Microsoft looks to enter formal talks in order to buy Yahoo
By Steve Ragan May 4, 2007, 16:12 GMT
According to the New York Post, Microsoft is asking Yahoo to re-enter formal talks in order to finalize a merger of the two companies. This move was attempted in the past just shortly after Google emerged, but in the end went nowhere. After the huge loss last month to Google over the DoubleClick purchase, Microsoft is intensifying their plans to acquire Yahoo.
Microsoft is now showing urgency that they have lacked in the past according to the Post report. The talks have come and gone over the years, but this new attempt comes just a few months after the last stalled offer to buy the second largest internet search portal. According to the Post, several Wall Street sources placed the price tag on Yahoo just shy of fifty billion dollars.
If you look at the past business gains for the three companies Google has trumped Microsoft at almost every turn. There was the DoubleClick bid that Microsoft lost, and in 2005 the ad deal with AOL. Add to that that Google creates on what appears to be a monthly basis hosted applications and software that directly competes with Microsoft. One source told the Post, “The minute you hear Microsoft start arguing against something on antitrust grounds, you know they are desperate and need to do something big.”
According to the follow-up report form the Wall Street Journal, “The renewed talks are a sign of the continued growth in Google's power and problems over the past year with in-house efforts at Yahoo and Microsoft to ride a boom in Internet advertising.”
The news of the latest talks comes shortly after Yahoo started using their new advertising platform. (Panama) The Post cited sources that said the platform did not fail as reported. The first quarter results were skewed because of unfair comparisons. They made a valid argument when they mentioned that if the results are not better in the next two quarters, investors might push for the merger or ask the CEO Terry Semel to step down.
So what would the merger mean? It would give Microsoft a twenty-seven percent share of the internet search market and close the gap with online ads with Google to thirteen percent. This is a huge jump when you look at the numbers. What about the deal itself, is it fair? Some claim this is just another attempt by Microsoft to buy out competition instead of developing their own business plan. Microsoft tried and failed to develop a solid business plan for internet dominance so this is the next logical step for them.
Add to that the fact the deal with Yahoo would be good for both companies. What about Google, one can argue that Google is playing the role of Microsoft of old by snapping up deals at the last minute using its name and money as a leveraging force. Some say it is because of those tactics that Microsoft’s hand was forced. Should Google be worried about the merger? Maybe, but with such a large lead in market share; they might not worry too much at first.
The final point reported by both the Post and the Wall Street Journal is that the deal will mean more eyes and a stronger target market. Microsoft with the older crowd and Yahoo with the younger demographic means more eyes for the advertisers. That is something both companies need according to recent online advertising reports. There is also the predicted merger of technologies, such as making Yahoo Music available on Zune or Xbox.
So far, Microsoft and Yahoo are making no comments on the talks or potential merger. Google likewise is also remaining silent. This story will be updated.