As much as I believe that Microsoft needs to do something major, and as much as I have predicted that it would put Yahoo in play in 2007, the idea of Microsoft trying to buy Yahoo, while in a sense inevitable, is still desperately difficult. The two companies’ cultures are different, as people keep yammering, but you could say that about Microsoft and pretty much any other company — Microsoft is an anomaly in an industry of anomalies — and so culture is not the real issue.
The real issue has to do with size and experience. Bringing off multi-line acquisitions of this size — call it $50-billion and 11,000 employees, against Microsoft’s $293-billion mkt cap and 71,000 employees — is always tough, and Microsoft, while a relatively profligate small acquirer, doesn’t have material large dealing experience to point to. It can do the deal, in other words, but the subsequent carnage may be something to behold — which Google might actually end up applauding.
[Update] Some people are saying that Microsoft needs to spin out its “Internet” business and combine that with Yahoo. Newsflash folks: This is 2007, every technology/software business is an Internet business. If you want to make the argument that MSFT needs to carve out media and advertising then make it, but don’t conflate media/ad with Internet and pretend the latter still remains a distinct category, because it doesn’t.
Pretending there are are Internet and non-Internet aspects to a tech company like Microsoft is like pretending you can have peeing and non-peeing sections in a swimming pool. It doesn’t work.