Microsoft + Yahoo is a bad, bad move

Bad for Microsoft shareholders and probably good for Yahoo shareholders. 62% premium above Thursday’s closing price is a good offer, and board of directors at Yahoo must consider it very seriously.

Why is it bad and why it wouldn’t work? Let me count the ways…

1. Two mediocre companies – mediocre in terms of Internet world – will not create one better Internet company. Windows Live sucks. Yahoo has been losing its market share in search market and its new ad marketing system, Panama, hasn’t made difference to Yahoo. I really can’t see how the combined company will compete with companies like Google better…..

2. Mega merger rarely works. The reason why Cisco has been successful in M&A is because Cisco targets mostly small companies. There are a few exceptions, but it takes enormous amount of work to integrate large companies. It will take long time for Microsoft and Yahoo to work through integration, and competition will be far ahead of Micrsoft+Yahoo by then.

3. Microsoft has bullied its way into browser world by including internet explorer with its operating system, but these days, especially to web 2.0 companies and their web applications, browsers do not matter. Their applications are browser-agnostic in most part. Google returns the same result whether you have IE or Firefox or any other browser. Other Google services (or applications to an extent) will run the same whether on IE or Firefox or any other browser (if there is difference, it would be minimal). Furthermore, they are also OS-agnostic. Whether you run Linux, Solaris, or Windows, these web applications and web sites are made to run
the same no matter what OS and what browser you use. This is precisely why Microsoft should and is worried about Google and the whole slew of web 2.0 companies (look at Facebook and its huge list of applications – Facebook is already its own platform).

However, motivation is clear, and the proposed deal looks enticing to both Yahoo (for capital, financial and resource reasons) and Microsoft (for technology and market share gain reasons)…. But I can’t help but feeling that this will mark the time Microsoft finally jumps the shark……

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