Misconceptions about Microsoft’s bid for Yahoo
1. This move demonstrates just how scared Microsoft is of Google: This theory has been advanced by the NY Times, and it is simpleminded. The truth is, Microsoft is scared of a lot of other people for a lot of other reasons besides online search and advertising. When we consider the core areas where Microsoft generates its revenues, it quickly becomes obvious that Apple and the open-source community are among its biggest rivals. Google is just one part of the equation.
2. This move will allow Microsoft to finally gain a strong internet foothold: Not so fast. As John C. Dvorak rightly notes, this takeover attempt will likely not get the appoval of EU regulators, who remain decidedly hostile to Microsft’s browser strategies. The same can be said for American regulatory bodies.
3. Microsoft is overpaying for Yahoo: Granted, Microsoft’s offer constituted a 62% premium over Yahoo’s share price at the time the offer was made, but we musn’t forget that Yahoo’s share price has been driven down lately and was arguably undervalued. And sure, at $44 billion the deal would be the biggest in tech history, but let’s remember that Microsoft has a market cap of $300 billion, enough money in the bank ($22 billion) to cover the cash component of the deal, and is quitely pocketing $1.5 billion a month in earnings. If Microsoft is overpaying for Yahoo, it is only because it can afford to.
