Microsoft - Yahoo: Combined Financials

Henry Blodget | February 1, 2008 8:10 AM

microsoft-yahoo-click.jpgWe have estimated the combined financials for a Micro-Hoo online combination (see this spreadsheet).

Microsoft expects the combination to yield $1 billion in cost synergies. We have run two scenarios, one with any cost synergies, the other with the expected $1 billion:

MICRO-HOO: No Cost Synergy

Revenue:
2007:          $9.8 billion, up 12%
2008E:        $11.4 billion, up 16%
2009E:        $13.1 billion, up 15%

Operating Profit:
2007:          - $250 million, -2.5% margin
2008E:        $200 million, 2% margin
2009E:        $600 million, 4% margin

MICRO-HOO: $1 Billion Cost Synergy

Revenue:
2007:          $9.8 billion, up 12%
2008E:        $11.4 billion, up 16%
2009E:        $13.1 billion, up 15%

Operating Profit:
2007:          - $250 million, -2.5% margin
2008E:        $200 million, 2% margin
2009E:        $1.6 billion, 12% margin

Please see spreadsheet for details.

See Also:
Complete Coverage: Microsoft's Bid For Yahoo!
YHOO / MSFT Bidding War? Microsoft to Raise Offer? Doubtful
Microsoft Conference Call: No Color on Yahoo Reaction
Analysis of Microsoft Bid for Yahoo: Brilliant Move, Deal Going Through
Microsoft Letter to Yahoo Board

Microsoft-Yahoo:
Microsoft Wants to Buy Yahoo Again
How to Structure a Microsoft-Yahoo Deal
One Problem With a Microsoft-Yahoo Deal: MSN is Only Worth $10 Billion
Proof that Microsoft Plans to Buy Yahoo?
Playing the AOL-Yahoo-Microsoft Chess Game

Why Microsoft Needs to Buy Yahoo:
MSN: Still Sucking Wind After All These Years

And What About AOL? Join the Party!
Playing the AOL-Yahoo-Microsoft Chess Game
Why Yahoo Should Buy AOL
Why Microsoft Will Steal AOL from Yahoo

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Henry Blodget said:
Sorry--tweaked spreadsheet earlier and forgot to update post. Should be correct now.
Bob said:
I must be missing your logic. You're showing the scenario with $1B in cost synergies having a lower profit? Shouldn't that be the other way around?
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YaSoft! Good / MicroHoo! Bad

There are enormous synergies in this merger, and many benefits for advertisers.

Yahoo! has a strong consumer franchise, and technically very strong search and advertising match capabilities.

Yahoo! is let down by unfriendly and inefficient processes and services for its advertisers, however, which is why it generates advertising revenues, but is not great at generating good profits.

Digital Marketing blog - YaSoft! or MicroHoo! ?

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