Microsoft and Yahoo!: An unlikely story

A Microsoft acquisition of Yahoo! would represent a sudden reversal of the software giant's divestiture of content assets.

Mary Jo Foley over at MicrosoftWatch reports on the ongoing rumors that Microsoft has made a play for Yahoo!, offering $80 billion for the portal and receiving a prompt rejection.

This deal, if it is even real, would be reactionary and dumb on Microsoft's part. It would be overpaying to get an asset that, if tied to Windows, would become yet another liability when the antitrust lawyers come sniffing around. Wouldn't AOL and Google, newly tied themselves, be able to claim that a Yahoo! link on the Windows desktop constituted tying? Trying to chase Google, which is making a mistake by linking its search to a particular catalog of content, is not a growth strategy for Microsoft.

Moreover, Microsoft has been divesting itself of its content assets, for example by selling Slate to The Washington Post Company. If it's any indication of the reversal of that strategy, Cyrus Krohn, the former publisher of Slate, now works for Yahoo! in its Santa Monica offices.

The Yahoo! assets are incredibly valuable. Buying them isn't necessarily a bad idea, if you're Rupert Murdoch or Viacom, but not Microsoft, which brings too much baggage. I am with Marc Canter, who says Yahoo holds a key (though not the only one) to the way content will be profitable. Bill Gates is a smart guy, he decided his company doesn't know content. That's a decision I'll wager they'll stick with. After all, Microsoft has a big enough to-do list for the next couple years with Vista to get out the door, among other things.


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