MicroHoo!, How About YaMicro!,
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Negotiations continue between Microsoft and Yahoo! about a possible merger between the software behemoth and the Internet giant. Which of the names above do you like the best? I am partial to the last one, if only because it is kind of fun to say. Although the first one is also fun. The middle one would never work with the Yahoo portion coming first. As benevolent as Bill Gates is, I don’t think his ego would allow any joint name between Microsoft and Yahoo! where the Yahoo portion came first.Terms have not been agreed upon, but the shear discussion of such a marriage has other Internet companies and legislators alike clamoring about the ramifications.
Google, a rival to both Yahoo! and Microsoft, didn’t waste any time voicing their concerns over a joint Microsoft/Yahoo! beast. Google CEO Eric Schmidt is on record saying that the deal could “break the Internet and diminish choice.”
Google has made a significant dent in the free email service industry with their Gmail service. Microsoft and Yahoo! were the dominant players in the field before Google entered the picture. Google is also attempting to cut into Microsoft’s turf by offering Internet applications that compete with the Office software suite.
So now Google is worried that a joint effort between Microsoft and Yahoo will kill the Internet. I don’t think so. As my colleague Lynn Carpenter pointed out last Thursday in the Market Minute of IDE, Google has now become a verb. I have not heard anyone say Yahoo this or Microsoft that.
Google is the king of search engines, claiming 59.5 percent of the domestic market and 62.8 percent of international search engine activity. While the combined efforts of Yahoo! and Microsoft would certainly be more competitive in this arena, they still would not eclipse Google.
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Google is also kicking butt in the advertising revenue segment, raking in almost 40 percent of the online advertising market.
Yahoo! has the dominant position in news traffic and is still the number one email service provider in the world, despite Google’s efforts with Gmail. Microsoft and Yahoo! are both among the leaders in instant messaging.
So why is Microsoft pursuing Yahoo!? It seems like the strengths are overlapping. If the goal is to compete with Google, what is the attraction? Google recently acquired YouTube and DoubleClick. These were acquisitions that created new segments for Google or enhanced areas where they were weak.
Microsoft and Yahoo! would create a virtual monopoly in instant messaging and would put them in a more dominant position in email service and the on-line news arena. But what else would the merger bring to the table?
Legislators are jockeying to voice their opinion on the potential merger. Most of them are concerned about potential unfair advantages for the merged company.
I don’t see it.
As I stated above, the combined entity of Microsoft and Yahoo! would not be dominant anywhere they aren’t already. Google would still be dominant in the search engine and ad revenue areas. I understand the posturing by Google and their CEO, but I for one don’t see the need for concern.
Personally, the acquisitions by Google made more sense than this one potential acquisition by Microsoft. If I were the CEO of Google, I would stay the course and let Microsoft spend the $44 billion it will take to complete the deal. It might even be more than that in the end.
And the joint company will not be an attractive investment, in my humble opinion.
With that in mind, I have the perfect name for the company - SoftHoo.
Good luck and good trading,
Rick
P.S. To let me know what you thought of today’s article, send an e-mail to: feedback@investorsdailyedge.com.
[Ed. Note: Subscribers to Rick’s KISS Investing service recently closed out gains of approximately 150% on Continental Airlines and 175% on the Diamonds Trust. Click here to learn more about KISS Investing]
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Tags: , Google, Microsoft, US stocks, YahooAbout the Author
Rick is currently the Editor-in-Chief of The ETF Options Trader and the Triple Wave Investor. At the age of 23, on the third options trade he had ever placed, Rick turned $1,800 into $22,000 in less than a week, when the company he bought became the target of a takeover. He admits it was a stroke of luck, but it was a memorable education as to the leverage that options can provide. He lives near Delray Beach, FL with his wife and three children.
Investor's Daily Edge is a free investment e-letter delivered every day before the market opens. In each issue you'll receive clear recommendations and practical strategies for protecting your portfolio and multiplying your money, whether the market is rising or falling.
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[…] And Rick Pendergraft sees Google continuing it’s search and advertising dominance online even against the possible combination of Yahoo and Microsoft. He says, “Microsoft and Yahoo! would create a virtual monopoly in instant messaging and would put them in a more dominant position in email service and the on-line news arena. But what else would the merger bring to the table? […]