Why Microsoft is Buying Yahoo

Microsofts timing for buying Yahoo is certainly very curious – on the weekend before the Monday release to Manufacturing of Windows Server 2008 and Vista Service Pack 1 and XP Service Pack 3 promised arrival shortly thereafter. Redmonds marketing has in past been impeccable – a slow drumroll prior to RTM or a launch, nothing from Microsoft itself to get in the way of the rollout. Strange brew.

Here is my thinking on the subject.

1)Microsoft at 7% is steadily losing search market share to Google. Redmond can ill afford the spectacle of that dropping to 3-4%. Yahoo would add 17% to at least delay the progression if not reverse it entirely.

2)Microsoft is looking for the opportunity to catch another stranglehold (read monopoly) position – in this case it would be one stop shop for content (news, sport, finance, etc, etc) and email services among others. Look at the numbers here for the powerhouse that MicroYahoo becomes – nothing small about these numbers. By combining Yahoo with MSN as advertising buys Microsoft becomes the premiere “magazine” outlet on the Web. Time-Warner, NYTimes, ESPN, and others certainly have to beware.

3)Microsoft would like to have a Yahoo launch vehicle for its Live Service and Silverlight software and Yahoo is a perfect vehicle for this. This is similar to Redmonds buy of the Beijing Olympics coverage by NBC now being a Silverlight-only production.

4)Microsoft would like to take the attention away from the open wound that is Windows Vista on the desktop. Redmond is also selling futures on Windows 7. Hey does this sound Cairo-ish, then Milennia, then Longhornish familiar? But with grassroots campaigns like Save Windows XP getting real traction, Redmond needs a diversion….Big Time.

Here are some recent postings on the Yahoo bid by Microsoft:
Joe Wilcox at Microsoft-Watch – this is a must read by someone who follows MS closely
Henry Blodgett as told by Darryl Taft – conceptually right, wrong in the details
Legg Mason of Wall Street Speaks -all sorts of vested Wall Street intereests covered here
Mini-Microsoft an always entertaining point of view; also great links too
NYTimes has a ton of coverage – M+A and investment banking would be in the doldrums without this bid
NYTimes Technology Section – Microsoft Is Building a Spaceship Out of Spare Parts
Postscript: This is my 700th posting, not too bad for 4 years of keeping an open eye on the IT scene