BusinessWeek reported that Microsoft and Yahoo might be merging .
I think it would be unfortunate to see the #2 and #3 of web search portals merge. There should be some rule to encourage 3 competitive leaders in any sections of the market. The way things are going right now, we tend to end up with just 2 top companies. If this went through, we might end up with having just 2 real choices, Microsoft or Google.
Yahoo share prices have been falling due to declining revenue. So Microsoft offer would be hard to resist. If the merger does goes through, they have lots of challenges ahead as mentioned in the article. They probably still won’t be able to beat Google so I hate to see us losing a 3rd option. The only reason for Yahoo to decline the offer is if they based their decision on something other than pure financial and business sense. However, based on their statement, it would:
evaluate this proposal carefully and promptly in the context of Yahoo’s strategic plans and pursue the best course of action to maximize long-term value for shareholders.
Analyst would say that in order to maximize long-term value for shareholders, merger is the best way to go. I am not an analyst but as a web user, I would disagree. Yahoo and Google users choose them as alternative to Microsoft. So I believe that if Yahoo merge with Microsoft, lots of Yahoo user would switch to Google or some other upstart companies. So the bringing together of “critical mass” Microsoft CEO Steven Ballmer is referring to might not materialize. Having a close view of mergers before, I could see how working environment is usually poisoned after a merger and there’s hostility. Add that to the fact that Microsoft and Yahoo cultures are so different then that effect would be amplified. Productivity will get a big hit. This was impressed upon at the end of the article:
Maybe the biggest challenge Microsoft will face is cultural. Yahoo’s 14,300 employees come largely from the Silicon Valley world that loves to hate Microsoft. “Yahoo has always considered itself a bit of an upstart,” says a former Yahoo employee who asked to remain anonymous. “Most Yahoo employees will feel that, A., we lost, and B., there is no way in hell that I am going to work for Microsoft.”
Sad thing? I still own Microsoft stock, which went down today on the news. But I think that long-term this is a good deal for Microsoft’s shareholders too. With one caveat: Microsoft and Yahoo employees need to work together to create value, not destroy it. That’s going to be pretty tough since the cultures of the two companies aren’t a total fit.
I like it. Not because people say it will change the search business. To me Yahoo! is way more than search.
Along with Google, amazon and eBay, it is showing how to transform delivery of software and economics of IT infrastructure. It is a VC which nurtures and provides an exit for a number of creative startups.
Even if Microsoft rationalizes the search, webmail, and overlapping assets such as the open source Zimbra software properly (there are so many other areas of overlap, but disparate code bases), it still has to figure out a way to capitalize on those assets through advertising and push those services into the cloud and hope that people pick them up.
There are far too many risks associated with this goal, which is why this could be the most disastrous acquisition since HP agreed to acquire Compaq. In a way, it’s a little sad.