The internet market is being dominated by three giant companies namely Yahoo, Microsoft and Google. Apart from Yahoo being the first search engine Google has apparently taken the lead in market dominance providing a more user-friendly, convenient and best search engine so far. This change in the positions has gotten Microsoft pretty worried which is currently at the third place having control over more or less 10 percent of online searches.
Now that it looks like that Microsoft is losing the search war, which if won can prove to be extremely helpful in advertising its applications software and overcome the declining growth of that sector, they are strategizing to reclaim there throne in today’s market of technology.
Henceforth to acquire such dominance Microsoft is trying to get yahoo to merge with them putting them in a more powerful position in their rivalry against Google. However Yahoo’s board of directors, considering the effects and implications this proposed merger would have on them, are not really showing that much of an enthusiasm towards Microsoft’s Proposal.
Given the fact that they have already denied there offer, stating that they would only agree over $37 per share, when Microsoft offered them $44. 6 billion, or $31 per share to acquire Yahoo. The argument is still in its premature stage, as the two companies haven’t even gotten over the financial agreements. Because other then considering the foreseen financial benefits of such a merger, there are various non-financial barriers like cultural and regulatory issues of both the companies to be taken into account.
Whether they will be able to surmount such conflicts and develop a search engine with such potential that would rival that of Google seems unlikely for now. “The IDC program director for digital media and entertainment thinks that the idea of Yahoo becoming a developed unit obliged to Microsoft culture and executives is not one of the bright ideas. ” (Albanesius, 2007) Yahoo has endured a decrease in profits for eight years consecutively while Google has gotten stronger. Part of Yahoo`s share of $40 billion online advertising market has been lost to Google.
This makes it more likely that Yahoo and Microsoft need to merge with each other because of the danger posed by Google`s supremacy in online search advertising market to both of them. Recently, Yahoo Shareholders have been offered to be paid half in cash and half in Microsoft`s shares. Microsoft has offered Yahoo shareholders with a 62 percent premium of its closing price. Hence the rejection of such an offer means that Jerry Yang , the Chief executive of Yahoo inc. is competent enough to increase Yahoo share price by 62 percent at the very least, if they stay independent.