Microsoft to Buy Yahoo!?

Justin Post, a Merrill Lynch analyst, notioned Microsoft should "catch" Google by buying Yahoo! The two search engines, MSN and Yahoo, have fallen behind Google and remain second and third for what seems indefinately. Microsoft and Yahoo! declined to comment to Post's report.

But would it make sense? Microsoft certainly could purchase Yahoo! either outright or buy paying a large chunk (say $20 billion cash) then debting the rest. Microsoft can afford the buy out on paper.

Yahoo! would have to agree, of course. There can't simply be an aquisition with so much at stake. Plus, if the two converged we'd be ever closer to an oligopolgy than we currently are -- though free search for users doesn't seem much to shy away from it's advertisers who would suffer.

Shareholders would also have to agree. A company can't simply stiff ALL it's shareholders. That certainly wouldn't play well on Wall Street. Shareholders seem to be grumbling about Post's report, possibly one more reason Yahoo! and Microsoft have failed to comment. Now would constitute poor timing on Microsoft's behalf as shareholders are already angered by Microsoft's reported plans to spend as much as $2 billion to catch up with Google.

Another factor to weigh in when considering such an aquisition -- besides the humanity behind it, how many jobs would be lost? -- the search engines have different focuses on the market. Google competes for Internet advertising by creating more building software while Yahoo! aggregates more content. Microsoft is a software building company and may not mesh well with a content aggregate aquisition.

With all the news encompassing Microsoft these days -- Gates leaving in 2008, changes in rank, $2 billion spending -- shifting the focus from completely software toward a more holistic yet different angle with a content focus may not sit well with shareholders.

Microsoft may need to keep this in mind, however. With the expansion of services and consumers pressing for all inclusive, free use of everything they could ever wish for an eventual aquisition may be a golden goose for Microsoft and Yahoo! if their market values continue falling far below their competitor's. Who knows what is to come with the transition out of Gates? He's moving on to bigger, better things with his philanthropy while taking a step back from his money making conglomerate. Perhaps this is just the thing Microsoft will use to become more "hip" and in touch with the changing times. The Internet is being consumed at vast rates and a younger generation has learned to live through the Internet. Extending mash ups from helpful sites to broad companies may be the next big thing. It certainly isn't a new idea, but this could have implications we'll be guessing on for years to come.