Opportunity Knocks only Once

Why Microsoft should buy Yahoo
by: Jerry Liao

You may wonder why I decided to write about the Microsoft-Yahoo merger again after it failed a couple of times before. The answer is simple — the situation has changed.

Just to give you a little backgrounder, Microsoft made an initial offer of $31 per share which Yahoo rejected. Microsoft sweetened the deal to $33 per share but Yahoo CEO Jerry Yang wants a $37 per share bid. Microsoft finds the demand too high and withdraw its bid for Yahoo. Jerry Yang turned down the $47.5 billion offer of Microsoft and instead pushing for $53 billion.

During the negotiation, Google suggested an escape route for Yahoo. Yahoo would outsource advertising and search to Google to boost its revenues but retaining its independence. Something Yahoo seriously considered.

Google recently pulled out of the search advertising partnership with Yahoo because the US Justice Department said it will file a lawsuit to block the deal. Right after the decision of Google, Yahoo CEO Jerry Yang said that he feels it is to the best interest of Microsoft to buy Yahoo.

Given the current situation, I think this is the best time for Microsoft to make another attempt to buy Yahoo. Why? Because Yahoo’s back is against the wall. Desperation is written all over Yang’s statement. You don’t make such a statement after a failed partnership.

And with the global economic problem, Yahoo is in no position to make demands. All they can do is to wish and pray that Microsoft will come back to the negotiation table and be generous. And I don’t think Microsoft will even make their initial $31 per share offer again. As I write this article, Yahoo’s stock is worth $13.92 per share.

Now why do I think Microsoft should buy Yahoo? For one simple reason — Yahoo’s community. For that alone, Microsoft should acquire Yahoo and its community if they want to give Google a good fight. Yahoo’s community is a force to reckon with, and this is the main reason why Google made an attempt to thwart the Microsoft bid.

Lastly, should Yang step down as Yahoo CEO? There will be two situations that will determine the fate of Yang. One, if the stocks of Yahoo continues to drop because of the Google failed partnership and two, if Microsoft will make this one of their conditions to make a bid again. Yahoo stockholders will force Yang to step down to save the online company.

Microsoft is in the best and most ideal situation right now to buy Yahoo at the price they want. Microsoft CEO Steve Balmer is saying that Microsoft is not interested. I can tell you it’s a lie. Microsoft is simply playing hard ball for obvious reasons.

Buying Yahoo is the easy part for Microsoft. The real challenge for Microsoft is to be able to combine the services of Yahoo and Microsoft, and offer something new and effective to its Micro-Hoo or Yahoo-Soft community. Otherwise, the community might just shift to Google.

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