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Ballmer now says that Yahoo merger would have added huge integration overhead

Microsoft is often at the center of controversy for its business practices. Microsoft is currently languishing in a distant third place in internet search with Google sitting at the top of the heap and Yahoo following up in second place.

Microsoft and Yahoo have been involved in an ongoing soap opera over the outright purchase of Yahoo as a whole or Yahoo's search business by Microsoft. The talks between the two companies have ended and begun several times and ultimately no purchase has been agreed to by the two parties.

Microsoft CEO Steve Ballmer told analysts at its annual meeting that his company reached an agreement with Facebook to integrate Microsoft search services into the social networking site. In 2007, Facebook and Microsoft made public that Microsoft had bought 1.6% of Facebook for $240 million.

The original purchase gave Microsoft exclusive rights to sell advertising on Facebook until 2011. The new agreement between Facebook and Microsoft is an extension of the original agreement between the two companies reports The Wall Street Journal. Microsoft rival Google has a very similar deal in place with MySpace, the largest of the social networking websites online. Google search technology is used on the MySpace website and Google sells the ad space for MySpace.

The Wall Street Journal reports that a significant amount of time during the analysts meeting was spent addressing concerns about Microsoft's internet business. Ballmer says that Microsoft will be boosting its spending for on-line technologies and marketing. Part of the increased spending will be used to acquire new companies.

Ballmer and Microsoft are still trying to spin the failed purchase of Yahoo to a positive. At the time, Microsoft and Yahoo were in negotiations, Microsoft saw Yahoo as the fastest and most efficient way of gaining ground in internet search. Ballmer said that Microsoft could get to where it needed to be without Yahoo, but it would take much longer to get there. Now Ballmer says that the integration of Microsoft and Yahoo's operations would have created "huge integration overhead."

Why is internet search such a big deal for Microsoft? The Wall Street Journal quotes Ballmer as saying, "Search is one of the starting points on the Internet. It's the best place to distribute new Internet services to the consumer."

The new agreement between Microsoft and Facebook allows Microsoft to be the exclusive provider for search and ads only for U.S. Facebook users.

Microsoft announced last week that Kevin Johnson, the executive in charge of the division that includes its online services was stepping down and that the division will be reorganized. Microsoft also announced that it would be purchasing a company called DATAllegro for an undisclosed sum. DATAllegro is a start-up that manages data warehouses with computing hardware and is apparently the first purchase by Microsoft since it said it would increase spending for its online division.

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Was Microsoft Ever Serious About Buying Yahoo!?
By mikefarinha on 7/28/2008 12:55:52 PM , Rating: 2
This whole thing now makes me question if Microsoft was ever serious about buying Yahoo!.

Everyone and their brother knew this would have been a bad deal for Microsoft, no one could see the benefit to such a move.

Perhaps Microsoft was simply using it as a distraction for something else they were doing in some other market?

Was Microsoft so cunning that they were able to calculate the fact that Google would try and swoop in to make a deal with Yahoo! that would result in an anti-trust investigation?

Did Microsoft know that this would cause some sort of shareholder backlash and thus throw the company into disarray?

Should we take everything at face value that Microsoft wanted to buy Yahoo! but couldn't agree on a price?

What the heck was the whole purpose of this move by Microsoft?!?!?!

By Radnor on 7/28/2008 1:02:43 PM , Rating: 2
Going for facebook, and advertise there isn't such a bad option. I guess Microsoft was really trying to buy yahoo, not online for search engine, but probably for patents and human resources as well. Yahoo is still a profitable company.

It was a all in one deal. Just in patents, i cant imagine what yahoo might have under the hood. look at Rambus, way more lawyers than engineers atm. Still kicking.

Anyway, didnt seemed to me such a bad deal, if it ever was signed.

By Arribajuan on 7/28/2008 1:38:24 PM , Rating: 4
Long read but quite interesting,

so they do not want yahoo, just patents...

That is why then they said to not want all of yahoo, but just the "search technology" which Yang did not like.

By riku0116 on 7/29/2008 2:00:24 AM , Rating: 2
Did Microsoft know that this would cause some sort of shareholder backlash and thus throw the company into disarray?

Well I can't really speak for the other questions you've raised but I'm quite certain that Microsoft knew letting Yahoo go the way of the dodo would not have been in its best interests.

Most Yahoo search users would use Google as an alternative instead of Live Search, which would further strengthen the search giant's grasp on the market. Sure a few percentage of Yahoo users may join the Microsoft camp, but it is not worth the risk of competing against an even stronger Google.

"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer
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