What Microsoft hopes to gain from buying the Internet company
Baffled by Microsoft Corp.'s push to acquire Yahoo Inc.? These frequently asked questions provide the lowdown on the contest for the Internet company.
Does a Microsoft-Yahoo deal make sense? Probably. As separate companies, Microsoft and Yahoo duplicate systems and staff. Microsoft CEO Steve Ballmer said a merger could save $1 billion annually. According to industry observers, the time is right because Yahoo's stock is down, and the company hasn't improved its results even after co-founder Jerry Yang took over as CEO in the middle of last year. Plus, Microsoft's offer, initially 62% over Yahoo's share price, is a very good deal for Yahoo shareholders.
In most areas, a Microsoft-Yahoo merger would be good for both companies. For example, in display ads, adding Microsoft's share would only improve Yahoo's position as the market leader. And because Yahoo is already a powerhouse in mobile technology, adding Microsoft's advertising assets and mobile technology would help the combined company battle Google Inc. for the leadership position.
Market research firm IDC says Microsoft, with access to Yahoo's search tools and talent, could buttress its play in the mobile space with respect to search, location-based services and advertising -- three key revenue growth areas of the future. And, IDC said, acquiring Yahoo would allow Microsoft to move enterprise technology to the mass market.
However, not even a combined Microsoft-Yahoo could challenge Google in video advertising, where its YouTube site is the overwhelming leader.
"This acquisition gives [Microsoft] the opportunity to create a 'consumer' subbrand," according to IDC. "By subbranding their SaaS activities, Microsoft can protect their fee-based software license business while aggressively driving growth in the consumer space."
Will the Microsoft-Yahoo deal work or will it be a disaster? For one thing, merging two giant companies is very difficult. Look at US Airways and America West, Vodafone Group PLC and Mannesmann AG, America Online Inc. and Time Warner Inc., Pfizer Inc. and Warner-Lambert Co., and Glaxo Wellcome PLC and SmithKline Beecham PLC.
Imagine trying to merge the cultures of Microsoft and Yahoo as well as the technologies. Silicon Alley Insider founder Henry Blodget gives some reasons why the deal will be a "disaster."
According to Blodget's Web site, it will take a year from the time Yahoo agrees to the deal for the transaction to be finalized. During that time, innovation at both companies will be stifled because developers probably won't want to launch new products when they could be about to lose their jobs. Yahoo/Microsoft employees will be wondering if they'll have jobs, and if they do, they'll be trying to figure out where their loyalties lie. Meanwhile, "Google will be steaming full speed ahead," Blodget said.
In addition, Blodget said the Internet division at Microsoft will always take a "back seat" to the Windows/Office division. While Google wants to use the Internet to build out its business, Microsoft wants to use the Internet to protect its Windows and Office business, he said. "If Microsoft wants a combined Yahoo-MSN to succeed, it has to give it the freedom to destroy Windows and Office," he said. "As long as the entity is under the same corporate roof as Windows and Office, this will never happen."
Finally, Blodget said Microsoft is already doing too many things. Once the deal goes through, Microsoft will be competing with companies like IBM, Oracle, SAP, Salesforce.com and many other software-as-a-service providers in enterprise software. In addition, it will compete with Apple, Sony, Nintendo and others in consumer gadgets, gaming and PC platforms; and Google, Time Warner, Comcast, AT&T, and others in media, advertising and technology.
And because each of these businesses requires different skills, relationships, strategies and expertise, Microsoft will have a hard time winning in all those areas, he said.
"Google is indeed a threat to Microsoft, but so are Oracle, Apple, IBM, RIM and a host of other companies," Blodget said.
How will a combined Microsoft-Yahoo affect users? At some point, you'll probably see some glitches if Microsoft merges MSN and Yahoo, Live Search and Yahoo Search, Hotmail and Yahoo Mail, as well as the two instant messaging services.
And, experts said, as Google and Microsoft get more competitive over ads, you'll see new kinds of ads, including mobile ads. And because both companies want your traffic, they might not be above engaging in dirty tricks to get it. In fact, some observers are worried that a combined Microsoft-Yahoo would divert users searching the Web to its own pages rather than the pages that have the most relevant information.
What about consumer privacy? Privacy groups have vowed to fight the deal saying it would raise serious privacy issues. Their concerns center on the possibility of vast amounts of consumer tracking information being consolidated in the hands of a single vendor.
They claimed that the proposed acquisition would only intensify the practice of tracking the online activities and behavior of Internet users in order to serve up highly targeted ads to them.
Would the deal create more competition? Some industry experts said a combined Microsoft-Yahoo would be good for competition because Google has such control over the online advertising market. They say the deal would create a competitor strong enough to challenge Google, not only in search and online advertising but in online services and software as well.
Could this deal be good for Google? While Google might not think so, some analysts disagree. For instance, while Microsoft and Yahoo are trying to deal with integrating the two companies, Google will continue to innovate and possibly come up with new technologies such as improved ad formats. And that's an incentive for advertisers to stick with Google.
Can a combined Microsoft-Yahoo beat Google at its own game? That's the approximately $41 billion question -- originally the $44.6 billion question, but Microsoft's stock has gone down a bit since it made its initial offer.
Although the combined company will be in a better position to gain ground on Google, there's really no guarantee. More users go to Google for their Web searches than to either Microsoft's or Yahoo's search engines, according to Nielsen//NetRatings. To attract more advertisers, a combined Microsoft-Yahoo would have to capture more of those online users. But that won't be easy because Google has more than a 60% share of search in the U.S., and it's hard to get users to change their preferences.
Is Google scared? Well, the search company is making a lot of noise about the deal. Just recently Google CEO Eric Schmidt said he was concerned that there were things Microsoft could do that would be "bad" for the Internet, such as disrupting the free flow of information.
Google said that a combined Microsoft-Yahoo could exert "the same sort of inappropriate and illegal influence of the Internet that it did with the PC." Google is particularly worried that the combined company could have a monopoly in instant messaging, Web e-mail and portals.
In not so many words, analysts said it's like the pot calling the kettle black because Google nearly has a monopoly on search and online advertising.
Baffled by Microsoft Corp.'s push to acquire Yahoo Inc.? These frequently asked questions provide the lowdown on the contest for the Internet company.
Does a Microsoft-Yahoo deal make sense? Probably. As separate companies, Microsoft and Yahoo duplicate systems and staff. Microsoft CEO Steve Ballmer said a merger could save $1 billion annually. According to industry observers, the time is right because Yahoo's stock is down, and the company hasn't improved its results even after co-founder Jerry Yang took over as CEO in the middle of last year. Plus, Microsoft's offer, initially 62% over Yahoo's share price, is a very good deal for Yahoo shareholders.
In most areas, a Microsoft-Yahoo merger would be good for both companies. For example, in display ads, adding Microsoft's share would only improve Yahoo's position as the market leader. And because Yahoo is already a powerhouse in mobile technology, adding Microsoft's advertising assets and mobile technology would help the combined company battle Google Inc. for the leadership position.
Market research firm IDC says Microsoft, with access to Yahoo's search tools and talent, could buttress its play in the mobile space with respect to search, location-based services and advertising -- three key revenue growth areas of the future. And, IDC said, acquiring Yahoo would allow Microsoft to move enterprise technology to the mass market.
However, not even a combined Microsoft-Yahoo could challenge Google in video advertising, where its YouTube site is the overwhelming leader.
"This acquisition gives [Microsoft] the opportunity to create a 'consumer' subbrand," according to IDC. "By subbranding their SaaS activities, Microsoft can protect their fee-based software license business while aggressively driving growth in the consumer space."
Will the Microsoft-Yahoo deal work or will it be a disaster? For one thing, merging two giant companies is very difficult. Look at US Airways and America West, Vodafone Group PLC and Mannesmann AG, America Online Inc. and Time Warner Inc., Pfizer Inc. and Warner-Lambert Co., and Glaxo Wellcome PLC and SmithKline Beecham PLC.
Imagine trying to merge the cultures of Microsoft and Yahoo as well as the technologies. Silicon Alley Insider founder Henry Blodget gives some reasons why the deal will be a "disaster."
According to Blodget's Web site, it will take a year from the time Yahoo agrees to the deal for the transaction to be finalized. During that time, innovation at both companies will be stifled because developers probably won't want to launch new products when they could be about to lose their jobs. Yahoo/Microsoft employees will be wondering if they'll have jobs, and if they do, they'll be trying to figure out where their loyalties lie. Meanwhile, "Google will be steaming full speed ahead," Blodget said.
In addition, Blodget said the Internet division at Microsoft will always take a "back seat" to the Windows/Office division. While Google wants to use the Internet to build out its business, Microsoft wants to use the Internet to protect its Windows and Office business, he said. "If Microsoft wants a combined Yahoo-MSN to succeed, it has to give it the freedom to destroy Windows and Office," he said. "As long as the entity is under the same corporate roof as Windows and Office, this will never happen."
Finally, Blodget said Microsoft is already doing too many things. Once the deal goes through, Microsoft will be competing with companies like IBM, Oracle, SAP, Salesforce.com and many other software-as-a-service providers in enterprise software. In addition, it will compete with Apple, Sony, Nintendo and others in consumer gadgets, gaming and PC platforms; and Google, Time Warner, Comcast, AT&T, and others in media, advertising and technology.
And because each of these businesses requires different skills, relationships, strategies and expertise, Microsoft will have a hard time winning in all those areas, he said.
"Google is indeed a threat to Microsoft, but so are Oracle, Apple, IBM, RIM and a host of other companies," Blodget said.
How will a combined Microsoft-Yahoo affect users? At some point, you'll probably see some glitches if Microsoft merges MSN and Yahoo, Live Search and Yahoo Search, Hotmail and Yahoo Mail, as well as the two instant messaging services.
And, experts said, as Google and Microsoft get more competitive over ads, you'll see new kinds of ads, including mobile ads. And because both companies want your traffic, they might not be above engaging in dirty tricks to get it. In fact, some observers are worried that a combined Microsoft-Yahoo would divert users searching the Web to its own pages rather than the pages that have the most relevant information.
What about consumer privacy? Privacy groups have vowed to fight the deal saying it would raise serious privacy issues. Their concerns center on the possibility of vast amounts of consumer tracking information being consolidated in the hands of a single vendor.
They claimed that the proposed acquisition would only intensify the practice of tracking the online activities and behavior of Internet users in order to serve up highly targeted ads to them.
Would the deal create more competition? Some industry experts said a combined Microsoft-Yahoo would be good for competition because Google has such control over the online advertising market. They say the deal would create a competitor strong enough to challenge Google, not only in search and online advertising but in online services and software as well.
Could this deal be good for Google? While Google might not think so, some analysts disagree. For instance, while Microsoft and Yahoo are trying to deal with integrating the two companies, Google will continue to innovate and possibly come up with new technologies such as improved ad formats. And that's an incentive for advertisers to stick with Google.
Can a combined Microsoft-Yahoo beat Google at its own game? That's the approximately $41 billion question -- originally the $44.6 billion question, but Microsoft's stock has gone down a bit since it made its initial offer.
Although the combined company will be in a better position to gain ground on Google, there's really no guarantee. More users go to Google for their Web searches than to either Microsoft's or Yahoo's search engines, according to Nielsen//NetRatings. To attract more advertisers, a combined Microsoft-Yahoo would have to capture more of those online users. But that won't be easy because Google has more than a 60% share of search in the U.S., and it's hard to get users to change their preferences.
Is Google scared? Well, the search company is making a lot of noise about the deal. Just recently Google CEO Eric Schmidt said he was concerned that there were things Microsoft could do that would be "bad" for the Internet, such as disrupting the free flow of information.
Google said that a combined Microsoft-Yahoo could exert "the same sort of inappropriate and illegal influence of the Internet that it did with the PC." Google is particularly worried that the combined company could have a monopoly in instant messaging, Web e-mail and portals.
In not so many words, analysts said it's like the pot calling the kettle black because Google nearly has a monopoly on search and online advertising.
