Sunday, February 10, 2008

Will Google benefit from kicking Yahoo's butt?

The Yahoo board of directors met telephonically on Friday to consider asking Microsoft for more money or, alternatively, doing a deal with Google. Given the way Silicon Valley works, I think the latter is more likely, but who knows?This would be funny because it's competition from Google, not from Microsoft, that has demolished Yahoo's business. Even funnier, Yahoo would be joining up with the company that already has a monopoly market share in search and search advertising, so this would reduce competition, rather than increasing it. Neither of these things matters, of course, because it's all about using Microsoft as a bogeyman. Ooooh, scarey.Yahoo might be trying to wangle a bit more cash out of Microsoft, but that's far from certain: Yahoo would have got $50 billion last year, and next year it might be lucky to get $25 billion, unless its performance is transformed. As Om Malik points out:
A 62 percent premium to Yahoo's stock price is as good an offer as Yahoo can hope for. The company's turnaround efforts, the Peanut Butter Manifesto, and Jerry Yang's 100-Day Plan are all delusions of (lost) grandeur. After all, the stock's value had been sliced in half long before Steve Ballmer showed up on the door, dragging bags of money behind him.
Yahoo should have teamed up with eBay when it had a chance, but a $44.5 billion offer is pretty darn good. Yahoo is simply delusional if it thinks it can find someone more desperate than Steve Ballmer & Co. Whether it makes sense for Microsoft to pay so much for a company that can't execute (and seems to be rather short of grown-ups) is another matter. There doesn't seem much argument for the deal, beyond the point that no matter how badly Yahoo has done in search and advertising, Microsoft has done even worse.The only new thing I've seen on that front is a post on Todd Bishop's blog at the Seattle Post-Intelligencer. It seems Ballmer took questions during Microsoft's latest Minority Student Day in Redmond. According to the post, Ballmer said:
What our goal is, is to provide, what I would say, great innovation and great competition, particularly in the search and advertising area, to Google. ... There's already about $40 billion a year sold in search advertising, and in our desire to be a world leader in Internet search and Internet advertising, it helps us a lot to acquire Yahoo.
What are the challenges? There's a group of 13,000-plus people who work at Yahoo, and they have their goals and their ambitions and their desires and their thoughts and their software and their everything else, and we have to kind of mate up their goals, desires and ambitions with the goals, desires and ambitions of people here, and that's generally referred to as the integration process. If we do that well ... that will be a very good thing for customers, our shareholders, etc., and if we do that poorly, we probably shouldn't have tried this acquisition, so really doing that well is a high priority, and we're really focused in on it -- assuming that Yahoo accepts our bid, which has yet to happen. As I said a week ago, it's the execution that matters.... and that's the big unknown.

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