Ok Steve, if your listening here's your play. Given the ambitious, sprawling company that is now Microsoft you find yourself fighting across a large number of tricky markets. You're wrestling with the IT giants, IBM, Oracle and SAP while at the same time battling video game console manufacturers in the consumer arena. Oh yea... and you're also engaged in a chess match for control of the online media universe with a little company called Google.
The folks in charge of your Microsoft media business keep giving really cool speeches about their strategy but as of yet there isn't a scalable media business emerging. The good news is you have ambition, determination, a strong talent pool and a nice little war chest of $25 Billion in the bank. And this year, even in a tough year, you will generate another $15 Billion in free cash flow. So here are a couple of suggestions on how you could put $20 Billion of your cash to work, instantly create a dominant media business and establish a foundation for your consumer position.
At it's current trading level of less than $12 per share Yahoo's market cap is under $14 Billion. Facebook, while at one point valued at $15 Billion, is struggling to demonstrate that there is a clear advertising business to be built in social networks and as such their current valuation is far less than what it was at the peak. Let's make this easy math and suggest its now worth $6 Billion. MSN, loses $1 Billion dollars a year. Frankly this is hard to do. Even AOL is profitable, but I digress. In addition while there have been tons of people hired, good money spent and lot's of effort, the consumer branding at Microsoft is shall we say challenged. Microsoft Live indeed.
So how do you create a real media business as well as a brand construct you can park all of your consumer products and aspirations in? Buy Yahoo and Facebook. Roll them into a separate company with MSN that is a consumer facing and consumer branded company. Don't call it Microsoft. Call it Yahoo and have Facebook operate as a major brand inside this new company just like real multi brand media companies do. You will deliver a combined audience of over 200 million unique visitors, dominate traffic, social network engagement and now be able to better compete in search. You will then also have a model to merge MSN assets into so you can immediately go from losing money to making money online. From there you can turn your attention to helping Facebook define what advertising and revenue models work for social networking.
No thanks necessary. I'm hoping this will help clarify your media business and provide for the foundation of a real consumer position. I also hope this will help get you back to focussing on what really drives the revenues and profits at Microsoft, selling operating systems, development languages, tools and services to IT pro's around the world. Oh I have a few ideas on spending some of your money in this area as well but I'll leave that for another post.,