Microsoft Calls Off The Wedding, Is That The End Of The Engagement

Writing by Nick Stamoulis on Sunday, 4 of May , 2008 at 7:00 am

Microsoft have finally decided that continuing to woo Yahoo! was not worth the effort and have now called off the wedding. One of the keys to the withdrawal of their $33 per share offer was not the extra $5 billion required, rather it is Yahoo!’s actions in starting to waltz with Google - currently the king of search engines.

Whilst Microsoft are not afraid of litigation, one of the key problems they would have had to deal with would have been the close relationship that Yahoo! currently has with Google. Two points from the Steve Ballmer (Microsoft CEO) letter to Yahoo!’s Jerry Yang (Yahoo! CEO) clearly states their concerns:

In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.

This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google.

In fact, apart from the first couple of paragraphs, Ballmer hardly mentioned the dollar aspect. The question everyone will now ask is whether or not this is the end of the matter? Only Ballmer will know what is going on in his mind.

Acquiring Yahoo! had some strategic significance to Microsoft so it is quite likely Ballmer will sit back now and watch the Yahoo! Google watlz - a little like a wolf and chicken dancing - will they continue to dance, separate and find new partners, or does the wolf become the proverbial black widow and dine on the Yahoo! search engines left overs.

If Yahoo!’s alliance with Google sours a little and the price of Yahoo’s share drop significantly, you can bet that Microsoft will be back trying to improve their wooing skills. It is unusual for Microsoft as they have a reputation for shotgun weddings - perhaps next time.

Category: Search Engines

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