Feb 5, 2008

The Rape of Yahoo!

So Microsoft has made an offer for Yahoo! equivalent to $31 per share. Big deal. NOT.

Yahoo's interests in two Asian properties are worth perhaps $12 per share. So Microsoft would get Yahoo! for a net of $19 per share, at a time when Yahoo! is at a low point ... management turmoil and firings, a very disappointing quarter, an aggressive competitor (Google) eating more of its lunch each day, general stock market uncertainty, and the prospect of a recession.

As an "investment", all Microsoft would have to do (if the deal goes through) is put in some half-decent management, tough it out until sunnier days, and then sell Yahoo! at a hell of a profit ... as one or several pieces.

Microsoft may well have this as their "can't lose" bottom line. Their principal objective, though, is to become "#2" overnight, take whatever is better in Yahoo! and use it (including patents), put a stop to open source usage and support in Yahoo!, and possibly siphon search and advertising revenues.

Microsoft's evolution of it's "Live" services doesn't need Yahoo! ... it just needs more time ... perhaps a lot of time, given Google's astounding pace of product development and deployment. And in most, if not all, areas Microsoft and Yahoo! have equivalent product offering, e.g., mail, messaging, portal, search, etc. So unless Microsoft is thinking about making a Great Leap Forward by poaching superior implementations of equivalent products from Yahoo!, this deal doesn't make sense in a conventional way.

No, it's about search and related revenues, with a can't lose value proposition tossed in as well. And #2 (really an "also ran") as a bragging point in a battle between two competitors.

For Yahoo and its (panicky and/or greedy) shareholders, it's a rape job. For Yahoo! employees, it's a constant stream of pink slips.

Smart/predatory company, Microsoft. That's all.

Update: If true, Microsoft could cause a world of hurt for Google by acquiring Yahoo.