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Microsoft plans to take its bid for Yahoo directly to shareholders

In the world of mergers, there are numerous levels of "hostility" which characterize bids.  There are unilateral talks, mutually agreed upon, which are typically labeled as more germane, even if one company ends up absorbing the other. 

Then there are unsolicited bids, such as Microsoft's initial offer to Yahoo, which are often labeled as "partially hostile".  On the far end of the spectrum are "fully hostile" bids, in which one company tries to bypass another company’s executive and board leadership by offering a buyout directly to shareholders.  Among the famous examples of takeovers considered "hostile" was the HP and Compaq merger, which passed by a meager 51% margin in a shareholder vote.

Having been rejected by Yahoo's board, Microsoft commented that it was "unfair" that Yahoo did not embrace its "full and fair proposal to combine" the companies.  Now, Microsoft indicates it is planning to bypass the board and take the issue directly to a shareholder vote.  Microsoft states, "We are offering shareholders superior value and the opportunity to participate in the upside of the combined company. The combination also offers an increasingly exciting set of solutions for consumers, publishers and advertisers while becoming better positioned to compete in the online services market."

Microsoft's statement continues, "The Yahoo! response does not change our belief in the strategic and financial merits of our proposal. As we have said previously, Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!'s shareholders are provided with the opportunity to realize the value inherent in our proposal."

The decision by Microsoft to pursue a fully hostile takeover is truly a sign of the times at Yahoo.  Yahoo despite promising big changes continues to lose ground to Google in search engine market share, which in turn leads to sinking advertising profits.  The company dismissed 1,000 employees recently.  Yahoo aggressively acquired companies throughout last year, but its investments left it with little to show for it.

The hostile bid by Microsoft may nix a future board-arranged merger with Yahoo, but at this point it may be a moot issue.  If Microsoft has to, it can simply wait out the company until it falls further towards its demise, though it would prefer a quick merger while the company still has some vitality.

Yahoo has a lot to offer Microsoft.  Despite its dropping search engine share, Yahoo still represents a significant portion of the market and a major market name.  An alliance with Microsoft could establish a strong competitor to Google.  Further, Yahoo has a wealth of intellectual property, domain names, and other assets that could come in handy to an ever-evolving Microsoft.

The board is left to ponder Microsoft's words, and their significant decision -- as it may be their last.



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By Emryse on 2/12/2008 11:54:28 AM , Rating: 2
That's what it's about: core competency. At this stage in the game, with Google hot on their heels, MS should be slightly paranoid and take every opportunity to ensure they're steps ahead of the program.

Core competency is defined as the unique bundle of resources and capabilities that allows a business to offer a relatively rare value to their customers. Microsoft has maintained a competitive advantage over the years by ensuring that their products are penetrating as many facets of the technological universe as possible and those MS products are the universally accepted standard for compatibility and familiarity. Advertising real estate is where the money is at, and at the core all of Microsoft’s products provide this capability. So really, MS strategy is two-fold:

1.) Developers, developers, developers, developers (I couldn't resist)!
2.) Location, location, location!

1st prong provides resources; 2nd prong provides capability.

To sum it up, when you're king, you have to be mildly paranoid all the time: paranoid that no one else can do what you do, and paranoid that no one else can replace what you do. Google has the potential to do both; as such MS is playing the hardest and best strategies they possibly can to keep Google away from their competitive advantage. Conversely, Google knows that if MS gets Yahoo! whether by unsolicited bid or hostile takeover, it spells major problems.

Even if Google has superior products delivered to their users, remember: users of Google's search engine are NOT the customer. Paying advertisers are the customers; they will go to where their product will get the most exposure to the optimal audience.

Although I'm extremely interested to see how this plays out between MS and Yahoo!, I'm even more interested to see how the aftermath plays out with MS competition.




By TerranMagistrate on 2/12/2008 2:16:16 PM , Rating: 2
Of course, Microsoft is most certainly paranoid about competition and about the prospect of losing their monopolistic position to a competitor. They hate competition, there is no doubt about that.

This hostile bid is the same of story with Microsoft: If you aren't able to beat them, buy them out. Microsoft's ultimate goal here is to leverage their uncontested OS and Office software power to eventually gain a monopoly on the online services market too. Now that would be a nightmare.

What sets Google apart from MS is that Google embraces open source and promotes it. Microsoft will forever cling to their proprietary products to make sure those billions per quarter flows steady and increase.

Hopefully, this whole ordeal will the single most regrettable mistake that Microsoft has ever made. I'd rather not see the internet become proprietary courtesy of Microsoft.


"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs

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