Microsoft and Yahoo: Stop the insanity!

The on-again, off-again purchase of Yahoo seems to have collapsed over the weekend with Microsoft walking away from the table and abandoning the deal. On February 1, in a dramatic announcement, Microsoft “made a proposal to the Yahoo board of directors to acquire Yahoo for $31 per share in cash and stock, representing a total equity value of approximately $44.6 billion (based on share prices as of January 31, 2008).” This represented initially a 62 percent premium above Yahoo’s closing stock price on January 31.

You can read Microsoft’s official statement on the matter, as well as Steve Ballmer’s letter to Yahoo CEO Jerry Yang here.

To weigh in on this, my first thoughts are toward Yahoo, whose shares took a tumble Monday morning in light of the recent news (although it can thank Microsoft for the merger publicity that helped its shares rise during the past 3 months). I find the refusal to make this work out a bit difficult to comprehend on the part of Yahoo. Emotion aside, this is the wisest financial move it could make if we look at the numbers, look at Google’s strong stance in the market, and so forth. Aside from either greed (‘we can get more from the Microsoft giant’) or pride (‘we built this from the ground up and will rage against the Microsoft buying machine’). there is no logic whatsoever to refusing to be assimilated. Resistance wasn’t futile mind you. Microsoft is walking away. It has survived the day but simply to continue to flounder in the future until some lesser company walks in and offers peanuts when they are at their lowest ebb.

But then my thoughts lean toward Microsoft. What were they thinking there in Redmond? Does it really seem like two has-beens can combat the Google giant? And by has-beens I am referring to Yahoo (as a portal and e-mail hosting provider) combined with Microsoft’s MSN, Hotmail, Live cocktail that cannot seem to win over the Google-ites. How will putting these two worlds together create the successful 1-2 punch against Google? I didn’t think it would and apparently neither did Microsoft stock holders because shares have decreased until this week, after the announcement that the deal was off. Finally shareholders saw an end to the insanity.

My third thought pulled in Google. I recently heard Matthew Glotzbach,

product management director for Google, speak at the IT360 Conference in Canada. He started off by showing one of the original Google screens from 10 years ago (you can catch a glimpse of that here) and what it looks like today. Not much has changed. A winning solution that continues to succeed. It will be interesting to see how this will all play out … and if the insanity is really over.

Well, I have some research to do on Microsoft Live Mesh. Guess I’ll Google it.