Microsoft Yahoo collapse: the winners and losers

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Posted on 4 May 2008 at 11:14

Microsoft has withdrawn its bid for Yahoo after three tense months of haggling and uncertainty.

But who emerges from the episode with credit and for whom has it been a time to forget? Here we round up the winners and losers of the merger that never was.

WINNERS

Jerry Yang: The Yahoo CEO gets to keep his job, avoiding the threat of becoming just another Microsoft suit or being disposed of altogether, when Microsoft threatened to ask Yahoo shareholders to overthrow its board. Yang remains under intense pressure, however. Many Yahoo shareholders were unimpressed by Yang's Microsoft snub, with two Detroit pension funds already suing the board for failing its investors. He'll now have to prove he was right to turn down Microsoft's advances.

Internet users: The Microsoft Yahoo marriage would have essentially reduced competition in the internet search market to just two: Google and Microhoo. And with Microsoft's online strategy largely consisting of apeing Google over the past couple of years, innovation in the search market could have dwindled, with the two supergiants safe in the knowledge that no other company had the userbase or the resources to threaten their dominance. The continued three-way battle forces Microsoft and Yahoo to try and out-manoeuvre Google, whilst giving the market leader two rivals to keep a close eye on.

Yahoo employees: "Yahoo is in trouble right now and people are leaving in droves," claimed Silicon Valley headhunter Boris Epstein back in March, with many employees none too impressed with the prospect of joining the Microsoft payroll. And despite the fact that Microsoft was dangling a $1.5bn sweetener for Yahoo employees, many will be relieved that they don't have to update their CVs.

LOSERS

Google: High-tech mega mergers are notoriously difficult. It would have taken Microsoft and Yahoo months, if not years, to assimilate the staff, brands and technology of the two companies, giving Google even more time to increase an already overwhelming lead in the search market. Now it faces the prospect of Microsoft finding a better way to spends its $44 billion warchest - such as poaching a phalanx of Google engineers...

Steve Ballmer: Ballmer staked his credibility on buying Yahoo - and he failed. He gave the Yahoo board two choices: take the money or take the high road, and they chose neither. When push came to shove, Ballmer refused to carry out his threat to overthrow the Yahoo board, because it "would take steps that would make Yahoo undesirable as an acquisition for Microsoft." The days when Microsoft could bully its rivals into submission are clearly over.

Yahoo shareholders: Microsoft was eventually prepared to pay $33 for every Yahoo share. The last time Yahoo's share price was that high was January 2006, since when it's been on a downward spiral - until Microsoft fluttered its eyelashes, of course. Microsoft's bid represented a 70% premium for Yahoo's shareholders and it's highly doubtful whether Yahoo will ever be able to increase the value of the company to that level once more under its own steam. Yahoo's shareholders may rue the day its board decided to go it alone.

Author: Barry Collins