Microsoft sees potential in Yahoo deal
BOSTON -- A combination of Microsoft and Yahoo could reshape the Internet landscape for millions of Web users: Would the two companies join their online portals? Could they rethink the desktop computer to integrate Web content more directly?
The changes are potentially huge but probably not in the short term.
Microsoft executives did not indicate Friday exactly what they would do with Yahoo's brand if their unsolicited $45 million bid is accepted. But analysts expect the combined companies to preserve many of their separate free services, like instant-messaging and e-mail programs.
A more likely medium-term change is that some of Microsoft's Web content could fade away or get added to Yahoo, which has a vast collection of news and features aggregated from other providers.
Microsoft's Web properties, including its Yahoo-like MSN portal, aren't exactly slouches: They rank third, trailing only Yahoo and Google, in total visitors. But while Yahoo still is profitable, Microsoft's online services are a consistent money loser. The MSN search engine is a laggard, even with recent efforts to soup it up under Microsoft's online umbrella it calls "Live."
Having Yahoo in its tent could give Microsoft a rationalization for abandoning its unprofitable online elements.
"I think MSN folds into Yahoo," said Ian Campbell, CEO of Nucleus Research. "It would be foolish to keep that separate."
Perhaps the biggest change Microsoft and Yahoo could achieve together would be creating a better way to combine the Web and desktop computing -- not to mention cell phones, TVs, cars and any other gadgets that might someday plug into the Internet.
Microsoft's $31-per-share offer -- $44.6 billion -- represented a 62 percent premium to Yahoo's closing share price late Thursday, although it's below Yahoo's 52-week high of $34.08 reached less than four months ago.
Even with these possibilities, analyst David Mitchell Smith, a vice president at Gartner Inc., said the biggest change from a Microsoft-Yahoo deal probably will be to broaden their ability to deliver ads.
"I think that's really what it's all about," Smith said. "It's about advertising. It's about search."