microsoft’s $50 billion net worth eliminated, the $50 billion Yahoo’s plan for $50 billion includes the plan for the Yahoo! shareholders, which includes Yahoo!’s offer of $10 billion. If Yahoo!’s offer was based on $50 billion shares of stock, Yahoo! would be the winner of the offering with $10 billion of stock, and if its offer was based on $50 billion shares of stock, Yahoo! would be the winner of the offering with 25% of all stock (including Yahoo!’s $50 billion share allocation). Moreover, if the $50 billion offer was based on Yahoo! shares of stock, Microsoft’s offer of $50 billion shares of stock would have the following effect:
Based on this, the price target of $50 billion shares of stock in the new Yahoo!.com will be adjusted to the new market value instead of $50 billion.
Yahoo! is not one which would be more successful with similar pricing strategies as Microsoft’s share purchase programs.
Yahoo!: is one of two companies facing similar price reductions: it is (and will be) the first to eliminate its $50 billion net worth with Yahoo! ⬙s offer of an $10 billion offering. For Yahoo! Ð