Microsoft's secret slide: We'll lose $300 million in first years of Yahoo deal
- TAGS:FAM, Google, Microsoft, Steve Ballmer, Yahoo, yahoo-microsoft deal
- IT TOPICS:Applications, E-Business, Internet, Operating Systems, Windows
Note to Steve Ballmer: Check your PowerPoint deck before making a presentation to Wall Street Analysts. At Microsoft's Financial Analyst Meeting (FAM) on July 30, a slide that Microsoft meant to keep secret showed that the company will lose $300 million in the first year of the Yahoo deal, but make money steadily after that.
The Seattle Times reports that one of the slides in Ballmer's PowerPoint deck at the meeting was marked "not for disclosure." Ballmer didn't actually show it to the analysts, but the deck was available for a short while on the Microsoft investor site. The Seattle Times grabbed it --- you can see it here.
In discussing the deal, the slide notes:
Net: we will lose money in the first two years ($300m total), then start making decent return ($400m steady state).
Particularly noteworthy are Microsoft's transition costs, which are considerable --- $675 million, according to the slide. Here's their breadown, according to the slide:
Retention pre/post close $90m
R&D Paid search $170m
GFS [Global Foundation Services]/COGs [Cost of Goods Sold]: $145m
Sign-on $150m
Algo [algorithm) R&D $70m
Advertiser migration $50m
Based on these numbers that it's a good deal for Microsoft, after initial losses. But it's also clear that this deal is not intended to be a Google killer. It may well be that Microsoft recognizes it will never catch Google when it comes to search, and is just looking for some nice fat incremental income from the Yahoo deal.
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