Microsoft wises up

05 May 2008

It's not often one gets to say this but, well done, Microsoft.

By withdrawing its implausible offer, Microsoft gets to keep its $47 billion and avoid a nasty takeover battle. And it gives Yahoo's management the chance to prove the company is worth $37 a share.

Most M&As fail, and this seemed particularly ill-conceived.

The companies have nothing in common apart from online ad businesses that have been bested by Google. They have vastly different engineering platforms and company cultures.

As a BBC journalist wrote, "it was far from certain that the combination of two not-quite-that-successful teams of web engineers would have resulted in a credible challenger for Google."

Despite the high fives at the Yahooplex on Saturday, there's nothing to cheer. The Yahoo stock is about to plummet.

CEO Jerry Yang will come under intense pressure from the inevitable shareholder lawsuits and, if the stock stays down, angry staff.

Yahoo's new advertising platform, Panama, is a technical flop. The company's revival, it there is one, will come from the unlikely source of Google.

The trial partnership on search ads with Google has worked well and is ready to be expanded commercially. On average, Google makes 60% to 70% more from every search than Yahoo.

Which once more makes Google the winner, and with no serious rival.

But Microhoo was never going to be that. It is better for Ballmer to keep his cash and find a new online strategy.

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