Time To Change Microsoft – Yahoo (MSFT/YHOO), Here's a Better Deal

A quick update on the Microsoft – Yahoo deal. Now that people have had a chance to digest the deal a bit, I notice the sentiment is turning negative. Microsoft shareholders are walking and employees of both companies seem unhappy. The value of the offer has shrunk over $2/share already. It also seem clear that Jerry does not want the deal to happen. The only winners so far seem to be short- and mid-term YHOO shareholders. While it’s unclear if another suitor will jump in or make Microsoft up the bid, it seems unlikely. It’s still possible Yahoo could outsource its search to Google, but it’s clear that doing nothing is not an option. Since I think the deal would be bad for Open Source in a lot of ways, I was glad to see a reasonable proposal posted recently. It’s clear that Microsoft just does not do the web very well. Despite piles of money and a lot of motivation, they continue to fail miserably. The fact that they had to make this offer shows just how little faith they have in getting things done on their own. Forcing Yahoo to become part of Microsoft would almost certainly be a disaster. How this is going to play out is still up in the air, but I’ll be watching closely.

As a side note, I’ve seen a couple posts made that indicate this deal could be the beginning of the end for Microsoft. I think that’s a bit dramatic, but I will say that the fact that Ballmer is still CEO does surprise me a bit.

–jeremy

Microsoft offers to buy Yahoo in $44.6 billion deal

It’s been rumored on and off for years now, but Microsoft just made an unsolicited $44.6 billion bid for Yahoo. The bid, which would consist of cash and Microsoft stock, values Yahoo shares at $31 a share, a 62% premium on Thursdays closing price. More analysis here. Yahoo has rebuffed Microsoft in the past, but this time the offer might be one they can’t refuse. The price of YHOO stock after the announcement indicates the market thinks there is a high probability of a deal. This deal is clearly about Microsoft not being able to compete with Google, and not being too happy about that. Ironically, I don’t think this deal will help them compete any better. On the other hand, Yahoo has been a huge friend to Open Source. In addition to things like YUI (which we use at LQ) and Hadoop, they acquired a great company in Zimbra. To me, Zimbra is one of the only real long term threats to Exchange. Unfortunately, I’m not quite as optimistic as Matt about the future of some of these Open Source initiatives if Microsoft were to take over. I’m not sure companies like Flickr, del.icio.us, MyBlogLog, Zimbra and others would have sold to Microsoft… and for good reason. The cultures at Yahoo! and Microsoft are just entirely different. Concerns like that sometimes go out the windows when $44B is on the table though. Long term, I think Yahoo could probably offer more shareholder value alone than as part of Microsoft. The market doesn’t really think long term anymore, however, and in the short term Yahoo is hurting.

–jeremy

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