Victor Cook

Microsoft + Yahoo = No Longer a Recipe for Success

Dana,

Not a good recipe for success and besides, Microsoft doesn't need to spend $45 billion to fix their problem, because the source of that problem is in Redmond's back yard. See my post on "Microsoft-Yahoo Deal: A Question of S&M Synergy" at seekingalpha.com/artic...

M&A Implications of Microsoft's Yahoo Bid

Markos,

There may be syngeries from a Yahoo! acquisition but Selling & Marketing are not among them. See "Microsoft-Yahoo! Deal: A Question of S&M Synergy." at seekingalpha.com/artic...

What Would a Combined Microsoft-Yahoo Look Like?

The underlying problem with this merger is the lion’s share of the redundancies Mr. Ballmer refers to are in his own backyard.

In 2006 it cost Microsoft 18.8¢ more to generate a dollar in sales than it cost Google. Multiply that 18.8¢ times its sales revenues and you find that Microsoft had an $8.3 billion dollar problem. That's how much the company was over-spending on enterprise marketing in 2006 compared with Google. And it cost Yahoo 15.1¢ more to generate a dollar in sales than it cost Google. Yahoo had a $1 billion dollar problem. Combined there were almost $10 billion in redundancies at the companies.

The combined R&D spending ($7.4 billion) and Selling, General & Administrative ($16.3 billion) expenses of MSFT and YHOO totaled $23.7 billion in 2006. So their redundancies relative to Google amounted to over 42% of total spending. And over 85% of those same redundancies belong to Microsoft. These could be reduced without shelling out $45 billion for Yahoo.

For the details see my April 16, 2007 article “Microsoft’s $8 Billion Problem” at www.customersandcapita...