[Chapter 611: High Risks]
Before 1995, Microsoft had already begun to establish its dominance in the operating system software market, yet its annual revenue was only around $2 billion. Meanwhile, its main competitor, Apple, was also achieving annual revenue above $1 billion. Comparatively, Microsoft didn't hold an absolute advantage. Windows 95 was still over a year away from release. Although the internal team at Microsoft was very optimistic about the new operating system, perhaps no one in the world, except for Eric, could predict how Windows 95 would completely turn the tide.
At that moment, in a small restaurant near the Harvard Business School library, a composed Bill Gates knew that while Yahoo seemed like a defenseless little lamb in comparison to Microsoft, there stood behind that lamb a "beast" even fiercer than Microsoft at that time. Bill Gates quickly dialed back his earlier hardline stance, displaying the shrewdness typical of business negotiations, and said, "Eric, I could consider your suggestion about pre-installing Internet Explorer on Windows."
"It's all set for the Yahoo browser, and I'm sure you already know I just integrated three companies," Eric replied, catching Bill off guard with the sudden interjection.
Bill Gates felt some irritation at Eric's abrupt input but remained patient. "Alright, the Yahoo browser must operate exclusively on Windows if it wants to become pre-installed software."
While Eric understood the development trends in the operating system market over the next few years, Microsoft's market share for Windows at that time was only 60%. Mac, Unix, and even original DOS were still widely in use. It was impossible for him to reveal any weaknesses at this stage. He shook his head. "That's not possible. Allowing Windows to exclusively integrate the latest technology of the Yahoo browser to drive user traffic is already the biggest concession I can make. Following your suggestion means that unless Windows completely monopolizes the operating system market, Yahoo would automatically give up over 40% of its operating system platform, which is obviously impossible."
Completely giving up other platforms would bind the Yahoo browser software entirely to Microsoft. If Microsoft suddenly turned hostile, Yahoo would be left in a very precarious situation. Microsoft's reputation for commercial integrity wasn't great in this regard.
Windows 95 hadn't been released yet, and even Bill Gates didn't have absolute confidence in Microsoft's dominance over the operating system market. While he didn't verbally agree with Eric's suggestion, he also refrained from further arguing. "I will consider this matter. However, Microsoft cannot allow a completely unrelated company to apply for access to the Windows platform. If the Yahoo browser wants to be pre-installed software on Windows, Microsoft would at least need to acquire 40% of Yahoo shares."
"Yahoo will choose to go for an IPO next year. If I sell 40% of the shares to Microsoft, you'll become Yahoo's largest shareholder; that's no different from selling Yahoo to Microsoft." Eric quickly shot back. "Moreover, the offer from Microsoft now is far below my expectations."
Initially, Eric planned to flatly refuse the request for equity shares, but as he spoke, a sudden thought flashed in his mind. He decided to dangle a nice bait in front of Bill Gates. "I can promise to give Microsoft the option to buy 30% of Yahoo's shares, not right now, but with the option to acquire those shares five years from now. Five years later, Microsoft can decide whether to purchase the 30% of Yahoo shares based on Yahoo's market value at that time, with cash or stock exchange, whatever they prefer."
Bill Gates quickly calculated in his mind. He was very optimistic about Yahoo but didn't believe it could surpass Microsoft in five years. Internally, Microsoft estimated the value of Yahoo to be between $800 million and $1 billion. Even at best estimates, if Yahoo's market value increased tenfold in five years, Microsoft would still only need around $3 billion to acquire 30% of its shares. Given that Microsoft had an annual market value increase of over 30% at that time, their market capitalization could potentially rise to $80 to $100 billion in five years. By then, $3 billion wouldn't seem like much for Microsoft, and acquiring a 30% stake in Yahoo would make it their largest shareholder. After that, taking over Yahoo through a hostile acquisition would become much easier.
Eric observed Bill Gates closely, noting that his expression gradually relaxed, and perhaps he had thought of something advantageous as a proud smile formed on his face. Eric realized that Gates had already stepped into the trap he had laid.
Feeling confident in his plans, Bill Gates stated, "Eric, I can consider that, but Yahoo must grant Microsoft access to some of its browser software patents."
"If you insist, that's of course not a problem," Eric seemed more conciliatory now, asking, "Anything else?"
"That's all for now. If I think of anything additional, we can add it during formal negotiations."
"Okay," Eric responded. "Since you've made your conditions, I'll lay out mine. If we can cooperate, we can overlook details like exclusive licensing fees. However, Yahoo must ensure that the version of the Yahoo browser on the Windows platform consistently leads over other platforms. But Microsoft must also guarantee that within five years, it won't launch its own browser software."
Eric planned for Yahoo's technical software to take precedence on the Windows platform, so letting Windows possess the latest technology of the Yahoo browser didn't require any adjustment on Yahoo's part. If anything, it could serve as leverage for some benefits.
Bill Gates suddenly thought that Eric was still a bit naive; once Yahoo entered the capital market, in five years, it would essentially belong to Microsoft. Furthermore, five years was ample time for Microsoft to thoroughly understand all the technical details of the Yahoo browser and develop alternative technologies. By then, even if things changed, Microsoft could unhesitatingly oust the Yahoo browser from the Windows platform.
Yet, being the cautious businessman he was, Bill Gates didn't immediately agree. Although he felt there wasn't much risk involved, he planned to take these terms back to Microsoft's strategic development department for further analysis. He continued with a vague response, "No problem, I will consider it."
Eric didn't engage in the same level of calculation as Bill Gates and dismissed his "let's consider it" rhetorical games. They both understood that until a formal contract was signed, none of the promises held any legal effect. Moreover, Eric was well aware that as the new century approached, browser software would increasingly serve as a subsidiary service to internet giants, weakening their role compared to the 1990s. Besides, in the original timeline, while Microsoft had dominated the browser market initially and maintained a large market share, its internet business was still getting trounced by Yahoo, Google, Amazon, and others, hardly generating any profits. Even the once outstanding MSN online service ultimately shut down.
Having established the general intent to cooperate, the sky had completely darkened outside, and both parties felt no reason to linger any longer in the small restaurant.
When they parted, Bill Gates expressed a desire to visit Yahoo's headquarters next day. Eric had plans to host John Chambers and Steve Case the following day and didn't want Gates' involvement, concocting a reason to excuse himself until two days later.
...
As he watched Gates and his wife drive away in their luxury car, Eric strolled a few steps toward a quiet patch of grass, pulled out a pack of cigarettes from his pocket, lit one, and casually sat on the grass. In the darkness, he surveyed the occasional pedestrians, feeling curious. It puzzled him that despite both he and Bill Gates having revealed their identities, there was no crowd gathering around them.
Caroline, who had been tagging along like a little shadow, settled next to Eric. Initially intending to remind him not to smoke on campus, she hesitated, noticing that Eric seemed deep in thought and decided not to interrupt. Watching the sparks bobbing in Eric's hand, she felt an initial worry that he might drop the cigarette butt carelessly. But soon, she thought if he did, she could just pick it up for him, and the thought of doing something small for him brightened her mood significantly.
Recalling his discussion with Bill Gates, Eric recognized that even though they had roughly reached some cooperation intentions, the specific contractual terms would inevitably adjust in future negotiations. The biggest risk in this cooperation was probably that 30% purchase option, which was the largest bait he had thrown out to Bill Gates. If Bill Gates could figure it out, Eric certainly could too. However, having strategically prepared for two-plus years and wielding the prophetic advantage of being a time traveler, Eric felt that if five years later, the internet wave didn't catapult Yahoo's market value beyond Microsoft's reach, he could simply sell Yahoo and return to Hollywood.
As for the other matters, Eric wasn't overly concerned. Bill Gates, who made his fortune through software, was still most concerned about browser software. Eric could see that even if the Yahoo browser were completely free, it would significantly bolster Windows' promotion, which explained why Gates was so eager to rush in and obtain Yahoo before the launch of Windows 95. The reality of the original timeline had already shown that holding the dominant position in browser software didn't necessarily confer any advantages for Microsoft's internet business.
The choice to partner with Microsoft stemmed not only from Eric's desire to leverage the upcoming Windows 95 launch to promote the Yahoo browser but also from his fear that Microsoft might use its market advantage to produce a new browser with distinct technological standards, undermining the internet industry's development. In the original timeline, Microsoft's IE and Netscape browser used the same Mosaic kernel but created various different peripheral technical standards, leading to a series of website compatibility issues. If Microsoft were to launch another browser with an entirely different web decoding kernel now, the incompatibilities would become even more severe. Eric didn't want to engage in a long-standing technical standards war with Microsoft; that would lead to mutual destruction.
Caroline's gaze followed the flaring cigarette in Eric's hand until he suddenly turned towards her, waving the nearly burnt-down cigarette, asking, "You want to give it a try?"
Caroline quickly shook her head. "No, I don't want to."
Eric laughed, got up, extinguished the cigarette butt, and tossed it in the nearby trash can. "What dorm do you stay in? I can walk you back."
Caroline's gaze followed the cigarette butt as it flew into the trash, then she paused, and upon hearing Eric's question, turned her face to answer, "I'm not in a dorm. I live in an apartment to the east."
Guided by Caroline's direction, Eric walked toward the east, saying, "What's up with living off-campus? It's not safe for a girl like you."
"No, it's not just me. I live with classmates, and it's very close to the school," Caroline replied.
"Hmm," Eric nodded and didn't press the issue further.
As they walked for a bit, Caroline found another topic to discuss, saying, "Eric, why did you agree to sell 30% of Yahoo to Microsoft? Even five years down the line, it seems like a huge risk."
In the original timeline, Yahoo's market value had once approached $100 billion. Eric believed that after consolidating a series of plans he remembered, as long as the internet wave arrived on time, Yahoo's market value in this timeline would definitely multiply several times. Even if it only reached $200 billion, then 30% of shares would equal $60 billion, representing 10% of Microsoft's peak market value in the original timeline. It would be challenging to predict whether Bill Gates would be willing to trade 10% of shares for 30% equity in Yahoo, as a 10% stake would effectively bring in a major stakeholder into Microsoft, impacting Gates' control over the company. Furthermore, even if the deal went through, Eric wouldn't suffer. Windows was on the verge of becoming a monopoly operating system; as long as PCs weren't phased out, Microsoft would continuously generate stable profits. With Bill Gates gradually unloading his Microsoft stock, Eric might even find himself as Microsoft's largest individual shareholder at that time.
Moreover, even if Microsoft didn't encounter anti-trust investigations in this timeline, considering the frenzied nature of the upcoming internet bubble, it was still inevitable that it would face a day of reckoning when the bubble burst. Following the collapse of the internet bubble, as internet company stock prices plummeted, Eric could still use the funds cashed out during the bubble period to easily facilitate a second internet industry layout.
However, these weren't things Eric could share with the girl next to him. He casually stated, "The greater the risk, the larger the reward."
From her limited knowledge, Caroline could only see the risk. She didn't feel Eric could gain anything from this deal. Yet, imagining the series of miracles Eric had created in just a few short years, she had no doubt about his viewpoints. She thought to herself that if she couldn't comprehend something, it only meant her thinking was too simple.
As they continued walking, nearing the red brick apartment building of Soldiers Field, Caroline felt increasingly anxious. She knew if she didn't proactively grab hold of something, Eric would surely disappear from her life again after dropping her off. The thought of only seeing him again in newspaper articles made her heart flutter. After walking a few more steps, the girl finally mustered the courage to grab Eric's arm and said, "Eric, you mentioned in the restaurant that you wanted to hire me as your personal assistant."
*****
https://www.patreon.com/Sayonara816.