Koogle: Well, most great institutional investors and large, large very-successful-over-the-long-haul investors look for a combination of three or four things in companies and if they don't find those things or you don't find those things inherently, you might keep an eye out as to whether or not the prospects of the company are any good or not. If they are, is the company, or can it be a leader in its market first off?
Second, is it addressing the market that's truly big and growing fast? The next one, is the fundamental model a good one so that it can actually get to cash flow positive and profitability? And can it drive the truly excellent kind of numbers that allows it to fuel additional growth?
And the last part of it, is it well managed? That combination of four things I don't think differs independent of what industry you're looking at or what stage of market development, or whatever. So you've got to seed through those things or look through those things and you know, there are a number of companies. This is not unlike any other emerging industry where a lot of new businesses get formed. Some of them, because capital has been very available, aren't necessarily businesses, some of the companies that have been formed. Some are, but went public pretty early and are having to execute in the public eye at an early stage in the company's development so you've got a whole combination of things. I think it's four primary things -- is it a leader, is it addressing a big market that's getting bigger, is it well run, and does it have a fundamentally strong business model? Some fit that, some don't.
Tom: Excellent -- well said. Now we went out to our Yahoo! message folder and we asked shareholders there and folks following the company to share any questions they may have. An interesting one came from a guy named Charles who wrote, on July 8, 1998, "Yahoo! sold $250 million in stock to Softbank in a private placement, raised the cash, but since that time as an investor, I see the money has essentially been sitting there gaining interest. The interest actually has been a big contributor or a contributor to the profits. What is the rationale behind diluting the stock if the money is not going to be used for anything more than interest payments at this point?"
Koogle: Well, in managing a business over the long term, I can tell you as a CEO, a General Manager, you try to get a business cracking and get critical mass and you pay attention to putting into your arsenal different currencies that you can go use for different kinds of things. You know, either funding operationally new investments that take you into new markets or new regions of the world or acquiring companies as a way of speeding your market entry and we have in the past, favored stocks as the currency when we make acquisitions.
Our business is not fundamentally a capital intensive one. It's one of the beauties of our business model, so to date, we have not had to use the cash. I can tell you at every stage of the company's growth we've tried to make sure that our balance sheet was very strong and very strong in relation to the scale of the business we are operating, so that in fact, we have that additional degree of freedom in case we needed it to go execute.
You never want to be backed into a corner where you lack the currency in whether its form is in stock or cash to really take ground ahead of your competition. In the face of markets, pullbacks, and times when in fact there may be some consolidation and shake out, having a large cash balance can sometimes be really beneficial because you can put it to use in taking minority shares in companies that desperately need the capital and secure strategic space. You could also use the cash in the face of poor market pullback to do some acquisitions and a few things, too. I would urge everybody to think of the cash balance on any company's balance sheet as kind of an arsenal that you keep there and use selectively in the face of all kinds of other verticals out on the market. That's how we view it.
Tom: Well said, and the way we look at The Motley Fool balance sheet is really the indicator of the long-term prospects of the business in a world where there's so much focus on the income statement, but you talked about acquisitions there and I know you know, and we had to ask it, there have been rumors about potential merger acquisitions between Yahoo! and eBay and rather than get into the specifics on that, I'm wondering if you would just outline one or two things that you look for in looking for acquisitions and then if you do have a specific comment about your auction business and potential merger with eBay and you want to introduce it here on the Motley Fool Radio Show, go for it.
Koogle: Well, I'll make the vanilla statement that we always do, which is we do not make comments on any kind on rumors and speculations independent of what name you put in the sentence or not. We just don't ever make comments on rumors and speculation. That said, we have been acquisitive, we're going to continue to be acquisitive. We've actually acquired, I think, about 14 companies now over the past two to three years and we do a steady stream of those as a way of speeding our market entry and if you look back, a lot of those we haven't actually made a big to-do about -- we've just been steadily acquisitive in the backgrounds.
As you know, we try to stay off the radar screen with a lot of our stuff because we do have competitors. We are going to continue to be steadily acquisitive and in general we always do have a filter that we lay on things, we have a strategy, no surprise to you, and we take a look at that strategy and we are constantly evaluating new acquisition prospects from a standpoint of do they extend our strategy, do they get us quick time to market, do the numbers work, does the culture fit, and all those sorts of things, so we do the normal process.
Tom: You've been very helpful. Thank you very much. Now closing pay-off question -- Tim you've been around with Yahoo! essentially almost from the start and now Yahoo! is an $80 billion company. Just 30 seconds on the quality of your life as CEO of a company that's worth $80 billion today and is much larger in scope and has a much larger base of employees versus what is was like four or five years ago. Happier lifestyle today? A lot more pressure? What does your world look like today that it didn't look like four or five years ago?
Koogle: Well, actually in a lot of ways there has been no change in what you are calling the quality of life. I sometimes tell people that this has been the most special experience I've ever had in my career and I really mean that. I had more fun with this than anything else I've ever done. At the same time, it has been a consistent exercise in sleep deprivation. I'm real passionate about this thing and I'm working with folks here that I truly love and that's a really easy formula for getting consumed by it and I have to admit, I'm pretty consumed with what I'm doing, so I don't have a lot of spare time, but I do love what I do.
Tom: All right, the next time I have you on the program you're going to have to come play the guitar on the air. Would you be willing to do that?
Koogle: I'd better practice, I guess.
Tom: Tim Koogle, Chairman and CEO of Yahoo! here to talk about first quarter earnings and all things Yahoo!-related, thanks for joining us this weekend. Fool on!
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