Microsoft Ends Yahoo Bid

Microsoft walks away from its bid on Yahoo. And why we are happy about it.

After facing the threat of a possible hostile takeover by Microsoft, Yahoo can sigh a breath of relief after the software behemoth withdrew its $44.6 billion offer earlier this weekend, ending a 4-month stalemate that had critics and investors alike paying LOTS of attention.

Wall Street had rated the takeover as a 90% probability.

Microsoft CEO, Steven Ballmer, probably being deprived of the opportunity to exasperate his family and friends over a BBQ this weekend, wrote the following letter to get some much-needed closure. Hope you noticed Ballmer’s subtle allusion to anti-trust concerns circling around possible future Yahoo-Google business partnerships.

Rumor around the campfire is that Yahoo is frantically trying to negotiate a deal with Google to outsource search advertising and get it announced before the markets open Monday. Certainly, this happens in strong anticipation that Yahoo’s stock might tank today. Already, reports are coming in that Yahoo’s stock has dropped nearly 20% today.

So, why are we happy about Microsoft not acquiring Yahoo? It’s probably because the real winner here is Google. Not only did its two largest rivals lose focus while trying to out-maneuver each other, but Yahoo literally threw itself at the feet of Google. While Yahoo and Microsoft lose market share from this power-struggle, Google will maintain growth, avoid the merger of two competitors, and likely earn all of the paid search business from Yahoo.

With the bid falling through, Microsoft just doesn’t seem that influential or scary anymore and its failure to acquire Yahoo adds to Microsoft’s poor presence as a major online player. Moreover, around the time Microsoft was facing antitrust and monopoly concerns, it failed to maintain a steady dose of product innovation and that can be worrisome for stockholders. On the other hand, Yahoo, now facing stockholder wrath, has an uphill battle ahead. Yahoo must now prove its market worth 

As stated by the NY Times, “short of a merger or an outright sale, few moves would seem more drastic than outsourcing the search business to Google and reassigning its people and dollars to projects like reinvigorating the Yahoo portal, buying hot start-ups and taking other initiatives that would differentiate Yahoo from the Internet search leader“.

As radical as these ideas may seem, they have been contemplated by people in and outside Yahoo for a long time. And although Yahoo said it had no plans to get out of the Internet search business, the idea has again become fodder for debate.

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