Ask Jason Prescott, I have long predicted that Microsoft would make a bid for Yahoo!, but it still was a strange surprise to wake up to this morning.  In the above story, there’s a bit from an analyst that claims this is all about advertising revenue from search:

“This deal is mainly about advertising, and mainly about search-based advertising,” said the 451 Group, based in Boston. “It combines the second and third players in that market to take on the number one, Google. The main thing this brings Microsoft is a profitable advertising business, something it has not managed to achieve with its own online services business, which loses money.”

…that’s a pretty shallow look at things, probably they just had an early reading in on the memo that Ballmer sent to Microsoft employees, which is nothing more than a leak to the blogs and the press directly from Ballmer. It’s definitely not just about search. Microsoft has been making a sustained effort to drive entertainment and lifestyle options over a Microsoft software and increasing hardware platform platform. Yahoo is certainly more than just search advertising. Yahoo! Games, Yahoo! Sports, Yahoo! Finance, Flickr, Yahoo! News, Yahoo! Personals are all powerful competitors in their space. It fits in seamlessly with Microsoft’s powerful Xbox platform and gives it a much broader userbase to compete against Google’s Gmail and the other Google Apps like Google Docs. Google is still really just getting started in terms of taking on Microsoft’s dominant office productivity software, but it is definitely part of their mission, leveraging the super appealing Gmail and trying to wedge it and their improving online office suite into the picture for business customers.

Where’s Bill?

Maybe its a coincidence but I think it’s interesting that this comes immediately on the heels of a press offensive to celebrate Bill Gates’s retirement. Especially since the public celebration comes 6 months before his real departure in July.

Is This the Front Lines of Microsoft’s Endless War Vs. Open Source

One of the things, most people don’t know about Yahoo! is that they are one of the big champions of open source software, the free community developed applications that are like garlic to Microsoft’s software sales and licensing vampire. Yahoo is mainly deployed on FreeBSD, and a Microsoft takeover would be a crushing blow to many open source initiative, including Yahoo acquisition Zimbra, which has been emerging as a worthy alternative mail server to Exchange. Read more in this thread at Slashdot

No surprise YHOO closed up 47%

Yahoo’s Story About Microsoft Trying to Buy Yahoo
Funny Bitterness: An Ex-Yahoo Employee’s Advice to Microsoft

Check out this comment:

I have contacted a few mid level management people at Yahoo who could be described as, ‘Yahoo Purple Lifers”. They have intimated that they will stay and work to make any cultural changes to the organization, and I quote, “as painful as possible for the new Microsoft directors and division Veeps, short of insurrection”.

I’ll try and write something up on this attitude that seems pervasive, on my blog, over the weekend. There has been plenty of bitterness over the layoff’s already.

They are very different companies; although one could reason that this acquisition is the lawful and logical harvest of equity for Yahoo’s long term investors and employees with stock. But it takes more than a mere decision to make such a gargantuan move work.

They are Very Different cultures.

Hey! There’s one reason you might not want to buy the stock…