Microsoft, Yahoo face many hurdles to successful merger
SEATTLE -- Launching sporadic strikes at starship Google got Microsoft and Yahoo nowhere.
So on Friday, Microsoft let loose a quantum blast across Google's bow — an unsolicited $44.6 billion bid to acquire Yahoo.
The proposed merger brims with potential. Yahoo would bring legions of loyal users of its Internet e-mail, chat, search, news, shopping and dating services. Microsoft would contribute engineering prowess and its deep presence in home PCs and corporate servers.
As allies, the tech titans could leapfrog Google to the budding sweet spot of the Internet advertising galaxy: display ads on popular websites. By joining forces, the companies would reach 86% of U.S. Internet users and control 59% of the online display ad market, according to Nielsen Online.
"If Microsoft and Yahoo join forces it will be the most important event in the Internet industry this year, without a doubt," says Ken Cassar, analyst at Nielsen Online.
Yet black holes abound.
Google remains solidly entrenched as the leader in the current sweet spot, online searches and search advertising, commanding a 78% market share, worth $11.5 billion a year, says Jeffrey Lindsay, analyst at Sanford C. Bernstein. Yahoo, by comparison, has an 11% share, worth $1.6 billion.
If the deal is consummated, Google clearly must respond. But it can afford to move methodically. Corporate mergers are intrinsically messy. And this one is rife with looming deal breakers.
Starship "YahooSoft" could be thrown off course by a clash of corporate cultures, antitrust hurdles, or the possibility that the flight plan — set primarily by forceful Microsoft CEO Steve Ballmer — is simply wrong-headed.
"Although synergies are certainly great, the merger raises the question of how effectively they'll be able to continue operating during their integration," says Andrew Frank, research vice president at Gartner.
Yahoo says its board of directors will evaluate the proposal, but offered no timetable on when it would reach a decision. The company's vice chairman and former CEO, Terry Semel, abruptly resigned late Thursday. It declined further comment Friday.
Related Stories
ABC News Live