The Impact of the Yahoo-Microsoft Deal

Many folks may not anticipate what will happen tomorrow. But in the last 48 hours the once Microsoft/Yahoo! deal that was expected to save Yahoo! from financial trouble has fallen apart. The fate of Yahoo! and its future will be determined by tomorrow's actions.

In order to bring most of you up to speed on the ongoing developments between Yahoo! and Microsoft I shall quickly recap. Yahoo! has been facing attempting to negotiate a deal to merge with someone over the last few months. Its main rival Google would be a no go since it the deal would face scrutiny due to monopoly laws. The only other viable source would be Microsoft who had the capital and justification for the purchaser. News Corporation (Murdoch's MySpace Company) became interested but could not afford the asking price form Yaho0. After months of negotiation, the deal was suppose to be finalized by tomorrow, May 5, 2008.

The deal ended up going sour before the due date and the fate of Yahoo! is on the line. What is the impact of this situation though? In the current troubled economic state that we are in, the sky is the limit. This in turn may possibly be the catalyst that history will refer to in books or nothing at all may occur.

I speculate that Yahoo! stocks will take a tumble this week and in 14 days or so, Yahoo! will be bought out by a rival at a discount price. As a cynic, I believe that Microsoft setup this situation in their favor from the get go. Their interest to take over Yahoo! would benefit them the most as it would negatively hurt the most. Microsoft needs some leverage in order to compete with Google and acquiring Yahoo! would help. When other parties became interested in the deal, Microsoft has to commit to their guns and offer a price that other companies could not afford. In a way they inflated the value of Yahoo! temporarily in order to prevent others from attempting to purchase it. At the last minute, Microsoft pulls out of the deal and during the ongoing days and weeks, Yahoo! would lose monetary value and become desperate and accept the first check that rescues them. Would you be surprised if by the end of this ordeal Microsoft ends up with Yahoo? Neither would I. Michael Arrington of TechCrunch offers a similar view on the fate of Yahoo.