Feb 7, 2008 114 reads by Navneet Kaushal

It's been many days since Microsoft’s bid on Yahoo! for a US$44.6 Billion came up. It doesn't seem likely that any other buyout offer is going to come out of the blues if the trends in the debt markets are to be considered.

Perhaps, Yahoo! hoped that there would be a competing bid soon, and which could perhaps raise Microsoft's bid to about $40 per share, but nothing of that sort has happened as yet. Hence, Yahoo!'s board of directors isn't left with any other option but to respond to the bid.

It seems that at present Yahoo! has a couple of options, first is to accept the offer and second is to enter into a treaty with Google and outsource its search advertising in order to boost cash flow. Finally, Yahoo! could choose nothing at all, but that certainly wouldn't be an escape route as it could be followed by shareholder lawsuits for failure to fulfill fiduciary duty.

According to estimates if Yahoo! decides to strike a deal with Google and gives it the search advertising business, it could augment the cash flows by 25%. While this sort of a move would prevent Microsoft's takeover, it could be quite a blow to Yahoo!'s pride, who had formulated and worked really hard to bring out the Panama program to compete with Google.

Cues are nowhere in sight whether DOJ would give its consent to the deal or not, but horse-sense suggests that the Microsoft and Yahoo! merger would help create a more competitive environment.

A merger certainly is unacceptable to Google as it would have all the potential to eat into their share of revenues, so Google's outburst is all the more justified. If there's an official verdict from the DOJ that the merger cannot move ahead, then things would pretty much remain the same for Google. And Yahoo! could be saved of any shareholder litigations as well. But Yahoo! might have to compete better to maintain its present position or perhaps to regain its past glory!

Navneet Kaushal

Navneet Kaushal

Navneet Kaushal is the founder and CEO of PageTraffic, an SEO Agency in India with offices in Chicago, Mumbai and London. A leading search strategist, Navneet helps clients maintain an edge in search engines and the online media. Navneet's expertise has established PageTraffic as one of the most awarded and successful search marketing agencies.
Navneet Kaushal
Navneet Kaushal
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