In Focus: Microsoft to Eat Yahoo
Microsoft's strong $44.6 billion come-on to Yahoo has got the techie and business quarters of cyberspace running high fevers, writes Michael Weiss, who actually felt a little guilty using Google to report this feature.
Well, the real question now is: When will Microsoft beginning withdrawing its troops from Iraq?
“Shock and Awe” was Wired’s headline responding to the news that the software giant has offered $44.6 billion to buy out Yahoo in what would be Microsoft’s biggest acquisition yet. (Anyone remember Starbucks’ sinister Phase 2 of operations?)
In a clear bid to outstrip Google of its market dominance in the search engine sector, Bill Gates is willing to pay $31 a share, which is almost twice what Yahoo’s stock is worth (or was worth before the merger announcement). Unsurprisingly, the Justice Department’s Anti-Trust team are already scanning the proposal’s fine print.
The two companies flirted like this less than twelve months ago, but a deal then was squelched due to Yahoo’s confidence that it could pull itself out of the financial doldrums. It didn’t, as Microsoft chief executive Steven Ballmer reminded Yahoo’s board in one of those friendly Microsoft courtship missives that translates to, “There can be only one.”
Yahoo had announced that it would be laying off 1,000 employees this year — a bloodletting that Microsoft says needn’t occur if the company were absorbed.
Bloggers are too overwhelmed, generally, to be able to decide whether this takeover would be good or bad.
Gizmodo polls readers on their reaction to the possible takeover.
Larry Dignan at Seeking Alpha has “some key questions to ponder: Would Zimbra become the future Office Live? How about rationalizing products, ad systems and search algorithms. What about ad markets? Cloud computing projects? The overlap is immense…Microsoft would get Yahoo’s managers like Sue Decker and research teams. Microsoft touted R&D critical mass and innovation as two big selling points.”
“If this goes through, what becomes of the Yahoo brand?” asks Todd Bishop at Seattle PI. “One analyst asked that question during the conference call. In short, it’s yet to be determined, or at least yet to be made public. This was the response from Kevin Johnson, president of Microsoft’s Platforms & Services Division, on the call.”
I Started Something has a match-up of Microsoft/Yahoo features.
Paul Kedrovsky at Infectious Greed sees the merger as a “good idea.” “Tying two share-losing rocks together — both companies are losing marketshare in search and in search-related advertising — won’t make them fly. The trouble, of course, is that MicroHoo would have much more scale, but a size problem is not why the separate companies are struggling against Google.”
“On the infrastructure side,” writes Rich Miller at Data Center Knowledge, “the deal could have significant implications for the open source community, where Yahoo has been a major player in several projects. Most of Yahoo’s infrastructure runs on FreeBSD, and the lead developer of PHP, Rasmus Lerdorf, works as an engineer at Yahoo. Yahoo has also been a major contributor to Hadoop, an open source technology for distributed computing.”
And here’s Canadian Mark Evans: “To me, Yahoo’s [sale] was inevitable. It was just a matter of time before someone stepped up to the plate. The interesting question is how this move will alter the online landscape. Will it propel other deals to happen as the major players adjust strategically to a Microsoft-Yahoo combination?”
Michael Weiss is the New York Editor of Pajamas Media. His blog is Snarksmith.
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7 Comments
1. progressoverpeace:$45 Billion for Yahoo?
Is it really not possible to replace/copy Yahoo (including advertising to get eyes) for less than $20 billion?
I don’t know. It seems like a ton of money to spend for nothing but a label, and a dying label at that.
Feb 1, 2008 - 9:22 am 2. PersonFromPorlock:It’s a natural! After all, Microsoft is to Apple (or for that matter, Linux) as Yahoo is to Google.
Feb 1, 2008 - 11:19 am 3. Kevin McCann:Are we missing a bigger trend? One reason that was given to defend Microsoft from Anti-trust years ago was that it was contending with nationalized companies from afar. It needed to be super-big for the sake of an American Business. What does Gates care about America? What could a billion $ do for our troops and their families. I say to hell with him. He has become an elite Bolshevik type socialist just like the progressive scum at Google. Anti-trust laws need to take them all down to size. The long term sanctity of free capital markets is trending out of control. Their power has no loyalty; only lobbyist. There will never be an International Anti-Trust Power that would not be saturated in corruption. To what end is this going? America will be better served when Patent, Contract, and Anti-Trust laws are aggressively enforced!
Feb 1, 2008 - 8:40 pm 4. DoktorNo:Competition is the hoe as corruption is the weed.
Ideas are the flowers as freedom is the seed.
A battle of giants steps on many flowers.
Call me a scaremonger, but for me this perspective is bleak.
Ordinary consumers are not aware of this, but I spoke with some guys who are working in IT business, and they said, that this is nothing good.
Y! is a main sponsor of PHP language development, and its servers runs on FreeBSD. Of course M$ would trash these both wonderful things, because they are a threat to their monopoly.
Feb 2, 2008 - 12:58 am 5. DoktorNo:Call me a scaremonger, but for me this perspective is bleak.
Ordinary consumers are not aware of this, but I spoke with some guys who are working in IT business, and they said, that this is nothing good.
Y! is a main sponsor of PHP language development, and its servers runs on FreeBSD. Of course M$ would trash these both wonderful things, because they are a threat to their monopoly.
Feb 2, 2008 - 1:02 am 6. RT:Speaking as someone who has been through several M&A processes, both as a accquisitor and accquiree, I can see the advantages from the business point of view, but I am convinced that the process will “fail”.
The example of Hotmail, which also had a FreeBSD infrastructure, where the server count doubled as they were converted to running Windows, the process for which took more than two years, is instructive.
The fundamental point about M&A is to integrate quickly, or all the good people will leave out of frustration at the friction. Yahoo cannot be integrated quickly into Microsoft, because the latter are going to be utterly hung up on ensuring that everything runs on windows, IIS and SQL server. Even assuming MS spend unlimited amounts of money porting code and scripts to Windows, the doubling of a literally 6 figure number of servers involves actually building additional datacentres; which takes 2-3 years.
My prediction is that the takeover will fail, with Microsoft left with the search code but little else. They could always have planned it this way of course, but it’s an awful lot of money just to remove someone who doesn’t even threaten their main revenue stream.
R
Feb 2, 2008 - 1:09 am 7. Dom:Microsoft just hasn’t found a brand name yet for online services that could rival Google. Livesearch isn’t attractive and the very name limits expansion of its branded services, and Microsoft has always met resistance online. They should go back to the drawing board and forget about Yahoo, certainly at that price.
Yahoo for their part might do well to take the money and run, or else to stay alive it might as well get out of search altogether – they do have a few interesting fringe operations such as Yahoo Answers and their news service. Could they sell rights to the Yahoo search alone, and develop other valuable markets like blogging and hosting? I don’t know what blogging facilities they presently offer but it seems an obvious revenue stream and the market might be ready to treat Google as another unwieldy Microsoft in that case. Yahoo does have a strong brand but the search wars are over.
Feb 2, 2008 - 10:55 am