Where the Microsoft/Yahoo merger goes from here


The Microsoft/Yahoo drama transformed into a full-blown soap opera over the last week, complete with compelling new plot twists, cast changes and even a hint of stalker-like obsession. It all started when Yahoo formally rejected Microsoft's unsolicited $44.6 billion buyout bid, arguing the offer "substantially undervalues" its worth--Yahoo said it would still leave the door open for future negotiations, stating in a release its board of directors is "continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders." Microsoft responded with the kind of grim, "If I can't have you, no one will" determination typically reserved for spurned boyfriends in TV movies starring Tori Spelling--reiterating it "reserves the right to pursue all necessary steps to ensure that Yahoo's shareholders are provided with the opportunity to realize the value inherent in our proposal." Hours later, Yahoo made itself all the more desirable, significantly improving its position in the mobile web market by displacing rival Google as T-Mobile's exclusive mobile search services provider in the operator's northern and central European markets.

Things got all the more interesting mid-week, when Vodafone announced the hiring of Microsoft senior VP of mobile communications Pieter Knook, who will be charged with heading up a new Internet division guiding the telecom group's mobile web efforts. The 17-year Microsoft vet joins Vodafone March 10, opening the door for Microsoft to name Andrew Lees to head up its mobile division. The move was the most notable change in a series of dramatic executive comings and goings that seems to suggest Microsoft is fully convinced a Yahoo merger is on tap. Yahoo isn't going out without a fight, however--the web services giant is reportedly in negotiations with Rupert Murdoch-owned media goliath News Corp., secretly negotiating a deal to combine social networking site MySpace and related News Corp. digital properties in exchange for at least a 20 percent Yahoo stake.

But for all of the challenges still facing a Microsoft/Yahoo merger, The New York Times suggests the real headaches will follow if the deal is indeed consummated. Beyond the philosophical schism separating the two companies' cultures and visions, each firm also boasts its own complex and almost entirely incompatible software system: Microsoft's proprietary software is completely at odds with Yahoo's open-source programs and applications, generating speculation Microsoft may allow Yahoo to continue operating its own infrastructure. The mark of a great soap opera is keeping the drama alive even after the "Will they or won't they?" speculation ends--looks like Microsoft and Yahoo are just getting started. -Jason

P.S. Because of an ice storm and dense fog here in the Midwest--combined with the usual incompetence of the air travel industry--FierceDeveloper was forced to cancel its planned live coverage from this week's GDC Mobile conference in San Francisco. Apologies for any confusion or inconvenience.