Sunday, February 03, 2008

Microsoft-Yahoo Deal

The tech industry is abuzz with the news about Microsoft's Unsolicited $44.6 billion offer to buy Yahoo! with both stocks and cash. The keyword there is "unsolicited". This was one of those rumors that kept showing up every few months and it finally materialized. This deal has been analyzed in every which way possible by every analyst out there. But here's my two cents on it:
  • Microsoft could not afford not to make this deal. They have tried the past 3 years to come up with an search & advertising alternative to Google's but haven't been going anywhere. They have a huge amount of cash - something like $35+ billion. They had to show their investors that they are doing something with all that money and hence, voila, Yahoo!.
  • Yahoo could not afford not to accept this deal. As Saul Hansell put it "An Offer Yahoo Can't Refuse". They have not been able to convert their 500 million visitors into revenues and their stock isn't going anywhere in the last 3 years. Their management is basically a musical-chair. On top of all that, Microsoft is offering 60% premium above the stock's closing price on the day the deal was made public. This is so that no other company can beat that deal (except maybe Google, who wont be able to buy Yahoo anyway for anti-trust reasons). It is what is known as 'Checkmate' in Chess. Well played, Microsoft. By going public with the deal, Microsoft is putting pressure on Yahoo's board and investors to make its move.
  • Microsoft-Yahoo merger would not and could not work in the long term. There are just too many roadblocks - differing work cultures, too many competing product offerings, overlapping user base and above all, the management-by-committee that's running Microsoft would drive core Yahoo folks running for their life. Couldn't agree more with Mary Jo Foley of ZDNet.
  • And finally, has any mega tech merger been successful? AOL-TimeWarner, HP-Compaq, Oracle-PeopleSoft and eBay-Skype have all been unable to boost the acquiring company's revenues by any reasonable amount.
It'd be interesting if Yahoo refuses this deal and Microsoft launches a proxy bid for Yahoo, a la, Oracle-Peoplesoft. Grab your popcorn, people!


  1. As per , you're right that the deal makes a ton of sense.


  2. Yep what you wrote makes a lot of sense. I won't be surprise if this time yahoo accepts the bid, they are like between the devil and the deep sea, if they refuse their stocks will again go down and with the recession already in the horizon , non one with some sense of business would want to refuse a sweet offer like this one. Would that be good for small players, as microsoft can bring in much more user friendly web interfaces to many of its application suites and bring in the "Paid Software" culture in internet too. Something for open folks to be cautious about. Are the days where we have to pay for an email account getting closer?