Content Matters

While the long-rumored Microsoft-Yahoo collaboration makes sense on many levels, there are two interesting articles that suggest the deal will not happen.

 BusinessWeek reports that last week's rumors of the deal heating up were nothing new and that the NY Times and WSJ articles, in fact were based upon talks from a few months ago.  As that article points out, things are actually looking more positive for Yahoo today than they were earlier in the year.  The launch of Panama and recent acquisition of Right Media should buy some more time for Yahoo to get their act together. 

Meanwhile, Forrester's Charlene Li point out that integrating the two companies would be a Herculean task.  The Redmond and Sunnyvale corporate cultures are very different from one another.  Anyone who's been through any type of merger or acquisition knows that conflicting cultures can wreak havoc on even the best deals.  And, as Li indicates, this integration would have to take place while the combined company tries to head off Google's dominance of the industry.

On paper, a Microsoft Yahoo merger makes a lot of sense.  The combination of Yahoo's web 2.0 savvy, market and advertising capabilities plus Microsoft's technological skills could make a formidable competitor to Google.  But, like sporting events, business doesn't get played on paper.

I believe that Yahoo is relatively undervalued at $30 per share, but only if they can unlock the value of their disparate assets.  If the merger route is not the best path, perhaps a refocusing (a la the infamous peanut butter memo) will help.  Last week's announcement that they will finally kill Yahoo Photos in favor of Flickr is a good starting point.