Just a month after Google walked away from a merger deal with financially-troubled Yahoo!, Microsoft (MS) has made an offer to buy Yahoo!’s search business for (US)$20 billion. Indications are, financially-strapped Yahoo! will embrace the deal.


Microsoft attempted a takeover of Yahoo! this past summer offering (US)$47.5 billion for the entire company, but Yahoo!’s then CEO, Gerry Yang, rebuffed the advance. The company needed a ‘White Knight’ investor to help it out of its financial hole but Yang was determined not to sell out to MS. That’s when talks with Google, about cooperation on search and advertising, started. But Google walked away from deal at the end of a three-month evaluation period citing fears of a long and costly anti-trust battle. And Yang found himself coming to MS, hat in hand, seeking a deal.

But MS CEO Steve Ballmer snubbed Yang back, although industry observers said MS was probably still very interested in acquiring all or part of Yahoo!. MS watchers predicted Ballmer would be back with an offer for Yahoo! within three months.

They were right.

There was speculation that MS’s cold shoulder toward Yahoo! was rooted in personal animosity on Ballmer’s part, toward Yang, for his rejection of the first MS offer, back in July. The fact that Ballmer’s new offer, for Yahoo!’s search business, came less than two weeks after Yang stepped down as CEO of Yahoo! amid increasing pressure from his board of directors and major shareholders.

If MS acquires Yahoo!’s search business, one major question remains. What will become of the millions of Yahoo Mail users around the world? Many fled MS Mail (then HotMail) when MS instituted mandatory user registration and will be looking for another non-MS alternative if it turns out that Yahoo’s e-mail operations are simply shut down and written off following the sale of its search business. Observers note that only Google’s GMail remains as a viable alternative, on the same scale as Yahoo! Mail or MS Mail.

Leave a Reply