Debt Free

It's been the subject of more speculation that yesterday's Superbowl between the Giants and the Pats. Being a stone's throw from the Redmond stronghold as I write this, I've sure heard a thing or two myself about the whole thing. That's not quite true. I don't have that good of an arm. It would actually take about 3 minutes to drive there, providing all the lights went my way.

What if all the lights go MSFT's way? What will that mean for investors, Internet users, employers of the two companies, and a group that hasn't been talked about much, Yahoo Small Business users? Well, from an investor perspective I see much short term turmoil. First of all, if you own some Yahoo stock, congratulations, you just made 49%. Wait, that's only if you've only had it for a few months. Maybe you saw their play for online poker and thought they would boost their revenue, so you picked up a few hundred shares. If you've had it for longer, you're not even back to where you were at the end of October, so don't get all worked up just yet. There's a couple of turns to go before the end of this race.

There is a major corporate culture integration issue to deal with, and that's far from a sure thing. You have two different corporate cultures that would have to mesh in order to make the merger successful. There's obviously no guarantee that the going there would be at all easy. Difficulties there would impact the efficiency of the organization (MiYahoo, MicroHoo, Microsoftoo, Yahoo- a Microsoft Company) and cost money. It would also hinder the new organization's ability to react quickly to any initiatives by the main competitor in this whole stew, the Big G (I'm not talking about Good Chevrolet). This is something Microsoft is having enough trouble doing already.

With Microsoft's past history of being obstinate when it comes to getting what it wants, there's a good chance that this deal will go through as planned, even if they have to do a little pot sweetening along the way. Regulators don't seem to be of a mind to block a deal at this time. Will they leave the Yahoo brand itself alone, while trying to cure whatever ails it? Or, will they just roll everything into Microsoft and set their sights on Google? One would think that just acquiring Yahoo in order to completly absorb it would make little sense. After all, Microsoft already has competitors for many of the products and services that Yahoo offers. Merely gobbling them up and then attempting to integrate their offerings would do little to guarantee that they would keep existing subscribers for Yahoo Mail, IM, and MyYahoo. These subscribers are one of the primary nuggets Yahoo offers.

If they are going about this to only grab a larger share of the online search market, with little regard to some of the other Yahoo assets would seem a bit foolish and shortsighted, and Microsoft may be many things, but typically they are not either of those. One of Microsoft's main problems is that they have often shown themselves to have the “My Way or the Highway” mentality. That being said, they have long had the business MO of acquiring what they cannot produce in house. DOS ring a bell, anyone?

If this deal goes through, how will the RedmondBoyz deal with the fact that Yahoo runs on a platform that Microsoft despises, open source FreeBSD? Will they try to port the entire thing over to a Windows platform? Past history indicates that there's a very good chance they would, much as they did with Hotmail. There would be inevitable problems with such a transition and that would cost them many of the subscribers they are paying $44 billion for, not to mention the huge labor cost of the transition itself. Would they just leave it well enough alone form a platform perspective and welcome (or even tolerate) a bit of open source into their midst? That would be hard to imagine.

The logical question is this. How can two different companies that can't figure out how to match Google separately, make some inroads into Google's market share when they are unable to crack the code on their own? If it was only that they currently lack the pure intellect to mount a serious challenge to Google, bringing in some new blood may well provide the missing ingredients. However, many of the smartest minds in the world are already employed by Microsoft and they haven't solved the puzzle yet. How will swelling the brain trust some more make a difference? It's more likely that it's a problem with the organization itself that has prevented Microsoft and Yahoo from not even toppling Google, but reaching half their market share. Given that that is likely the problem, how will two different organizations that are unable to topple Google on their own, manage to mount serious competition separately?

How about Yahoo's subscriber base? How will Microsoft treat them? After all, there's a reason that they choose Yahoo over Microsoft in the first place, and haven't seen fit to change up to this point. If Microsoft merely tries to turn Yahoo into Microsoft II, or just completely disolves Yahoo entirely, some of them will inevitably leave the fold. Where will they go? Well, Google has GMail..... The fact is that Yahoo is a major media company. They attract millions of people every month to Yahoo Games, Finance, Sports, Music and Movies. Would Microsoft be so foolish as to turn their back on these visitors. Probably not, but they may well be so foolish as to think that they are so much better that they can just move all these properties to the Microsoft equivalent and everyone would just follow.

Yahoo has so many different media partnerships. How will Microsoft work through the myriad different agreements, contracts and content agreements that they'll have to negotiate? How much money will this cost and how will it affect operations, both from a subscriber and a business side? Time may tell, if the deal is consummated.

Another issue is that Yahoo has serious brand equity. That's a major asset, and part of what Microsoft is offering huge dollars for. Are they offering all that cash only to be rid of the brand, or are they trying to capitalize on it? Will they capitalize on it initially, only to retire it at some point in the future (as soon as they can find a way, without costing themselves too much?) Time will tell, and better minds are certainly employed by Redmond's biggest tax contributor.

A group that would doubtlessly be affected, but has not been much discussed are the thousands of small business people and bloggers that use Yahoo web hosting, domain registration, tools, and other Yahoo SmallBusiness components, such as Yahoo Stores. What will become of them, anyway? Many of these small business people make their living with some or all of these Yahoo products and services. Microsoft has no serious competitors to this part of Yahoo's business, although they have made attempts to develop them at various points along the way. All of these different components have competitors in the marketplace, and everyone that is currently using them has other choices, but changing to a different platform would be tremendously costly and interrupt their business.

Doubtlessly some of the online businesses would disappear, their owners to rejoin the corporate world, as bitter a pill as that would be to swallow. Others would just suck it up, absorb their losses, and move on, chalking it up as just another speed bump in their parking lot. Yahoo small business is such a small part of Yahoo's overall revenue picture that I wonder what Microsoft would do.

One thing this whole thing may well do is force Google to really get busy. One suspects they've been merely going through the motions a bit lately. Those days will be over, and the snoozing Giant will be up and fighting again. Microsoft better watch it's flanks. Integrating an acquisition of this nature while simultaneously fending off a competitor such as Google is a pretty big bite to chew. They better have sharp teeth.