Wednesday, April 9, 2008

The MicroHoo funky chicken dance

The Microsoft-Yahoo dance continues.

Yahoo! will be testing out a partnership w/ Google to display advertisements from Google's AdSense program, on searches made at version only).

Microsoft was quick to retort, that such a move would further consolidate Google's position in the online advertisement marketplace- a statement that was backed up by US Senator Herb Kohl


Yahoo does not want to be bought, and definitely not in this hostile takeover. It would be a shame to see it go thus, and they're doing everything they can to stall. To their credit, they're doing quite a bit. They acquired an analytics firm earlier today, signed on a promising big-name partnership exploration(the biggest name these days, if you will...), and are, after a very long time, showing a hunger(fear?) that can probably get them out of this jam.


Microsoft has a point, but it's somewhat moot, because for every little thing Yahoo pulls off, it is able to convince its shareholders that Microsoft needs to name a better price, to compensate for the growth potential being created. So if I were Yahoo, I'd be pulling off a lot of things, every day, through the end of the month, and just before the Microsoft deadline, present my shareholders with a case that outlines a going-it-alone strategy.


From a shareholder standpoint, a huge price for Yahoo is not something that Microsoft shareholders want to bear, short term. There are estimates pointing to the downturn in MSFT stock that would happen if Microsoft were to go up even by $3/share. Moreover, it's not like the Yahoo stock acquired in the process would pay off their losses. And finally, the long-term benefits of the MSFT-YHOO merger are in the loooooooonnnnggg term- not something that shareholders(particularly the large institutional ones that hold shares in both MSFT and YHOO) want to wait out for.


All the same, Yahoo is either playing with a great hand(and they either get a huge payout from MSFT, or they get MSFT to walk away), or they're fighting to death(and we see the boring proxy battle).
The "worsening economic conditions" would make it harder for Microsoft to go very high...or so I think.

These next 3 weeks should be very interesting.

Does anyone *actually* know when the two weeks of AdSense testing for Yahoo begins?? What happens if the AdSense tests are in progress, and uncle Ballmer's deadline expires? Does he extend it to watch the next step for Yahoo + Google? Does he start the proxy battle knowing that he might lose(shareholders might love the 16% savings/16% revenue increase from a Yahoo-Google partnership..).

Good stuff...