Now What?
By Denis Campbell • Jul 20th, 2008 • Category: Business
(Reprise article)
The fish at the end of the Pixar film “Finding Nemo” bob on the surface of Sydney Harbour in plastic bags unable to break through to the big ocean below them. The executive teams at Microsoft and Yahoo! seem in a similar situation and face much bigger hurdles whether or not they eventually merge.
Carl Icahn is vexed the deal did not go through, has launched a board coup and Yahoo! CEO Jerry Yang is in big investor trouble. Steve Ballmer at Microsoft is not exactly sitting pretty either. No one ever wants to be the guy to follow an icon. Steve sits in the shadow of the man who basically created PC’s, Bill Gates. When Bill spoke about the deal, his “Steve takes all strategic decisions” quote was not exactly the ringing endorsement neither the market nor Steve wanted to hear to ease jittery nerves. Microsoft needs an Internet solution and buying Google is not an option.
Both Steve and Jerry have been fortunate that petroleum price and natural disaster headlines have taken some of the heat and Ballmer realises that even though he did the sensible thing by walking away from an untenably priced deal, he is no closer to finding an Internet business solution to bolster or replace his vastly underperforming MSN. Even with their artificially high volume figures (since every person signing out of their 100 million+ Hotmail e-mail accounts is automatically re-directed to an MSN home page) the results are poor. Too, Microsoft generates only 9% of Internet search traffic while Yahoo! does 17.5%.
So spending $42-$47.5 billion dollars buys the winner of the combined entity a 26% share of the search market. The leader, Google, controls 62% of the market, continually innovates to aggregate solutions and is doing everything it can to keep eyeballs glued to Google run/based/partnered screens. Whilst they struggle to merge two behemoth entities, they will lose further ground plus Yahoo! has a poor service record and fails to let customers opt-out of online adverts so that may not work to Microsoft’s advantage because one must overcome customer dissatisfaction with both companies. Even a name change to something like Microhoo! won’t help.
Google is the 500 lb gorilla in the corner of the room. They are leaner, smarter and faster than the other two so it seems the business case is damned if you do or damned if you don’t.
The only winners will be Carl Icahn and shareholders who take their payout and run. Nice work if you can get it.
Denis Campbell is a journalist, author and businessman.
From a farmhouse in South Wales overlooking the Irish Sea, he and his wife run Target Point Ltd, an EU-wide strategy firm working with global businesses across a dozen industries on clarifying and executing strategy and changing their culture and focus. As a businessman living in the EU for 10-years, writing was a passionate hobby. He began blogging in 2006 with a number of pieces examining the corrupt climate of deception in the billion dollar spiritual self-help industry and re-published collected business, political and lifestyle features published across the EU since 2001. It has since grown into The Vadimus Post, from the Latin Quo Vadimus – where are we headed? (…and do we know why?), a daily e-magazine for those wanting to dig deeper, learn more together and dialogue on the key issues of the day.
Thanks for visiting and feel free to let me know your thoughts and opinions.
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