The Digital Edge Blog

It may be happening…

Reuters is reporting that Microsoft has made a formal bid for Yahoo:

Technology giant Microsoft Corp said on Friday that it had offered to acquire Internet media company Yahoo Inc for $44.6 billion in cash and stock.

Microsoft said it had offered to buy Yahoo for $31 per share, which it said represented a 62 percent premium above the company’s closing stock price on Nasdaq on Thursday

The time is right for a deal like this…

Yahoo has been humbled over the last few quarters, and is trying to fight its way back into a sustainable and meaningful position in the market. It is currently in a bit of internal turmoil with layoffs pending and a significant reorganization in process. This time around, they may seriously consider a deal like this.

Over that same period, Microsoft has been working to get it’s act together, and has made some progress. They are looking for ways to accelerate growth and build up some momentum, and a combination with Yahoo could offer a lot to them. This may finally give Microsoft the desire to pursue a deal like this aggressively.

And of course, the raison d’être for a deal like this - Google - has finally lost a little momentum in the marketplace, falling short of many peoples growth expectations. This could create a bigger opening for more focused competition.

At a macro level, the uncertain economic conditions in this country will help to “right size” Yahoo’s expectations of what they can achieve on their own, and what value they can place on the company. That will help temper what is probably the biggest deal killer around - big egos.

With all that said, getting a deal like this done will be hard. A merger on this scale would be lengthy and complicated. There are real cultural differences between the two organizations that will need to be worked out. The suite of services being offered - especially around search and advertising - will need to be rationalized. Keeping talent on board throughout the organization - not just in the management suite - will also be a challenge. But despite the obvious hurdles to getting a deal like this done, the combination of Yahoo’s web centric assets with Microsoft’s massive structural advantages is incredibly compelling.

Everything is aligned to make this deal go through.

If it doesn’t happen now, it probably never will…