brandondawson.org

A week after claiming they were done pursuing Yahoo, Microsoft has again made an offer. This time around, it’s so preposterously one-sided that Yahoo would be twice the fool to take it as they’d have been to accept Microsoft’s truncated stock-price offer the last time around. [link]

But that’s not what it’s really about, and everyone knows it. What it’s really about is taking advantage of Carl Icahn lurking as a stalking horse; the barbarian at the gate. What it’s really about is bringing Yahoo to terms on Microsoft’s original offer.While Yahoo’s search has improved dramatically the last few years, it has little value to Microsoft except as part of a deal for the content side as well. Search needs eyeballs to be worth anything, all the more so in a world where the opposite strategy –ie, the famously minimalistic Google– has the lion’s share of those eyeballs.

Combine the two, and you’ve got the #1 content destination in the world –by a wide margin– with a compelling and continually improving search product, with which you can tie in the Windows monopoly (while it still exists) and find neat stuff to do with Yahoo’s more esoteric acquisitions (Flickr, del.icio.us).

While buying Yahoo’s search (and their “Panama” contextual text-ad platform) would represent a leap forward for Microsoft, whose only current buzz-worthy search-ad segment is old-school graphical display ads, it does not represent a problem solver for Microsoft. It only adds a couple pieces of the puzzle that they presently lack.

Yahoo, on the other hand, has incredibly undervalued (per its stock price) assets that can’t depreciate further. Yes, they’re at rock-bottom. But they can only go up from here, and CEO Jerry Yang, for all the derision he’s gotten for sticking to his guns, should also be recognized for holding out for true shareholder value, not just that demanded by a notorious monopolist, nor an equally-notorious vulture capitalist such as Icahn.