A Quick Long-Term Analysis of GOOG, YHOO, MSFT

Fact: According to Forbes, writing after yesterday’s close of trading, “Unable to topple Google on its own, Microsoft is trying to force crippled rival Yahoo into a shotgun marriage, with a wager worth nearly $42 billion that the two companies together will have a better chance of tackling the Internet search leader…. Microsoft’s $31-per-share offer represented a 62 percent premium to Yahoo’s closing price late Thursday, although it’s below Yahoo’s 52-week high of $34.08 reached less than four months ago.”

Analysis: Most of the buzz about the Microsoft-Yahoo commentary yesterday was simply noise, bleating about the immediate impact (or not) on Google, as if the salience is a snapshot rendered in instantaneous who’s-up-who’s-down.  Yet I had a reader comment yesterday very perceptively on my post, saying “Whether the deal is timed well, overpriced or not, is for time to decide. Which may even take a couple of years!”

That got me to thinking about the value of these three companies over the long-term looking back.  Thanks to the web that’s easy to quantify, at least in terms of stock price; you can do it at MSN or on Yahoo Finance, but just for grins let’s do it at …

… at Google.  Using the links at the top of the chart-box there, you can look retrospectively at a day, week, month, etc.  As I see today, in the one day of trading since the offer was announced, Yahoo’s up, Microsoft’s down (normal in acquisitions), and Google’s down even more.  But if you look at the past six months for example (I like that because it happens to be about the time that Microsoft approached me), you can see that Google’s fairly flat while Microsoft is up almost 4 percent – a good return; and of course Yahoo’s spike yesterday is still in there.

But let’s crank it to eleven – click on the “Max” length.  That takes the left-side of the chart back, past the two successive sets of Stanford-grad-student proto-billionaires (Google’s Brin & Page, Yahoo’s Filo & Yang, the former’s 2004 IPO at $85, the latter’s 1996 IPO at $13).  “Max” takes you back to the earliest point in the history of all three, to March 13, 1986 and the Microsoft IPO (which launched at $21 and ended the day respectably up at $28).


Check out those appreciation numbers!  Exclamation point borrowed for effect 🙂  

To underscore the point that smart investors take the long view, GOOG is up 376% over its history; YHOO up 1964%; and granddaddy MSFT is up an astounding 30,168% in its time on the market.  (You can also see the dot-com bubble there in the run-up.)

Hippies can still trust Microsoft, for another month anyway, for it then turns 30. But in the 22 years that it has been a publicly traded company, the record shows (see here and here) that Microsoft has created among its employees four billionaires and some 12,000 millionaires through stock appreciation.

So, as my reader Allan pointed out, analysts should ponder the long term to see how a combined Microsoft and Yahoo stack up. 

(Note: Allan has a nice photo blog, which includes a simply phenomenal photo called “Lonely Feet.”)

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