Management and the Technology Professional – B302

Case study answer 3

Answer:
Based on my investigations I would say it would be wrong to cancel the client project. If the project goes ahead, is a success Yahoo will gain a possible £59,171.60 which is a decent return especially after an initial £25,000 outlay.

If Microsoft purchases the company during the projects success the final gain or net present value will only be affected by about £20,000 which isn’t a failure by any means. On the other face of it, if the project fails its £25,000 gone, but that is a risk of any project and it’s a cost which has to be outlaid for the project to even start.

I would say that there is a much greater loss at stake if the project isn’t taken on. Yahoo either loses £0 (if Microsoft takes over) or a potential £90,000 (if Microsoft doesn't takeover) from not investing itself in the project. The losses of actually undertaking the project are surely more manageable and provide the greater possibility of success and a profitable return whether Microsoft takes over the reins or not.

I personally feel that if the advertising project goes ahead it has a 60% chance of success. The 40% failure is based on some of Yahoo's previous projects which didn’t exactly become a great success, such as 'Panama' which put adverts next to search results. This didn’t create the revenue return which Yahoo really needed from the project. My 60% success rate is down to this project being done by Yahoo. Yahoo is still a big name brand and has a buzz about it from its previous financial successes in the past.

The acquisition of Yahoo by Microsoft I feel has a 60% chance of happening. After all Microsoft has been pondering the purchase for a while and has even considered increasing its bid according to some financial insiders. Microsoft obviously looks upon a purchase of Yahoo as a stepping stone in the online application war with Google which many people feel is the future of the industry. I recon it’s just a matter of time till Yahoo is taken over by Microsoft. It’s another question altogether as to whether the acquisition will happen during the projects 4 months duration. Yahoo and Microsoft are considered to be the 2nd and 3rd biggest companies on the internet behind Google, and their combined ideas and effort will certainly provide some competition to Google’s some what dominant streak recently. Microsoft for one needs some fresh ideas into its works as its 'live.com' idea hasn’t exactly been the greatest success, and has been looked upon badly for being unoriginal by some internet users. It also hasnt gone unnoticed by people within the company that Yahoo has updated its employee severance packages very recently (February 12th) suggesting they feel that a takeover by Microsoft could be very much on the cards.

Notes:
For the calculations of NPV k (i.e. discount rate) was 0.04.