章 731: Chapter 732: The Dream Is About to Be Realized
[Chapter 732: The Dream Is About to Be Realized]
A cash gap of approximately $1.1 billion wasn't a problem for Firefly, which had ample cash flow. If Firefly Group decided to step in, all issues would naturally be resolved.
However, Eric never intended for Firefly to be involved in this acquisition from the start. Besides, Eric had already planned to invest all of Firefly Group's excess funds into high-tech companies like Yahoo. Diversifying attention onto this matter would definitely delay progress in other areas.
After considering for a while, Eric took out his phone and dialed Emily Brighton.
LTD Group had performed exceptionally well over the past two years and operated a retail network with Victoria's Secret, which could generate substantial cash flow. Eric had seen in LTD's financial documents that Emily intended to pay off a long-term debt of the group early. With that in mind, getting LTD involved in this acquisition seemed like a good idea. Although Eric was a major shareholder in LTD, those shares were held by Firefly Investments, so at least in terms of equity, any future connection between MGM and Firefly Group would be nonexistent.
When the call connected, Eric greeted her and asked directly, "Emily, are you interested in investing in Hollywood?"
Amy Pascal sat quietly on the sofa as she listened to Eric and Emily discuss for over ten minutes. By the time Eric hung up, she had a good idea of the outcome.
"$600 million," Eric said to Amy after ending the call. "LTD can probably come up with $600 million, but there's still a gap of about $500 million."
"If the box office of Night at the Museum performs well, we could leverage the copyrights of a few films from Flower Films to secure the rest of the funding through debt financing," Amy replied. "But that cycle will take at least another three months, and Credit Lyonnais Bank won't have any leverage on the deal price anymore. They definitely won't budge on the payment deadline."
Eric thought for a moment and said, "If Vivendi is willing, let's bring them in. As for Kirkorian, it's best to leave him out; bringing in someone like him would only stir up trouble."
Just then, Drew came downstairs with the twins, each pulling a suitcase.
After hugging Amy, Drew nestled closely against Eric, linking her arm with his, and asked, "What did you guys discuss?"
With a firm grip on the little girl's restless arm, Eric laughed, "We talked about financing. I'm planning to involve LTD and Vivendi; what do you think?"
"Sure, it's your call," Drew nodded, showing no signs of questioning Eric's decision.
Amy interjected, "Eric, I think Vivendi won't be satisfied with just the $500 million remaining share."
"That's all it is. If they're unwilling, we'll reach out to Wall Street investment firms. I think it's unlikely they'll refuse. Both Vivendi and Kirkorian know that trying to seize MGM from us will leave them with a mess when Flower Films and DreamWorks withdraw, so cooperation is the only way to join this acquisition," Eric replied. He paused and added, "After acquiring MGM, we still need to integrate DreamWorks. If they're really unsatisfied, Firefly could always transfer its 30% stake in DreamWorks to them."
Amy nodded, but Drew asked, "Eric, wouldn't that weaken our control over the company even more?"
With a valuable portfolio of copyrights worth around $1 billion, Flower Films and DreamWorks were significant players. MGM, burdened with high debt, was persistently hovering on the brink of bankruptcy. Credit Lyonnais Bank owned about 75% of shares, worth around $1.5 billion, while MGM also had 25% in circulation, making the total market value about $2 billion.
Eric wasn't entirely certain about MGM's total share capital. However, looking at the market values of several companies, $4 billion could be accounted as 40 shares, with Flower Films completely under Drew's control, representing 10 shares. In this acquisition, Flower Films would invest $400 million, and LTD would invest $600 million, securing 10 shares. Therefore, upon the merger's completion, Eric would still retain 50% of the new company's shares, enough to maintain firm control.
After analyzing these numbers with Drew and Amy, Eric said, "Although there may be a large shareholder like Vivendi, the future company's equity will still be quite dispersed. Other minority shareholders would find it difficult to impact the business operations. The shares we hold will give us absolute control. Moreover, after the merger, the company can issue an additional 10% of stock to raise operational funds without impacting our controlling interest."
...
For these past days, Bill Gates felt an increasing sense of oversight, which became more pronounced over time. This all stemmed from the contract signed with Yahoo last year.
Though Microsoft secured an agreement to acquire 30% of Yahoo's shares in 1999, as Windows 95's beta version gained popularity and rival Apple faced a sales slump, Bill Gates gradually realized that Windows 95 could very well dominate the operating system landscape. The clearer this thought became, the more he felt he had lost out on the contract.
A year ago.
If he had been more cautious and more confident in the market prospects of Windows 95, perhaps today's situation would not be this way.
As the release date for Windows 95 approached, Microsoft's stock surged, doubling its total market value compared to last year, surpassing $40 billion. Bill Gates was not insecure enough to think that Microsoft wouldn't be able to buy the 30% stake in Yahoo in 1999; he just felt that the agreement had shackled Microsoft's development strategy for the next four years, creating a sense of being trapped.
After all, four years remained.
The internet industry had already begun to show signs of fanaticism, and in this scenario, Microsoft could hardly just sit back and hold on to its dominant position in the operating system industry without taking any action.
But what could they do?
Originally, Bill Gates valued browser software highly, but last year's contract made Yahoo's browser the default on the Windows platform. Furthermore, the agreement prohibited Microsoft from launching a standalone browser for several years, depriving them of significant leverage in this critical internet interface.
Bill Gates had considered tearing up the contract; he had even tasked Microsoft's legal team to conduct a risk assessment on the matter. If he were to forcefully breach the contract, Microsoft would only need to pay around $300 million in penalties -- an amount well within its means. Worst case scenario, they could tussle with Yahoo in court for a few years.
However, from last year to now, although a year might not seem long, it was sufficient for Yahoo to further strengthen its technological and patent barriers across various internet products, including browser software.
Take the browser as an example; if Microsoft had immediately developed its own browser a year ago without signing that contract, leveraging its considerable advantage in operating systems, it could have forcefully taken market share from Yahoo's browser using bundling strategies and promoted a proprietary internet technology standard.
Now, though, Microsoft faced not just a superficial loss of time; compared to a year prior, it had not only missed the train in browser technology but also lost ground in a variety of web standards like I.E.S. script language, GIF image format, and even MP3 audio format -- technologies that strongly depended on the decoding capabilities of Yahoo's browser software kernel. With over 90% of websites now adopting these standards, without Yahoo's patent licensing, other software developers could barely parse most mainstream web pages.
To prevent accusations of monopolization, Yahoo maintained an open licensing policy for these technologies and Microsoft had already received part of the browser software patent licenses.
However, it was evident that if Microsoft were to breach the contract, those patent licenses would surely be voided, and Yahoo would definitely not grant any further licenses.
With over 90% of internet enterprises and users already accustomed to Yahoo's technology standards, even if Microsoft achieved domination of the operating system market, it would be impossible to forcefully establish an alternative standard.
Seated in the front row of the hall, Bill Gates listened with complex emotions as Yahoo's COO, Jeff Locke, passionately explained how to utilize YahooPay.
This conference was held at a student hall temporarily rented by Yahoo from the Massachusetts Institute of Technology for their product launch on July 10 at 6:15 PM.
In the past fifteen minutes, Yahoo's CEO, Ian Gurner, provided a brief overview of Yahoo's development over the years and introduced several of Yahoo's popular internet products again, including Yahoo Browser, Yahoo Mail, Yahoo Instant Messaging, and the Yahoo portal -- all of which surpassed ten million users. Bill Gates realized that these products also represented vast groups of technical patents.
In North America, where intellectual property protection was extremely stringent, these patents were not something that could be freely utilized. Without proper authorization, even a giant like Microsoft couldn't recklessly use them. While Microsoft certainly could afford heavy fines for patent misuse, it could not withstand the consequences of violating business rules. After all, Microsoft also held a wealth of patents in the operating system sector, and if competitors learned from Microsoft's ways of rule-breaking, survival would become impossible.
Meanwhile, Jeff Locke was introducing Yahoo's online payment tool, making Bill Gates feel increasingly astounded.
Though he didn't know much about finance, he realized that this payment platform could, in fact, become indistinguishable from a bank. Given America's relatively open financial regulatory system, obtaining a banking license wouldn't be too difficult for Yahoo if they desired it.
The potential for a fully monopolistic virtual bank was staggering to imagine.
With these thoughts, Bill Gates leaned slightly forward, instinctively glancing at Eric, who was conversing softly with Cisco CEO John Chambers a few seats away. Noticing Bill's gaze, Eric gave him a slight nod.
Bill nodded back, his peripheral vision catching a camera sweeping over, promptly straightening his posture and flashing a professional smile.
This conference reminded Bill Gates of serious matters, especially given its television broadcast format.
Out of caution, the event wasn't broadcast live; instead, it was recorded and set to air three hours later on ABC at 9 PM. Even so, it meant millions of viewers would witness this event, undoubtedly providing strong promotional effects for Yahoo.
The launch date for Windows 95 was confirmed for August 24, and Microsoft's marketing department had already devised a plan to satellite broadcast the product debut, expecting hundreds of thousands of viewers to tune in.
However, at this moment, compared to Yahoo's moves, Bill Gates suddenly felt Microsoft's launch event appeared rather modest. He resolved to talk to Eric afterward, hoping to have Windows 95's launch also broadcast on ABC. Of course, Microsoft could afford the associated costs, but without strong upper management support, obtaining such broadcast opportunities on the big three television networks was no easy task.
...
On stage, after Jeff Locke finished introducing YahooPay, he took a moment's pause amidst applause from the thousands of guests in the audience. He took a sip of water from the podium, allowing everyone to digest the information shared.
After a brief moment, Jeff Locke picked up the remote control again and pressed a button, revealing a fresh image on the big screen along with two bold words: Yahoo-Blog.
"OK, next, I am solemnly introducing another new internet product from Yahoo, the Yahoo Personal Homepage."
With a gentle smile on his face, Jeff Locke gestured to the large screen behind him and continued, "The internet is still a very new world for the vast majority of people. We have enabled access to a massive amount of information on the Yahoo portal, communicated with friends thousands of miles away via Yahoo Mail and YCR, and debated current hot topics in Yahoo forums. Now, moving further, many might wonder if there's a network tool that can allow us to showcase ourselves to everyone. Well, today, your dream is about to be realized."
*****
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