FT : Microsoft Yahoo Off Again On Again

Saturday, May 5, 2007

Fear is a great motivator.  The fact that Microsoft, the Goliath of the technology industry, has been spooked into another attempt to buy Yahoo is testament to Google’s speed and aggression in dominating key chunks of the online world.  Google has long led the lucrative area of search-related advertising, on its own and third-party sites.  Now it is pushing for similar dominance in serving display adverts.  Its acquisition of DoubleClick was probably the last straw.  It even goaded Microsoft (of all companies) to challenge the antitrust implications.  Of course, if Microsoft buys Yahoo there will be serious regulatory scrutiny.  But strategically, the deal has long made sense.  Microsoft knows the vital importance of search and online advertising for the future of its software business.  But it has failed to turn huge investments into serious results.  Yahoo, meanwhile, has a unique global platform spanning search, display advertising, e-mail and video – but it has failed to take full advantage.  An acquisition would, at best, marry Microsoft’s technology expertise and lack of media savvy with Yahoo’s media expertise and apparent shortcomings in technology.  The combined company would create the only serious counterweight to Google in search.  It would also have a huge base of e-mail and instant messaging users, easily the world’s biggest online audience, and deep enough pockets to outspend even Google.  The trouble is making it work. Terry Semel, Yahoo’s embattled chief executive, might feel it is time to sell.  The danger is that a takeover by Microsoft, long seen as the evil empire, could produce a huge culture clash and a wave of defections from Yahoo.  The $50bn-odd deal would be a huge risk and would presumably force anyone else with serious internet ambitions to take a look.  The deal’s structure will be key.  But, this time, Microsoft might just be scared enough to pull the trigger.

Reference : http://www.ft.com/cms/s/6a8d482a-fa68-11db-8bd0-000b5df10621.html

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