1. History. There has never been a truly successful merger between giant tech companies. Compaq went from healthy to danger list after acquiring DEC. The tech cemeteries are filled with companies who tried to merge with equals and failed. The closest to success, I can think of is HP-Comaq. H-P is doing okay now, but the operation almost killed them. And now that the dust has settled, just what did they gain buy the acquisition that cost them billions and took years to sort out.
2. Culture. Mergers and marriages bring together often disparate cultures. This often causes ongoing family feuding, children going out on their own and so on. For those of us who know smart and capable people at both companies, their cultures are decidedly different. Financial analysts and M&A experts very often overlook the issue of culture. But the employees don't and cultures that don't merge can cripple a company.
3. Microsoft doesn't solve Yahoo's problem. Best I can tell, Yahoo maintains a 1999 business model. It wants sticky eyeballs to come to Yahoo sites and never leave. While people are there they will flash as many ads in front of those eyeballs as the visitors will tolerate. People are tolerating less and less of that. Yahoo has not really adjusted to a mobile strategy, where the ads follow people wherever people wish to go, which is Google's very sharp strategy. What does Microsoft do to either enhance or change that core strategy? I don't know. You may mention Windows CE, but I do not see why tht will get people on-the-go to follow Yahoo any closer.
4. Yahoo does not solve Microsoft's problem. Redmond has so many strategic problems, but I think at the core of it, is that Microsoft is becoming as big and unimportant as did IBM 15 years earlier. It is the undisputed leader in the enterprise and in the world's desktop productivity software. That gives it a long life, but a steadily shrinking one. Microsoft will see some significant ad revenue increases by buying Yahoo, but how long will it take for Microsoft to realize $45 billion in, not just revenue--but actual rofit from this transaction?
5. Neither company scores high in GRAC. This is a term I coined in the 1980s: 'Generally regarded as Cool." GRAC is much more important than merger & acquisition folk realize. Companies whose perspective customers regard what they produce to be cool are the ones that revail, particularly among early adopters. IT folk says this doesn't matter, because their purchases of tens of thousands of something is where the real money is. True, but moving forward those numbers are less relevant, I think, than what and who early adopters generally regard as cool.
OK, I'm no expert. And nobody has ever envied my personal stock performances over the past 6-7 years. But we shall see how this proposed marriage of behemoths works out. We shall see.
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