Yahoo acquisition - Will it be Microsoft or Google?

By Aditya Mhatre at 2 February, 2008, 9:18 am

This story has already been over reported in all sorts on only media but it is very difficult to hold myself back to write about it. So basically what happened was that Microsoft wrote a love letter to the Yahoo board saying that its is ready to pay $31 per share in cash or stock which if you do the numbers correctly comes to about $44 billion.

Yahoo reacted by saying that it was “unsolicited” but hasn’t yet declined the offer, which means that the board is considering it. Jerry Yang, the co-founder had taken over his company’s reins from Terry Semel not that long ago so the question still remains whether the board thinks that Jerry is capable to resurrect Yahoo or not. The $31 per share is a 62% premium over the current price of the stock but an interesting thing to note is that its only 15% higher than Yahoo’s best price in the past 12 months. Now, don’t confuse the politeness of Microsoft’s letter to be a merger request. It’s tehcnically a hostile takeover without malice.

Now anyone with an email address will tell you that this step has been taken to fight Google. Infact, Steve Ballmer (CEO of MSFT) without mincing words said that this was to counter the dominance of one player in the market and that Microsoft and Yahoo can together offer a credible alternative. This move by Microsoft also demonstrates its seriousness towards the online services business model. Let me also bring to your notice that Microsoft had previously shown interest in buying Yahoo but Yahoo was not interested. But a lot of things have changed. I can comfortably argue that rise of google has hurt Yahoo more than Microsoft but now even Microsoft is feeling the heat. Interestingly, even aftet these giants merge, Google will still be numero uno in the search market. The Microhoos will have to work really hard to convince advertisers to move to their platform instead of Google’s already successful business.

Interestingly all the stock analysts are saying that it will be a good idea for them to merge and expect the Yahoo board to accept Microsoft’s offer. All the tech analysts are using words like synergies but I see a operational and administrative hell for atleast 2 years if the deal goes through and only god knows where google will be at that time.

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