Two losers as Yahoo & Microsoft end talks

One pulled offer, yet two losers. Or so it seems after Microsoft’s withdrawal of its $33 a share, $46.5bn bid for Yahoo. The latter’s co-founder and CEO Jerry Yang faces a potential shareholder revolt following Yahoo’s failure to get it together with its software suitor after demanding, and being refused, $37 a share.

In the lucrative online search market, as Richard Wray points out in The Guardian, Google dominates and only working with each other will give Microsoft and Yahoo the scale to compete. Meanwhile, talks to secure a deal to outsource its paid search business to Google, another potential means of bolstering Yahoo, have gone nowhere.  

Microsoft isn’t looking too good either. Despite investing million of dollars in its own search business, it has lost ground and confidence against arch-rival Google, says the FT’s Richard Waters. What’s more, said Robert Cyran on Breakingviews, Microsoft’s bid was seen as recognition that its grip on desktop software – where its operating margins are 70% – may slip.

Google is offering competing applications (supported by advertising) such as word processing for free; “that’s where Yahoo, good at selling online ads and subscription services, came in”. With Microsoft and Yahoo unable to agree a deal, “the winner”, as Lex said in the FT, “is Google”. 

MSFT: 12m change -3%

YHOO: 12m change -17%