Wednesday, February 6, 2008

Should Microsoft Buy Yahoo!?

Last week, Microsoft placed a whopping US$44.6 billion offer to purchase shares of Yahoo!, which has been struggling as of late due to stiff competition from companies like Google and YouTube. In December 2006, Yahoo! underwent a major reorganization, and recently, it has been rumoured that hundreds (or even thousands!) of jobs could be cut from the company. So when Microsoft swoops in with a major bid that likely no one else could (or would!) attempt to beat, is this the Golden Ticket Yahoo! has been looking for? More important: will this spell disaster for consumers everywhere?

It's no secret that takeovers are essential in this industry for a number of reasons. Sometimes, it's to build capital in order to invest in things like R&D to create the amazing products we see today. Other times, it's to help effectively compete against major powerhouses: two (or more) heads are better than one, right? Other times, it might be a mutually beneficial relationship, where each company can compensate for a particular weakness by utilizing the strengths of the other. But many times, the reason is the sheer need to be number-one, and take out anyone in your path.

Before you jump to conclusions, I'm not saying this is Microsoft's intention nor motivation. But the bid wasn't exactly a "hey, we'll throw a bone out there and see the reaction." It was a move that would almost definitely obliterate all other bidders, and dangle a carrot in front of Yahoo!'s eyes that might just be far too tempting to resist.

Microsoft already owns plenty in the online arena; and we all know about its dominance in computing. The company recently made sure it had a major foot in the door of the growing social networking world by securing a US$240 million stake in popular Website If Microsoft combines forces with Yahoo! as well, what sort of "competition" will be left?

Sure, Google isn't an "innocent" party in this equation, owning major properties like YouTube, and online advertising behemoth DoubleClick. But at what point will it become absolutely impossible for any company to get their foot in the door, and the power be placed in the hands of too few?

Many argue that we see the same sort of problems in the cellular phone industry in Canada, where three main carriers dominate, only one of which operates on the worldwide standard of GSM. However, the opening of the wireless spectrum to new entrants this coming May could change this. Meanwhile, the ongoing debates about a potential merger between satellite radio providers Sirius and XM in the U.S. lead to the same antitrust-like issues.

Bottom line: acquisitions and combining forces certainly help to advance technologies in ways that one company might not be able to accomplish. But we have to draw a line somewhere.

On that note, I always laugh at friends or family that want to "boycott" a particular brand because of a bad experience. Half the time, the brand they decide to go for instead is actually owned by the same parent company, showing that their efforts are, quite frankly, futile. The sad truth is that there are so many conglomerates out there, that the company that makes your socks probably also owns the place where you had dinner last night, along with your favourite shampoo. Business is business, of course. But competition is what adds to the excitement, and leads to continual innovation.

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