Sunday, November 23, 2008

Microsoft Would Still Do a Yahoo Search Deal

At Microsoft’s annual shareholder’s meeting today, CEO Steve Ballmer has put the kibosh on speculation that the company will resurrect its bid to acquire Yahoo. However, Ballmer did suggest that a search deal was possible.

Microsoft’s single-minded pursuit to acquire Yahoo never made much sense to me. Sure, it would obtain substantial search market shareover night, but it would still have to claw its way up to compete with Google. Even when the two companies are combined, Google still holds the upper hand in market share.

There is also a great deal of overlap between Microsoft and Yahoo products, and there would certainly be a culture clash among employees. Brain drain is another issue. If Microsoft were to buy Yahoo today, it would not be obtaining the talent that it would have just a few months back. It would also be costly to retain people–even its own employees, many of whom would be hesitant to spend their time at Microsoft getting caught up in turf wars.

A merger with Yahoo would distract Microsoft from important initiatives that are core to its future success, such as project Oslo, an multi-product effort to steer developers toward model driven development and service oriented architecture, as well as continued investment in the .NET Framework.

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