Microsoft + Yahoo!: Here’s Hoping For A Better Option
Now that I’ve had some time to digest the news and opinions of Microsoft making an offer to buy Yahoo!, here are some thoughts.
This is a brilliant move for Microsoft. This earnings season was pretty backwards – Microsoft did surprisingly well while many of tech leaders – most notably Google and Apple – took a beating. Yahoo! disappointed in a big way.
Rumors are emerging that Microsoft moved very quickly after Yahoo!’s weak earnings to make their desire known – but Yahoo! was not interested. Kara Swisher claims that as a counter-move, Microsoft then threatened to go public with the offer – and actually did.
The result is bad for Yahoo!. Shareholders may now force Yahoo! to pair up with Microsoft even if management doesn’t want to. And if Yahoo! refuses Microsoft, it may now be expected that they sell to someone. Going it alone (the former status quo) is a third option that if taken – the stock will certainly tank.
So it sucks to be Yahoo! management right now, where options from last week are now obliterated. This may be why Semel resigned from the board this week.
Anyhow, back to the pros and cons of the merger. Is there anything positive about it? On paper, yes.
- Yahoo! would have access to hardware and software like never before – imagine Yahoo! built into Internet Explorer or Yahoo! Music on the Zune.
- Yahoo! would have an in with Facebook.
- A really huge online ad network.
- The combined company could take on Google.
But I have a longer list of downsides:
- The likely product synergies are uninspiring. Yahoo! Music on the Zune? Uh… still not buying one.
- If Microsoft is currently suffering from lack of vision and corporate bureaucracy, this merger doesn’t solve that. Yahoo! management doesn’t have much, either.
- Integration of overlapping properties will be a nightmare.
- Yahoo! has made some decent Web 2.0 acquisitions, namely Delicious and Flickr. But based on past history, I can fully imagine Microsoft deciding to “monetize” these refreshingly open services in bone-headed ways, like ads or default options for all other Microsoft services.
- At worst, it could create a huge, unwieldy albatross like AOL / Time Warner.
Will this merger happen? I’ll say: probably. Yahoo! management is surely in turmoil right now, trying to save the company. It must be tempting to just hand the mess over to someone else and get paid for it. It’s the easy way out.
But this way out is fraught with danger for the employees and ultimately us users. Despite talk of Microsoft preparing retention packages, I would take the more cynical view. Whenever there is a merger of this size I’m sure the suits will take the knives out and start slashing “redundancies.” – especially if one of the goals Microsoft laid out was to realize “operational efficiencies through elimination of redundant cost.” And ultimately, as a user, I fail to see how this will improve the few Yahoo! and Microsoft products I do use.
So I’m personally troubled this situation. I’ll be sad if the former Internet leader is sold to big, bad Microsoft. Especially when it doesn’t seem to be happening in a manner Yahoo! would like.
Perhaps Yahoo! has other options:
- Merger with eBay?
- Private equity?
- Google? Perhaps instead of an acquisition, Yahoo! will kill their ad network and partner with Google – and maybe give Google a minority stake in the company. This idea was mentioned earlier this week by Mike Arrington. Paul Kedrosky also muses on this idea.
Call me sentimental, but I’m hoping for option three.