Posted February 16, 2008 12:13 pm by with 10 comments

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By Alan Johnson

Since I have previously explained exactly why, even if Microsoft and Yahoo! were to join forces, people shouldn’t necessarily expect this to be the solution which would somehow “save” us from Google’s domination, it’s time to analyze Yahoo’s reaction to Microsoft’s bid.

Basically, Yahoo! has let the folks over at Microsoft know that the bid is not exactly something they consider tempting and everything has culminated with the letter they have sent to shareholders, where they specify, in their own words, “that Microsoft’s proposal substantially undervalues Yahoo!”.

While, for a person who strongly (or even blindly) believes in Yahoo! as a company and who wishes to see Google’s position finally threatened the letter may seem like a breath of fresh air, a smart business decision which makes them stronger than ever, a person with at least a small trace of common sense should see things in perspective and think twice.

Sure, the letter may seem convincing to some and everything may sound just great on paper, but reality sometimes has the habit of spoiling plans. And what did reality have to say this week? Reality lets us know that, even though the people behind Yahoo! may seem (overly) optimistic about the future, they have started to lay off employees this week and things will most likely not end here.

No matter how much we try to see it as yet another smart business move on their part, no matter how much we would like to try and find excuses and no matter from what angle we choose to view the situation from: if you are starting to let go of more than a few employees, you are not exactly giving the impression of a solid company.

Aside from that, it is highly unlikely that Microsoft will give up without a fight. They will try to reach their goals by whatever means necessary, as they have admitted themselves, and, given Microsoft’s track record, anything can be expected.

Yahoo! is having problems, current events clearly reflect that and, as such, things cannot continue in this manner for long. As a result, we will most likely see some more than interesting changes in the future and at this point, no merger should come as a surprise. There is a fine line between living in denial and making a smart business decision, and Yahoo! is definitely on the edge. Predicting the final outcome is next to impossible, but one thing is certain: we have quite interesting times ahead of us.

About Alan Johnson

Alan Johnson is the author of The Online Business Handbook.

  • Undoubtedly, Microsoft will not give up without fighting. I guess that there will be another way to merge with Yahoo soon.

  • Yahoo! is a great company and has potential to succeed but it doesn’t look like they can do that on their own right now. Microsoft may have been the answer to their financial problems.

    These layoffs could be just the beginning of terrible things but they could also be the beginning of restructuring that will make the company stronger and more capable.

    I don’t know if Microsoft can save Yahoo or if Yahoo even needs saving, but I would like to see what they do if/when they merge. It would make an interesting case study.

  • We are talking about staggering figures here….how anyone actually comes up with a “value” is beyond me.

    I guess the key, if Yahoo does want to sell, is whether anyone else is prepared to pay more. Now there’s a though, maybe Google could come in with a counter offer !

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  • I think it was a smart business move for Yahoo! Microsoft doesn’t have a TON to bring them. If if were Yahoo propositioning Microsoft then of course MS would accept. Either way, two weaks don’t make a strong. Google would still dominate.

  • Interesting times ahead indeed! Keep up posted.

  • Yahoo always seemed like a great company. Its sad to see it on the edge now. Do keep us posted. It makes for very interesting and insightful reading.

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  • The yahoo situation is certainly interesting, I think they really are on a knife edge. In my opinion they are the only company that continues to have the capacity to rival modern google if they innovate.