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Wednesday, May 07, 2008

Lessons from the Yahoo-Microsoft merger talks

Like most Yahoo shareholders, was disappointed to hear about Microsoft's abandoning the merger talks. While many investors are still hoping that a deal will get done at some point, for Microsoft's sake, I hope Microsoft stays away from Yahoo and builds its own search engine platform.

What's surprising about the merger talks was the tactics shown by Yahoo in avoiding the merger. I think a lot of it happened because its CEO, Jerry Yang, still thinks that Yahoo is his own company rather than belonging to the shareholders. That's the problem with the founder CEOs - they run whole heartedly to the capital markets to raise money but forget the fact that after getting the money, their fiduciary responsibility is to work in the best interests of the shareholders rather than themselves. If such people want to run the company their own way, then they shouldn't go to capital markets to raise money.

One important lesson from this merger - too often, people become so obssessed with getting something that they think that life won't last without getting that thing/person/firm etc. However, over and over, I have seen that life infact gets better even if we don't get the thing/person etc after which we had been running so much. Its just that when we are obssessing about something, we forget to see other opportunities that exist around us and that often are better for us.

Hopefully, Microsoft will realize from this experience that it is better off without Yahoo and it can develop capabilities internally or via mergers with more receptive firms to better compete with Google. Maybe once Yahoo shares drop back to teens and the board of directors get hit with shareholders' lawsuits, Jerry Yang and his cronies will realize that Microsoft's offer of $31-$33 was actually way above the true worth of Yahoo.

posted by Ruby @ 1:05 AM

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