Thursday, 14 February 2008

Yahoo in discussion with News Corp?

StrategyEye and other news sources are reporting the ‘rumour’ that News Corp is in discussion with Yahoo.

I gave you the benefit of my own views on Microsoft’s bid for Yahoo last week. To reread Click here. At the time I was deeply sceptical about the wisdom of the bid and, basically, didn’t think it would work even if it was consummated.

A further week of consideration and reading the acres of media reports on the deals only makes me feel that my initial reactions were spot on. Indeed, I’d now go one step further…
I have NEVER as an analyst taken the foolhardy step of forecasting the demise of Microsoft even though there were many times when a case could be made that they were going seriously off track. But Microsoft always bounced back – usually by in-house adaptation buoyed by relatively small strategic acquisitions. But buying Yahoo for $44b is well outside any previous Microsoft comfort zone. Culture clashes are always the reason for tech M&A failing. There seems to be huge opportunity for such culture clashes in this get together. Tie that with Microsoft’s need to cut $1b of costs and the many, many areas of overlap which will need surgery and you get a great recipe for major failure.

Could Microsoft weather a failure of the magnitude of of Time Warner/AOL?
But there is a scenario whereby a Microsoft/Yahoo merger goes so badly wrong that both beasts are mortally wounded in the process.

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