The Yahoo! Endgame

[exponent]

Yahoo! can only hope for an angel investment by a private equity company (or Microsoft) if they want to be competitive. Firstly, Yahoo! doesnt have enough cash for a major acquisition. Earnings are down 11% this quarter, and Google is growing rapidly through growth and acquisitions. However, Microsoft needs to diversify. MSN "LIVE" is garbage, and its clear that Microsoft is in the market for an ad-serving company (DoubleClick).

A tie-up between Yahoo! and a major financial player could turn out well. If I was running Yahoo!, I would definately consider having talks with Microsoft to merge some operations. Live would become YahooLive! and Yahoo Games could be rolled into MicrosoftZone quite successfully. MSN has been a loosing venture for Microsoft for quite some time. Its almost certain Microsoft keeps it because they branded it with "Microsoft". All it all, its an albatross for the software company.

I expect a merger north of $10 billion in the next 5 years for Yahoo! Unless some of the "also rans" consolidate, Google will hold its power. I'm not saying definitively that Microsoft will attempt to take over Yahoo! or that Yahoo will make an offer, but it should definately be considered. Perhaps an investment in Yahoo! by Microsoft similar to how Google invested in AOL and MySpace. If Microsoft and Yahoo! worked together on YPN/Adcenter, this could produce incredible results. Its the only viable endgame Yahoo! has to fight Google.

Yahoo! has to move fast. Google is spending carelessly, something Yahoo! did while Google was still taking a foothold. History repeats itself, I just hope Yahoo! isnt blind to what is occuring.

[hhheng]

I think yahoo fall back after google is because yahoo doesn't focus on searching, while google do. If yahoo doesn't catch up with google on searching, how can these 2 company compete? Under that case, they are 2 different companies with different products.

[exponent]

I was right about Microsoft eying Yahoo. Heres the news!!! (http://news.yahoo.com/s/ap/20070504/ap_on_hi_te/microsoft_yahoo) I guess it helps to have worked @ M$.

NEW YORK - Microsoft Corp. is resuming its pursuit of search engine operator Yahoo Inc. (Nasdaq:YHOO - news) that could help it better compete with Web search leader Google Inc., published reports said Friday.
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Yahoo shares surged more than 18 percent in morning trading.

The New York Post reported Friday that Microsoft has asked Yahoo to enter formal negotiations for an acquisition that could be worth $50 billion. Yahoo's market capitalization was about $38 billion on Thursday.

Microsoft, based in Redmond, Wash., had no immediate comment on the report, spokesman Lou Gellos said Friday.

The Wall Street Journal said executives of the two companies are looking at a merger or some other kind of matchup and said the talks appear to be early-stage discussions. It said the companies explored the idea of combining last year but the talks led nowhere.

The newspaper reports each cited unidentified people familiar with the situation.

Microsoft is feeling increasing pressure to compete with Google, which plans to beef up its portfolio with a $3.1 billion purchase of online advertising company DoubleClick Inc.

Microsoft currently trails both Yahoo and Google in the lucrative and growing business of Web search.

Google won a search advertising deal with AOL in 2005 that the Post said Microsoft wanted. In addition, Google is developing Web-based software that directly competes with Microsoft Office.

The Post story said Microsoft and Yahoo have held informal talks over the years and said Microsoft's latest approach to Yahoo signals increased urgency.

Earlier this week, Yahoo said it would buy 80 percent of advertising exchange Right Media for $680 million, increasing its stake in that company to full control.

Yahoo shares surged $5.22, or 18.5 percent, to $33.40 in morning trading, while shares of Microsoft fell 51 cents to $30.46.