Microsoft: Hallucinating...Or About to Buy Yahoo?

I'm going to go out on a limb here and assume that Microsoft division president Kevin Johnson is not a moron. I'm also going to assume that, when Johnson said yesterday that Microsoft plans to grow its Internet search share from 10 percent to 30 percent and its online advertising share from six percent, he could not possibly be imagining that Microsoft could do this on its own.

(Microsoft has been trying to succeed online for 12 years, and it's no closer now than it was when it started in 1995. Its Internet division is losing almost $1 billion a year. How does this compare to other Internet giants? Terribly. Even pummeled AOL is still printing money.)

So how could Microsoft actually achieve the goals Kevin Johnson laid out? There's only one answer: Buy Yahoo.

Buying Yahoo would give Microsoft 30 percent search share instantly. It would also boost Microsoft's ad share close to that 40 percent goal.

A Microsoft acquisition of Yahoo would be disastrous for Yahoo, which is having enough trouble competing with Google on its own (imagine what would happen if it got swallowed by the Redmond whale. In six months, all the remaining strong people would be gone).

But what such an acquisition would do to Yahoo is irrelevant. If Microsoft comes in with a Murdoch-like offer, Yahoo won't be able to refuse.

Comments

[DHeil]

Henry,

As someone who knows something about Yahoo, up close and personal, Yahoo is a dying brand unless it decides to realign it's assets away from this one-stop shop model.

Microsoft is always investing in the wrong channel or product and often too late. By purchasing Yahoo, it would be buying a dying brand. The only way this would work for Microsoft is if it did two things:

1. Break apart the Yahoo model and reapportion assets to best of breed brands, and

2. Get Yahoo for dirt cheap. And I mean dirt cheap. Anything over bargain basement pricing for Yahoo shares, and Msoft would be crazy to absorb it.

BTW, Yahoo employees would probably be thrilled to be absorbed by Microsoft. Yahoo's stock is dead in the water without massive change, inside and outside the company. It's going nowhere fast. And Microsoft is a pretty damn good company to work for on most days.

[realitytrumpsbull]

Congress brought antitrust against Microsoft,
years ago. When does a corporation effectively
become its' own country? Will Gates be the
next Randolph Hearst? Let's not forget the
Yahoo! China diming-out, there...OUR government
runs Winders, too...hmmm...what? Microsoft
trying to influence politics by censoring the
Internets? Noooooooooo!!!!!!

[curiousasheck]

When a companies performance, creativity, and vision is terrible about all you can do is purchase blocks of market share and hope for the best.

[CriminallySane]

And of course, in typical Microsoft fashion, they'll try to "feature it up" - without stopping to notice that one of the real reasons Google is as popular a search site as it is has to do with the pure simplicity of it - a search string text entry box and that's pretty much it.

They'll have their 30%, for a while, and then it will slowly erode under the weight of everything they try to pile on top of it.