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Summary:

The big story this morning – based on a highly speculative report in The New York Post – suggests that there could be a $50 billion deal in the making, as Microsoft makes plans to buy Yahoo. Now WSJ is reporting on the deal, saying the […]

The big story this morning – based on a highly speculative report in The New York Post – suggests that there could be a $50 billion deal in the making, as Microsoft makes plans to buy Yahoo. Now WSJ is reporting on the deal, saying the talks are at very early stage.

UBS Research has some interesting stats on the combined company, if the merger does happen.

A combined MSFT/YHOO would have 38% of US search share (vs. GOOG 48%), 27% worldwide (vs. GOOG 66%), 12% of US total page views (vs. GOOG 3%), and 19% of US total minutes (vs GOOG 3%).

There are varied opinions on this deal, and to me it does seem like a bad idea. Marrying a company with Internet DNA (Yahoo) with another who can’t take a step forward without turning its neck twice (looking back at the PC) is not that easy. Will this deal become the 21st century version of AOL-Time Warner merger, and a high-water mark for the current boom?

By Om Malik

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  1. This will never happen!Do not even underestimate Jerry Yang and David Filo’s love to Yahoo! this brand!!!!(9%)50B$ isn’t quite different from (9%)44B$,money is meaningless to both of them,they are rich enough to ignore any temptation.But Yahoo! this brand means a lot~~~!Unless they get enough esteem(for example,merge MSN brand to Yahoo!,just keep Windows live and Yahoo!)

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  2. The key has got to be how MSFT would integrate the acquisition. Would they make it as independent as XBOX? and turn over MSN asssets (Tellme too please) to the Yahoo team?

    If yes, they will be able to deny the PC-glances.

    If no, it will be TW-AOL2.

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  3. well, it sounds like old news – everybody has wanted this to happen for ages, and integrating yahoo IM and MSN Messenger was a solid first step to combining users…live.com is a confusing brand, but yahoo would put a serious stamp on this new microsoft – the amazing one that is emerging now, as i type, as the sharpest minds work on cloud db, next gen os development, new tools like silverlight…and top researchers and architects would be a killer deal, plus all of yahoo’s services…

    my only request: put gary flake in charge as cto, please!

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  4. i dont think they have an option.. they got to make moves stay alive against google.. and even if this goes through..all that needs to happen is google + apple..

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  5. I agree with Peter Brockman above. If this deal happens it will really depend on how the deal is structured. I don’t see Yahoo! folding into Microsoft. If this is going to work the two brands need to be preserved and under the hood methods of capitalising on the merger will have to be explored.

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  6. Google is much ahead in the internet war. Unless someone builds a better application to kill adsense and better search engine, mergers and acquisitions won’t help. Both Microsoft and Yahoo are not making aggressive moves in these areas.

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  7. Eyeballs are worth more than search and software, so valuation is too low. Yahoo! is worth much more

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  8. if it occurs, the deal is a lot more about Microsoft competing with Google than Yahoo competing with Google.

    both companies have tons of page views, but also they’re sucking wind at search market share & monetizing search. still, combining the 2 companies market share in page views yields an incredibly large property to do SOMEthing with, and it would make sense to at least combine forces there and/or cut overhead costs of the combined groups (either via Yahoo/MSFT acquisition or Yahoo/MSN spinout… perhaps a better deal).

    so it might be hard to execute, but it’s not a bad idea. and MSFT is getting a bit desperate… with good reason. i wouldn’t be surprised to see it happen at anything between $50-70B.

    (however, full disclosure: i sold my YHOO shares this morning on the rumor, given the 18-20% bump in market price. don’t need to wait around for Q2 panama results now ;)

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  9. Google should buy Yahoo!…. ahem :-)

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  10. Yes, they should buy Yahoo and then Google should buy AOL.

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  11. The bankers and perhaps even Yahoo management share the same view as Sumit and Sparky – which is why this leaked to initiate a bidding war with the outcome being GOOG trumping MSFT again.

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  12. YHOO + MSFT is too big to integrate. If MSFT could split off MSN and Live into separate entity it would be better fit with YHOO’s internet DNA. Then MSFT could focus on Google’s threat to desktop and YHOO/MSN could focus on content and search. Seems logical. Therefore won’t happen.

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  13. Real Mortgage News Friday, May 4, 2007

    Consolidation seems to be hitting the online world in a big way. In the short term it definitely seems like a good thing but it could also make it harder for the smaller players to compete over the longer term.

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  14. My big (and I suppose unimportant question in the scheme of things) is how will they brand themselves? Does MSFT simply engulf Yahoo and it’s brand? Do they truly combine? MicroHoo? YahooSoft?

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  15. MSFT’s future is in robotics and health care. Don’t be surprised if we see the company morph into the technology arm of the Gates Foundation, using its size and power to solve the world’s problems.

    Now that MSFT/YHOO are teaming up, i won’t be surprised if GOOG/AAPL get together, then they could all merge and take over the moon!

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  16. I just feel that Yahoo joining Microsoft would tarnish their reputation completely. As for having so much market share, I think they’d lose that pretty quickly (depending on which algorithim they selected).

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  17. This seems crazy..because I don’t think it will help either ultimately.

    The thing that will hurt the Google monolith is scale.. they become the new MSFT. A deal between Yahoo and MSFT only forces Goog to continue to get bigger, becoming less nimble.

    With Yahoo’s purchase of Right Media last week, and their existing Panama, at least MSFT can get back on track and find better ways to monetize MSFT search and destination site inventory.

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  18. Microsoft to buy Yahoo? Nah nah. The two companies’ philosophies are different enough. They are two different organisms and merging is not such a smart thing to do. Perhaps they could collaborate on key areas where they feel threatened by Google.

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  19. Greg Patrick Sunday, May 6, 2007

    However, they also have other problems. Att, Verizon and other yahoo isp partners has to agree to this as well. Now if this is a take over. They may have no choice but the isp’s still could pull out. If this does happen. I started with msn isp, then went back to msn isp.

    In the U.S. they may need to get Federal government approval before this can happen.

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  20. A year ago, the two companies were reportedly in talks about a merger, but those conversations were dismissed as rumors and speculation. Well, here’s Microsoft and Yahoo 2.0.
    A surprising turn of events show that, on the YAHOO homepage yesterday, a large advertisement for Microsoft’s Internet Explorer 7 can be seen.read more
    http://www.latestnews.co.in

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  21. I don’t know – but I think MS should take over Y! – Ms, from what I have seen the last coupla years, is better at handling and growing communities and is better at the whole blogging thing than Y! has ever been.

    So, if MSFT does buy Y!, flickr could benefit from the exchange.

    Just a gut feel, though.

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  22. Diversity is good. I would hate to see these two giants merge.

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  23. i think google combined with yahoo is the best – but this wont ever happen! haha

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  24. I support the ideao of Microsoft to buy Yahoo!

    Google is becoming hard to find anything.
    It is lostingh quality.

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  25. I agree with CArlos, the first person to comment on this post. Google is loosing quality. It was the best in 2006 and before as well as half way through 2007. Then it started getting sloppy. It gives very useless search results. So I don’t go against the idea of Microsoft buying Yahoo.

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  26. Sorry, I meant the person who commented right before me.

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  27. I personally think their work culture and idealogies are very different. If this merger happens, its not going to be a smooth one.

    You might want to cast your vote here.
    http://www.criticat.com/should-yahoo-get-acquired-microsoft

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  28. Well, yahoo uses FreeBSD and hosts them. Yahoo is basically married with and born from open source ! Microsoft represents the past, selling operating systems when linux/bsd/solaris are all free (same with office when there is openoffice and so on with almost all apps)!
    Micorosoft is going down slowly and on the way they want to take yahoo too. I hope that will never happend.
    You people should switch on linux/bsd ,then you will know what i’m talkin about.
    What keeps windows and Microsoft alive are those big companies like autodesk and adobe, which release software only on windows platforms. A big mistake. When they will make software for Linux/Unix, Microsoft will die and yahoo together with it if they merge together.

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  29. wow, i never thought that MS and Y! merging will cause any problems. I think MS a big impact on people daily life and same thing with Y!; both them should merge. and google, i like that too, but i Y! more than GG.

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  30. I am completely against the Merger between Yahoo & Microsoft.
    First off the bet, I have noticed that when ever Microsoft buys off something, it changes it to its advantage….that is what happened to HOTMAIL remember back in the day……
    YAHOO has one of the best Email systems out there. It also promotes its email interface to other ISP providers like ROGES in Canada, etc…If MS bought over yahoo, all the nice and quickness would have been gone. Today Yahoo is one of the fastest email in the world…Look at Hotmail on the other hand…
    Also other products like the calender, Flicker (Yahoo Photos), etc are cool features that make yahoo Special in its own way.

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  31. Lets i make my example here ….

    I always liked GeocitiesDOTcom cause of they amazing free web service
    (love it)…

    Then YaHoO buy it ,to me it are still Geocities but now with Yahoo logo .
    You see ,the key marketing about all of this are simple to keep the same
    services to the users that are Yahoo? Microsoft? but the service they use !!!!!!

    Some cannot just fight that captalism way ,lots of stuff are to be made
    opensource and free .And the key to caugth the users to this is
    for trap it to its community marketing,forums,blogs that keep it online
    on its services .
    And it is something that not happen to a offline product ,
    muttating online for a better place like free roads with free services ,
    are made it virtual for your stay .
    Else everyone just keep it offline and better live they lives for real with
    what they pay for .
    and not only internet access .

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