The Impact of the Microsoft-Yahoo Merger on Shareholders
The purpose of this essay is to critically assess the impact of the proposed merger between Microsoft and Yahoo on shareholders of both companies. TheMicrosoft-Yahoo Merger Review will be set against the current state of the industry, in particular, Google’s dominant position. Furthermore, this essay will evaluate the potential impact of the merger on shareholders and offer alternatives to the merger. Ultimately, it is recommended that the shareholders vote against the merger.
2. Background of the Microsoft-Yahoo Merger Review
In February 2008, Microsoft made an unsolicited bid to purchase Yahoo for $44.6 billion. The offer was rejected by Yahoo’s board of directors and subsequently, Microsoft withdrew its offer (Sieberg, 2008). In May of that year, Steve Ballmer, CEO of Microsoft at the time, made a public statement saying that he was no longer interested in acquiring Yahoo (Gibson, 2008). However, in February 2009, after Carol Bartz was appointed as CEO of Yahoo, it was announced that Microsoft and Yahoo were in talks for a potential search partnership (Yang & Aolton, 2009). In July 2009, it was announced that the two companies had reached a ten-year search partnership agreement in which Microsoft would power Yahoo’s search engine and yahoo would become Microsoft’s exclusive salesforce for search advertising sold on its own websites (Microsoft & yahoo!, 2009). The partnership was intended to help both companies better compete against Google.
3. Current state of the industry
The global market for online advertising is currently worth $209 billion and is expected to grow to $335 billion by 2020 (Statista, 2017). Of this market, Google currently has a 31% share while Facebook has a 16% share (eMarketer, 2017). Together, these two companies account for almost half of all online advertising spending. In terms of search engine market share in the United States, Google has 67.5%, followed by Bing with 20.1% and Yahoo with 12.4% (comScore qSearch 2.0 Multi-Platform, 2017). Globally, Google has a 92% market share while Bing has 2.5% and Yahoo has 1.7% (StatCounter Global Stats – Search Engine Market Share Statistics, 2017). These figures demonstrate Google’s dominant position in both the online advertising and search markets.
4. Google’s dominant position
Google’s dominant position is due to a number of factors including its history, brand recognition, financial resources and technology platforms. Founded in 1998, Google has been in operation for almost two decades longer than either Microsoft or Yahoo. During this time, it has built up a strong brand identity which is recognised by people all over the world. In addition to this, Google is one of the most financially successful companies in history with annual revenues exceeding $90 billion (Google Investor Relations – About Google – Company Overview, 2017). This gives Google a significant advantage over its competitors when it comes to investing in new technologies and initiatives. For example, Google acquired YouTube for $1.65 billion just five years after it was founded (Ahuja & Gomes 2006). This gave them access to YouTube’s user base as well as its technology platform which they have since used to launch their own video streaming service, YouTube Red. Furthermore,Google has developed a number of successful technology platforms including Android, Chrome and Gmail which it uses to control the user experience and expand its reach into new markets.
5. The impact of the merger on shareholders
The impact of the merger on shareholders will depend on a number of factors including the share prices of both companies, the current state of the industry and Google’s dominant position. Based on these factors, it is unlikely that the merger will have a positive impact on shareholders.
6. Alternatives to the merger
There are a number of alternatives to the merger which could be implemented by either Microsoft or Yahoo. For example, Microsoft could focus on improving Bing’s market share through innovative features and marketing campaigns. Alternatively, Yahoo could focus on growing its advertising business by expanding into new markets and developing new product offerings.
Based on the above analysis, it is recommended that shareholders vote against the proposed Microsoft-Yahoo merger. The merger is unlikely to have a positive impact on shareholders and there are better alternatives available to both companies.
In conclusion, the proposed Microsoft-Yahoo merger is not in the best interests of shareholders. The two companies would be better off pursuing alternative strategies which focus on their strengths and taking advantage of Google’s weaknesses.
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