Microsoft vs Yahoo

There is a reason I put them in that order, because Microsoft can exist in the absence of Yahoo, unfortunately Yahoo cannot say the same. The great debate continues, with a new plot twist, can Icahn convince the share holders that the current board at Yahoo needs to be replaced? Before I go to far, let me give those who aren’t up to date with the current situation some background.

February 1, 2008: Microsoft offers to buy Yahoo

In a deal worth around 45 BILLION dollars, about $31/share MS offered to buy Yahoo. Prior to the announcement January 31 2008, Yahoo’s stock was worth $19.81/share, with a little simple math MS offered right around a 60% more than the current value of Yahoo’s stock.

SO why would they offer to buy?

MS envisions that a joint company would bring together two important synergies the advertising realm and, what I believe is really important to them, “innovation in user experiences such as video and mobile.” Two other synergies they site are combining talent, and reducing redundancies between the two companies. The latter two I believe are minor.

http://www.microsoft.com/presspass/press/2008/feb08/02-01corpnewspr.mspx

So what happened? Ultimately the offer was not accepted, MS retracted the offer and decided that taking the offer to the share holders would not be a good idea.

Its all over right? No. MS has now said that if Icahn, a very powerful investor who is upset at the board for not accepting the deal,  is successful in his battle to convince the shareholders that they need a new board of directors then the talks could be back on. If Icahn submits his proxy the vote would occur during the shareholders meeting on August 1st.

So what do I think ?

Yahoo is a fool to not accept this deal. Days before the deal was announced around Jan 28, a 4th quarter earnings that had declined 23%!, and was going to cut 7% of its work force. 3 Days later MS offers a 60% premium on their stock, and they claim that they are undervaluing the value of their company! That is outrageous.

Both companies when compared to Google, are behind in the state of the art Online Marketplace. All of us can think back to the AOL, and Hotmail dominated web, and we all know now AOL is barely alive, and Gmail is now the goto for email.  They have a better user interface and are constantly adding new features.

Yahoo can cling to fame with its YahooJobs and it does have a better online platform then MS, but Google trumps search,  excels in advertising, and is growing in all other areas, and haven’t been around nearly as long.

Google has investing power, they have more money laying around then they know what to do with. The have developers sitting around thinking, how can we do this better, what do people want… MS can provide Yahoo with money for R&D. Which is exactly what they need to compete with Google.

It all comes down to the fact that if Yahoo or MS wants to compete with Google they need to combine synergies. Obviously MS can help (donate money) Yahoos advertising compete with Google. MS has a respectable Finance site which with a little yahoo spice could instantly set them mile ahead of Google’s finance site(which needs a lot of work, they just added a stock screener)

MS’s true vision is for integration with their OS.  I honestly think MS is looking toward integrating OS and other their technologies to an online platform. They want fully integrate their OS to the web, and need a better, more complete, platform.  With out a proper online framework they can not achieve their Windows anywhere dream.

They want to plug into more “social” network sites, they want to produce a more integrated Picture, Video, and Music online marketplace.

If you join MS and Yahoos online platform they will be much more powerful and after a lot of painful integration might stand a chance to be a thorn in Google’s side.

I think MS can survive without yahoo but they need to do something about their online platform.  Its weak, their os is advancing, and it is very user friendly, but they can not take the next step in computing OS’s until they have a proper online framework to build into.  Yahoo has the subject matter expertise to develop the framework MS needs.

Do i think Icahn will be successful ?  Maybe 🙂 yea i took the high ground, but i think the large investors, would be interested because they have already seen the huge jump in the stock based on talks* about MS buying Yahoo.  I think the people still left to convince are the small town peeps.  The ones who fear big business, who fear MS, and who would be the ones to “say” they would jump ship but who probably wouldn’t do a thing if MS purchased Yahoo.

I am interested to hear some thoughts about this…. i wrote this blog up pretty quickly, so i am sure i will spark some debate.!

Advertisements
Tagged with: , , ,
Posted in Microsoft, Web Sites, Windows, World Wide Web, Yahoo
One comment on “Microsoft vs Yahoo
  1. NIck says:

    BTW, why did i write this article? Mainly because i have a daily debate with, who will remain an anonymous, a yahoo employee about how they are so great without MS. Which i think is a crock!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: