Microsoft and Yahoo: Mergers

When major news sources start reporting the possibility of the biggest merger in the history of search, it’s impossible for a responsible journalist to ignore it. Even with the odds stacked against such a merger, it’s obvious that something is going on, and equally obvious why. In this article, we will try to shed some light on the possible scenarios going forward.

The New York Post, the New York Times, and the Wall Street Journal were all abuzz with the "news" that Microsoft had entered into formal talks to purchase Yahoo; one of them even put a price tag of $50 billion on the second-place search engine company. I put "news" in quotes because this isn't the first time we've heard about the two companies being in talks; they were reportedly in talks a year ago, at which time Microsoft was rebuffed. This particular round of talks has supposedly been going on for months. Naturally, both Microsoft and Yahoo have refused to comment.

The various unnamed sources of the major publications seem to agree that at least informal talks between the two companies have been going on for months. Nevertheless, a number of analysts think that this move has a certain air of desperation about it. Indeed, the two companies are so different that only one thing could make them even consider joining forces so closely, and its name is Google.

Google had no comment on the rumors either. Even so, at least one analyst didn't think it was beyond the pale to speculate on Google purchasing Yahoo, in much the same way that Google swooped in recently and purchased DoubleClick out from under Microsoft's nose for $3.1 billion. For the sake of this article, at least, let's put that possibility to the side and examine instead the what and why of a Microsoft buyout of Yahoo.