“In this corner…we have the challenger…from Sunnyvale, California, weighing in at thirty-nine and a-half billion dollars…” Well, you may not hear Michael Buffer announcing this, though the Microsoft (NYSE: MSFT) proposed purchase of Yahoo (NASDAQ: YHOO) is, while not yet officially hostile, on the verge of joining the “Let’s get ready to rumble!” crowd. It may not bring to mind the latest UFC mixed martial arts smackdown, or an Ali-Frazier heavyweight fight, but it’s shaping up as anything but friendly, with trash-talking and lots of stare downs already.
The early favorite in this close quarter’s corporate combat has to be heavyweight Microsoft, with a decided advantage in heft, financial reach and clout. Yahoo, in some handicappers’ quarters a still young but already fading combatant, may only be able to bloody Microsoft’s nose in the process, to stave off the inevitable for a while, but not actually keep the inevitable from happening. What’s the inevitable? All the smart money says Yahoo as a stand-alone entity will either hit the canvas or have to tap out. From any angle, Yahoo, which once “coulda been a contender”—and was– in the internet search wars, which has seen its prospects dim in the last couple of years, is likely on its way out as a major internet player.
When Microsoft announced its $44.6 billion offer to buy internet search engine Yahoo, Yahoo had already been badly beaten up by an even bigger bully, Google, which came out of nowhere to smash and stomp Yahoo into a painful, almost pitiful distant second place in the search engine wars. And when you’re second place, given the economy of scale necessary to compete in such a gigantic ring as the internet, you might very well be nowhere. Yahoo, in boxing parlance, was reduced to the status of “opponent.”
But it doesn’t take a fight fan of any kind to realize that this has been shaping up for a while. Yahoo, which some observers call desperate, has clearly needed to do something to change its fortunes, its business trend, as it is falling farther and farther behind Google. When Yahoo’s board voted to reject Microsoft’s $31 dollar per share bid, some see this as a formality, others a ploy, still others as a delaying tactic. On the Microsoft side, some observers question why they would even want Yahoo, and if the offer for the company with dwindling fortunes is even sincere. Do they want to prevent Google from swallowing Yahoo up? Why does Google or Microsoft, for that matter, even need Yahoo?
In an odd yet predictably desperate move, Yahoo has bravely or foolishly postured with rhetoric that it will continue on independently, yet there are rumors it is in talks with Time Warner’s (NYSE: TWX) AOL, an indigestible chunk of business goo that was swallowed but is still stuck like a perma-furball in Time Warner’s corporate throat. And if AOL and Time Warner aren’t poster boys for a bad merger or acquisition, who is? That is the cautionary tale also if Microsoft “wins” Yahoo. Be careful what you wish for.
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