Management and the Technology Professional – B302
Case study answer 3
As a software engineer in the small advertising division of Yahoo! I would choose to start the project. This is based on the fact that regardless of a takeover or not there would still be benefits both financially and in the relationship with the customer. Yahoo! will hold a responsibility to the customer to carry out the task in the form of ethics and possibly codes of conduct. As a software engineer inside Yahoo! you hold responsibilities to your superiors to carry out the task set. Following developments of serious lay-offs at Yahoo! in the planning stages this would also probably be a good time to demonstrate personal worth. Microsoft has also stated that if the merger goes through there would be job cuts inside Yahoo!, which is natural in any takeover. This should lead to an even greater drive by an employee to shine above the rest if they wish to save their job.
The probability for the success of the proposed project is extremely high. Yahoo! and its advertising division have naturally undertaken many identical projects in the past. This experience and automation of process has led to 99 percent likelihood that the project will be successful.
Will Microsoft's takeover bid be successful? This is a very important factor to consider as this will affect the total benefit values associated with the project. Microsoft has previously been in discussion with Yahoo! regarding a possible merger or takeover. The deferment or decline by Yahoo! for these discussions and their current incline to look for other options than the merger on the table affects the probability of it occurring in a negative manner. Microsoft has always been plagued by antitrust reviews and decisions against their interests, having an additional negative effect on the possibility. The difference in the operation of the two companies is great with Yahoo! being based largely around open source software and Microsoft the reverse. The value of the offer does carry a lot of weight in the probability. The offer was a 62 percent premium on the floating share price adding some value for shareholders inside Yahoo!. Weighing these decisions, a probability of a takeover occurring was set to 35 percent. The expected value can now be created for starting vs. cancelling the project. The expected value for starting the project is £56,270 and the expected value for cancelling is £-58,500.
The time value of money (k) has been calculated at 2.75 percent. This breaks down to 1.75 percent interest over the four months (bank of England interest rate at 5.25 percent/per annum) and the low risk of 1 percent. This allows us to calculate the NVP. The NVP for the most likely event is £69,331. To back the original decision the NVP turns out to be a positive number and the expected value of starting the project is much higher than the expected value of its cancellation.
Whether your logo is blue or red, a software engineer should not confuse possible management changes with a chance to have a holiday.
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