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Yahoo is Microsoft’s biggest blunder in acquisitions – it just creates an open goal for Google
Kara Zeilig
Feb. 1, 2008

Microsoft Corp said on Friday that it had offered to acquire Internet media company Yahoo Inc for $44.6 billion in cash and stock. Analysts are still wondering what that means for Google, Yahoo and Microsoft.

In recent years all Microsoft acquisitions related to Internet portals have turned out to be disaster. This one is no exception. It is similar to AT&T’s hostile acquiring of NCR only to find that Ma bell made the biggest mistake that would cost the company its life line.

If Yahoo deal is complete, Microsoft will consolidate the search alternatives under its umbrella. But the problem of Microsoft is that it never understood the Internet model. They keep buying successful Internet portals only to go nowhere with it.

This is no exception. Yahoo is more of a diverse set of portals than a search engine. Their main revenue stream is from advertisement. A software company struggles to understand that business model. The software business model is develop products, enhance the same periodically and make money from support and upgrades. The portal business is different. It is more ‘political’ in sense. Creating a popular site and generating revenue from the same is not the ball game of a tech savvy Microsoft.

This will give an opportunity for Google. The reason is simple. Microsoft will not know what to do with Yahoo. Like MSN, Yahoo will go nowhere. In that circumstance, Google will prosper and become a giant that can one day buy Microsoft.



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