In Focus: Microsoft to Eat Yahoo

Well, the real question now is: When will Microsoft beginning withdrawing its troops from Iraq?

Shock and Awe” was Wired‘s headline responding to the news that the software giant has offered $44.6 billion to buy out Yahoo in what would be Microsoft’s biggest acquisition yet. (Anyone remember Starbucks’ sinister Phase 2 of operations?)


In a clear bid to outstrip Google of its market dominance in the search engine sector, Bill Gates is willing to pay $31 a share, which is almost twice what Yahoo’s stock is worth (or was worth before the merger announcement). Unsurprisingly, the Justice Department’s Anti-Trust team are already scanning the proposal’s fine print.

The two companies flirted like this less than twelve months ago, but a deal then was squelched due to Yahoo’s confidence that it could pull itself out of the financial doldrums. It didn’t, as Microsoft chief executive Steven Ballmer reminded Yahoo’s board in one of those friendly Microsoft courtship missives that translates to, “There can be only one.”

Yahoo had announced that it would be laying off 1,000 employees this year — a bloodletting that Microsoft says needn’t occur if the company were absorbed.

Bloggers are too overwhelmed, generally, to be able to decide whether this takeover would be good or bad.

Gizmodo polls readers on their reaction to the possible takeover.

Larry Dignan at Seeking Alpha has “some key questions to ponder: Would Zimbra become the future Office Live? How about rationalizing products, ad systems and search algorithms. What about ad markets? Cloud computing projects? The overlap is immense…Microsoft would get Yahoo’s managers like Sue Decker and research teams. Microsoft touted R&D critical mass and innovation as two big selling points.”


“If this goes through, what becomes of the Yahoo brand?” asks Todd Bishop at Seattle PI. “One analyst asked that question during the conference call. In short, it’s yet to be determined, or at least yet to be made public. This was the response from Kevin Johnson, president of Microsoft’s Platforms & Services Division, on the call.”

I Started Something has a match-up of Microsoft/Yahoo features.

Paul Kedrovsky at Infectious Greed sees the merger as a “good idea.” “Tying two share-losing rocks together — both companies are losing marketshare in search and in search-related advertising — won’t make them fly. The trouble, of course, is that MicroHoo would have much more scale, but a size problem is not why the separate companies are struggling against Google.”

“On the infrastructure side,” writes Rich Miller at Data Center Knowledge, “the deal could have significant implications for the open source community, where Yahoo has been a major player in several projects. Most of Yahoo’s infrastructure runs on FreeBSD, and the lead developer of PHP, Rasmus Lerdorf, works as an engineer at Yahoo. Yahoo has also been a major contributor to Hadoop, an open source technology for distributed computing.”


And here’s Canadian Mark Evans: “To me, Yahoo’s [sale] was inevitable. It was just a matter of time before someone stepped up to the plate. The interesting question is how this move will alter the online landscape. Will it propel other deals to happen as the major players adjust strategically to a Microsoft-Yahoo combination?”

Michael Weiss is the New York Editor of Pajamas Media. His blog is Snarksmith.


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