Will Yahoo End In Traffic Jam?
Microsoft, News Corp. May Make Things Sticky Under a Three-Way Deal
As if Microsoft and Yahoo weren't a queasy-enough combination. Now comes the possibility of a messy, three-way, three-platform, three-headed, three-strategy, hostile-motivated combination of Microsoft, Yahoo and News Corp.'s Internet properties.
It all seems quite fantastical. But not necessarily if you are in charge at one of the participants. On an individual basis, a three-way deal would solve Microsoft's and News Corp.'s individual problems. The hitch is that the players also will create a collective mess.
Consider the incentives for News Corp. (the owner of The Wall Street Journal): It gets to contribute MySpace at a time when the valuation for the social-networking site is coming into question. Advertising on these sites has proved a less-than-brilliant opportunity, a reality revealed as Fox Interactive Media is expected to miss its $1 billion annual sales target by about $100 million. For Microsoft, the benefit is to convince investors that it is creating a viable alternative to Google.
But one need only look at some of the great serial acquirers of the 1990s to understand just how hard this truly is. Three-way deals rarely make it from announcement to the finish line. Then consider the combinations at Citigroup, where three separate sales organizations from three different parts of the Franken-bank still call on clients. Multiparty deals work best when the acquirers divvy up the target, as in last summer's $100 billion scrum over the Dutch bank ABN Amro.
Consider, as well, that the reason Yahoo is in this mess is because it can't operate its business as well as Google; Microsoft, because it can't compete as well as either Yahoo or Google; and MySpace still is trying to close the credibility and usability gap with Facebook. If these companies can't work well separately, why should investors trust them to do it well together?
By: Dennis K. Berman
Wall Street Journal; April 11, 2008
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