The big tech industry news this week is Microsoft’s announced hostile takeover attempt of Yahoo for a staggering $44+ billion dollars.
Michael Mace has nailed the deeper implications of this deal (and how it relates to Google) in his analysis posted here. I couldn’t agree with his conclusion more:
Even the bid for Yahoo is driven by Microsoft’s desperate desire to copy and co-opt another company’s business model. That’s exactly what Yahoo doesn’t need. Rather than focused management that can pick out the most disruptive embers in Yahoo’s portfolio and fan them into bonfires, Yahoo is likely to get layers of well-meaning ROI analysis, a distracting flood of resources, political integration hassles, cultural conflicts, and a mandate to “concentrate on the core.”
The process will probably strangle Yahoo and distract Microsoft. I really hope I’m wrong, but I think there’s a very good chance that the merger will be the beginning of the end for both companies.
In some ways, rather than increasing competition, this deal may prove to be the best thing that ever happened to Google. Microsoft is crashing into Yahoo at ramming speed, and the collision will sink or cripple both of them - leaving Google the only battleship afloat.
I found the quotes from Microsoft featured in this article in the New York Times to be interesting:
What was most striking to me Friday was Microsoft’s own expectations for the deal. To put it bluntly, they are awfully low. When I spoke to Yusuf Mehdi, Microsoft’s senior vice president for strategic partnership — and the man who had been driving much of its online efforts in recent years — he never once talked about crushing the competition, or even catching up.
A Yahoo deal, he told me, “will be good for consumers who want another search engine, Web publishers who want another ad placement service, and syndicated advertisers” — who also want a choice other than Google. He continued: “Because of Google’s heavy volume and its algorithms, they are a very efficient buy. But people are rooting for a credible No. 2. We got lots of calls today from Web sites and others saying, ‘We’re with you.’ ”
Was he really saying that Microsoft would be content as a “credible No. 2?” I had a hard time believing it. But when I pushed him on this point, he reiterated it. “Online advertising revenues are going to be $80 billion within a couple of years,” he said. (They’re about $50 billion now.) “That is going to mean a tremendous opportunity to all players. There has to be a place for another credible player.”
I have NEVER seen Microsoft shoot so low. What sort of leader pays $44+ billion dollars to become a “credible number two” ?? This reeks of desperation.
Microsoft and Yahoo will both be paralyzed waiting for this deal close, one way or the other. If Microsoft does succeed, it will be at least a year before the merged company is working efficiently. And a year in Internet time might as well be an eternity.
Rather than improving their own technology to catch up with Google, Microsoft has handed Google another hundred miles of runway to get even further ahead.
