Danny and I just got off the Microsoft conference call. He’s already posted live notes from the call. Microsoft CEO Steve Ballmer said at the outset, “This is a decision I’ve thought long and hard about. This is the right path for Microsoft and it’s the right path for Yahoo.” Ballmer added that “A year ago the Yahoo management team told us it wasn’t really the right time to discuss an acquisition.” Microsoft obviously feels that now is the right time, especially as the Yahoo stock has weakened (though now it’s up because of the offer).
The discussion and tone on the call made it sound like the deal was farther along than it actually is. The bid is unsolicited and Microsoft acknowledged that other companies may enter the negotiation. However, Microsoft’s general counsel Brad Smith opined that Google would not be one of them because “it controls 75 percent of search” worldwide and anti-trust regulations would preclude Google from bidding. That had the sound of a very calculated chess move.
Microsoft’s Kevin Johnson made what is probably the key statement of the press conference in many ways: “Yahoo has a great brand. We love the Yahoo brand.” Indeed, Microsoft’s Live Search brand, as Danny has pointed out, has struggled and confused consumers who are much more familiar with the MSN label. Despite all the talk on the call about engineering resources and technology, it would appear the chief motivations for Microsoft are acquiring Yahoo’s brand, its traffic, and its advertiser relationships.
Ballmer added that the combined company will represent “an incredibly efficient and competitive offering for consumers, publishers and advertisers.” He characterized the acquisition as the “next major milestone in Microsoft’s companywide transformation to embrace online services and invest in search and advertising.”
Johnson said there would be a single ad platform to bring scale to the combined effort. Danny speculated to me in IM that it will be Yahoo’s because it has the greater number of advertisers and one would not want to mess with migration as Yahoo had to in moving its customers to Panama.
General counsel Brad Smith said the reaction (this morning) “has been very encouraging from publishers and advertisers that [the combination] will create a more compelling and competitive marketplace.”
Assuming a deal, the central question is whether the “synergies” identified on paper would translate into real gains in market share and revenue. The integration promises to be challenging at a minimum. Johnson said that the company had a “very clear integration plan to bring the combined entity together, based on successful integration of aQuantive and Tellme.”
But it’s appropriate to bring some skepticism to how that might actually play out. The tone of the call suggested strongly that despite the brand strength and other assets of Yahoo – community and content — Microsoft would dominate and determine the integration (although Johnson alluded to a joint team that would consider the full range of assets). One might ask whether Microsoft’s culture would allow Redmond to see clearly which are the best products and employees to retain in the combined effort and which are the best to “let go.”
Regardless, the Microsoft-Yahoo combination would represent a formidable combination and competitor to Google in what would become a “two horse race” for online ad dollars and consumer traffic. Ballmer also said that this deal wouldn’t preclude further Microsoft acquisitions in the future.
Ray Ozzie spoke at length about the transformation of search and other consumer experiences that would be accelerated or triggered by the acquisition, including search, video, and social media. But first a deal must be accomplished.
Yahoo said in a release this morning that it will evaluate the offer and not much beyond that. It’s quite possible that other suitors will now emerge. Yahoo had not wanted this and has steadfastly tried to remain independent. But now that this offer has come that is probably impossible.
For more on the Microsoft bid for Yahoo, also see our other coverage:
- Microsoft Makes $45 Billion Bid To Buy Yahoo
- Live Blogging Microsoft’s Bid For Yahoo Call
- MSFT + YHOO: What Would Microsoft Yahoo Look Like?
- Q&A With Microsoft On Proposed Yahoo Purchase: 2+2 = #1
- Microsoft + Yahoo: Recapping Reactions