Wednesday, 29 July 2009

Microsoft + Yahoo - at last!

(By Richard Holway 1.00pm Wednesday 29th July 09) After 18 months writing about the various variations of Microsoft and Yahoo couplings (for the latest see our post of 19th July 09 Microsoft + Yahoo - on again?) it has literally just been announced that Microsoft and Yahoo have at long last agreed a deal. As the FT reported - Microsoft and Yahoo agree search deal - "in a joint statement, the companies confirmed the widely expected deal, which will give Microsoft a 10-year license to integrate Yahoo’s search technology into its existing search platforms, while Yahoo will become the “relationship sales force” for premium search advertisers for both companies."

My initial view is that this is a long way away (perhaps the best description would be "this is $47.5billion away") from the deal on the table 18 months ago. It's also a long way from that 'rumoured' last week (we did advise you not to believe Yahoo rumours!) in that there is no 'boatloads' of upfront cash (that's the term Yahoo's new CEO Carol Bartz used to say what she wanted). Indeed, is there any at all? Sure, there is opportunity for Yahoo to cut costs and share in future ad revenues. But this is not a gear change for Yahoo.

Indeed, initial reaction is that Yahoo shares have slumped 7%.
Conversely, it looks good for Microsoft as Bing now takes over from the Yahoo search engine. That gives Microsoft some scale in search to compete against Google. And they seemed to have acheived that at a knockdown price.

Update - 8.00am Thurs 30th July 09. Well, it looks as if the market agrees with my assessments. Yahoo shares slumped 11% yesterday whereas Microsoft put on 1%. If I was a Yahoo shareholder, I'd be pretty upset. The destruction of shareholder value over the last few years takes your breath away. I thought the AP story - Yahoo comes full circle in its retreat from search - was an excellent read.
Conversely, from a Microsoft viewpoint, it looks like a good deal. Read Lex in today's FT. But the deal is of such blistering complexity and could take an age to implement, that the only real winner out of all of this is likely to be...Yes, you guessed it, Google.
Perhaps now that's settled, Microsoft can concentrate on the real battle right now - who is going to win in the Cloud.

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