Microsoft wants to buy Yahoo, and that too for no less that $44.6 Billion. Yahoo had been posting bad results for a while now. There is news that Yahoo is about to layoff anywhere between 1000 and 2500 employees (7% of their employees). Former CEO Terry Semel who vacated his post for Jerry Yang, is also leaving his position as the Chairman of the Board.
What a day for Yahoo!!
Microsoft aims at gaining ground against Google by getting Yahoo into its fold. They have been trying to build MSN Live Search engine as a rival to Google, but with little success. On the surface, it looks like the MS/Yahoo merger might be beneficial to both of them. But that might not be so...
Microsoft's MSN and Yahoo are actually competitors in most of their application markets. Be it finance (Yahoo Finance vs MSN Finance/MSNBC/CNBC), email (Hotmail vs Yahoo Mail), web search (Live search vs Yahoo search), news, online games, maps or yellow pages, Yahoo and Microsoft are competitors.
So what will happen if they actually merge with each other. One of their two services will have to be let go. This is bad for competition and innovation. Also, many Yahoos have grown up hating anything to do with Microsoft. Some of these key people will leave Yahoo if a merger happens. And where will they go? Probably Google...
I think, if Microsoft really wants to compete with Google, they first need to shed their corporate (and bureaucratic) structure (atleast for their search division), and need to become more like a startup. Google has done very well by keeping the spirit of small teams and allowing individual innovation to prosper. I think Microsoft should also adopt the 20% time for personal projects idea (or something similar) that Google pioneered.
Instead of spending $45 billion in acquiring Yahoo they could use that money to foster a startup innovation culture within their own home.
Thanks to fauigerzigerk for suggesting the title in the YC News thread.
