Microsoft Backtracks on Windows 10 Goal; Yahoo! Bids Due; Visa/PayPal Speculation Grows
Microsoft no longer expects Windows 10 to be on 1 billion devices by mid-2018
Microsoft (MSFT) - Get Report, which is two weeks removed from stating Windows 10 runs on more than 350 million active devices, now says the operating system won't be on a billion devices by the end of June 2018, as it originally hoped. It's worth noting here that Microsoft's definition of a Windows 10 device includes not only PCs running the OS, but also Xbox One consoles, HoloLens augmented reality headsets and phones running Windows 10 mobile (the successor to Windows Phone).
The company attributes the about-face to the restructuring of its phone business -- Microsoft, all but admitting Android and iOS have won, has significantly pared the size of its smartphone business and unloaded its feature phone business. But a weak PC market can't be helping matters either.
Regardless, markets brushed off Microsoft's disclosure, with shares closing nearly unchanged. PC weakness has long been priced in, and close to nothing has been expected from Microsoft's smartphone business. Meanwhile, the company has been taking steps to decrease the link between Windows-related revenue and PC sales. Windows 10's anticipated Anniversary Update arrives on Aug. 2.
Yahoo! will reportedly collect final bids on Monday, make a decision soon
The New York Times reports final bids for Yahoo!'s (YHOO) core business are due on Monday, and that its board will make a decision soon afterwards. As previously reported, the bidders are said to include Verizon (VZ) - Get Report, AT&T (T) - Get Report, private-equity firms, and a group led by Quicken Loans founder/Cleveland Cavaliers owner Dan Gilbert.
Bloomberg previously reported AT&T and Gilbert's group each bid roughly $5 billion for a package featuring Yahoo!'s core business, patents and real estate, and that Verizon bid $3.5 billion to $4 billion just for the core business. Yahoo! was valued at $35.8 billion as of Friday's close thanks to its Alibaba and Yahoo! Japan stakes.
In addition to Yahoo!'s deteriorating financials -- the company has guided for revenue (excluding traffic acquisition costs) to drop to $3.4 billion to $3.6 billion this year from 2015's $4.1 billion and 2014's $4.4 billion -- the sale price stands to be pressured by the fact Yahoo! told bidders in late June they might have to make over $1 billion in payments to Firefox owner Mozilla. This is the result of Yahoo! giving Mozilla the right to demand all of the payments due to it as part of the Yahoo!-Mozilla search integration deal up-front in the event of a Yahoo! sale.
Speculation grows about a Visa/PayPal partnership
PayPal (PYPL) - Get Report recently moved up its earnings call date to July 21, which happens to be the same day Visa (V) - Get Report reports. That's fueling speculation a major partnership between the companies will soon be announced.
One possibility envisioned by RBC analyst Dan Perlin: A deal in which PayPal agrees to share transaction data with Visa in real-time in exchange for Visa charging lower interchange fee rates. He also thinks it's possible PayPal could strike a deal in which the company receives an incentive fee from Visa in exchange for driving a specified amount of Visa transaction volume -- Visa has similar arrangements with bank partners.
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For those wondering if Visa might bid for PayPal, PayPal CEO Dan Schulman recently shot down M&A speculation. On the other hand, the fact Schulman was formerly at American Express expect could help him form stronger ties with Visa and its rivals.