A Micro-Hoo Decision Coming Soon

Rumors are circulating that a decision will be made today by Yahoo!’s board on whether to accept the Microsoft offer. (If that isn’t true a decision must come relatively soon.) The only alternative that has publicly surfaced is “outsourcing search” to Google, which would boost near-term search revenues. However, that’s not really a credible alternative “bid” but may be used by the board as a negotiating chip with Microsoft.

Chip or no, it would appear that Microsoft holds almost all the cards in this game. The Yahoo! board members have a legal obligation to seriously consider the bid — and could get sued if they irresponsibly turn it down in the absence of a real alternative. Moving on to a post-acquisition scenario…

There are two interesting quotes in this BusinessWeek piece about what would appear to be the impending takeover by Microsoft:

Ballmer says: “Yahoo, the brand, will live.”

(That is self evident and merely confirms one of Microsoft’s reasons for buying Yahoo!.)

The second quote is more interesting and potentially telling about “integration”:

One thorny call will concern Microsoft’s adCenter and Yahoo’s Project Panama, both technologies designed to help advertisers finely target online marketing. In a combined company, there’s no reason for both to survive. And if you ask Tarek Najm, a distinguished engineer at Microsoft and adCenter’s general manager, what Panama technology he’d like in his product, he’s blunt. There isn’t any. “We’re the leaders in technology,” Najm says. “Ours is better.”

(my emphasis.)

This isn’t a merger, it’s an acquisition, and the “ours is better” attitude may be the prevailing one in making decisions about what to keep and what to get rid of. If Microsoft cannot be objective about products and resource allocation it won’t realize the full value of the deal.

Regardless it’s going to be a challenging and difficult integration process that will likely see numerous “casualties.” The combined company may be much stronger in selected areas, but one of them is unlikely to be search — at least in the near term. Mobile, however, might well be a standout in the positive column.

It would appear unlikely that anything will prevent the acquisition and the outstanding issue for the board is to get the best deal it can. At the risk of sounding like John Edwards, this is one of those situations in which rank and file employees tend to get “shafted,” unless they hold lots of options that are about to vest.

I think we’ll look back on Yahoo!’s acquisition, in a few years, as a milestone and the true end of “Web 1.0.”

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Here’s my earlier write up about the local implications and challenges of the deal.

The New York Times and its various sources suggest that the impending takeover is partly a result of Yahoo! CEO Jerry Yang’s hesitation and unwillingness to make “tough decisions” more quickly.

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