General Motors changes focus to profit, not survival

News from Detroit that General Motors could make money this year after losing as much as $88 billion since 2004 probably comes as a big surprise -- and a good one for U.S. taxpayers, who own 60 percent of the country's largest automaker as a result of government efforts to save the company. GM's new chief financial officer, Christopher Liddell, who left a similar job at Microsoft in December, said the company had a "reasonable chance" of earning money in 2010, according to the New York Times. "Preconditions for success are extremely good," Liddell said at a news conference at GM headquarters. Liddell also said GM was considering a stock offering this year that could substantially increase the value of the government stake, the Times said. "It's an important part of rejuvenation for the company," he said, "but it's important that we do this at the right time." Liddell said GM would wait until the national economy and the automobile market had improved before attempting to sell shares, the Times said. General Motors, once the world's largest carmaker before losing that title to Toyota, emerged from bankruptcy protection last summer. Liddell said the company was in better financial shape than critics contended, and said it had made substantial progress since its bankruptcy filing in 2009.

Nothing from nothing leaves $100 million

Rich people still are different from the rest of us. Perhaps that's the best explanation yet for why venture capitalists ponied up an additional $100 million on Thursday for a bit of Twitter, the wildly popular Internet microblogging service. Twitter, a Web startup that lets people express themselves in 140 words or less, has attracted millions of users in its three and a half-year existence but no known revenue. The new cash infusion is expected to raise the value of the company to $1 billion, even though it only has 60 employees and does not plan to begin accepting advertising revenue until next year, according to the New York Times. Twitter's valuation is apparently based in large part on the numerous takeover offers it has received, notably from its chief rival, Facebook, and as well from Google and Microsoft. “Twitter is so likely to be successful at this point, it is almost impossible to envision a way in which Facebook can truly monopolize online content-sharing,” Keith Rabois, the vice president of strategy at Web social entertainment firm Slide, told the Times. Facebook has more than 300 million users but its continued domination of Web social networking appears to face a serious challenge from Twitter. “There have probably been less than five examples of companies that have grown like Twitter has,” John Borthwick of Betaworks told the Times. Betaworks created the link-shortening service Bit.ly. Twitter is "a new layer of innovation on the Internet," Borthwick said. “This investment is happening because it represents a shift.” And just who are the new investors? They include Insight Venture Partners, a New York company, mutual fund giant T. Rowe Price and current backers Spark Capital and Institutional Venture Partners, the Times said.

Negative market reaction to Yahoo-Microsoft deal probably reflects reality

That Google shares fell today after the long-awaited deal between Microsoft and Yahoo was finally announced was a given -- it can't be good for Google that two of its largest competitors for the Internet search market have joined forces. But the fact that Yahoo's share price also dropped does not bode well for the future of this arrangement. The 10-year deal, under which Microsoft's new Bing search engine will power searches on Yahoo sites in exchange for a share of revenue, still must be approved by regulators in the United States and Europe, according to the Reuters international news service. Yahoo and Microsoft were motivated to reach a deal in their effort to challenge Google's dominance in the search market. Google has 65 percent of the U.S. search market versus Yahoo's 19.6 percent and Microsoft's 8.4 percent, Reuters said. Yahoo turned down Microsoft's $47.5 billion takeover offer last year. Analysts quoted by Reuters said the market was not energized by the deal because Yahoo did not receive any upfront payment as expected. "Those that were looking forward to a take-out, the deal today was rather disappointing -- it's not as good as what investors expected," said Marc Pado of Cantor Fitzerald & Co. "Overall, it's a big positive for two companies that have been struggling to keep up with Google. This consolidates their resources and allows them to make a more concerted push as the No. 2 entity," said Ross Sandler of RBC Capital Markets. Yahoo CEO Carol Bartz applauded the deal and said the lack of an upfront payment was not a deterrent because the agreement would be lucrative for her company.
While Yahoo CEO Carol Bartz had previously said that any deal would require a partner with "boatloads of money," she said on Wednesday that the revenue share agreement in the Microsoft deal was more valuable to Yahoo than a one-time payment. "Having a big up-front cash payment doesn't really help us from an operating standpoint," she said in a conference call with Microsoft CEO Steve Ballmer, Reuters said. Microsoft is expected to pay Yahoo 88 percent of search revenue from Yahoo sites for the first five years, while the companies continue to keep their advertising businesses separate. Yahoo said the deal will boost its annual operating income by $500 million and to increase cash flow by $275 million. The companies said they were hopeful the deal would close early next year, Reuters said.