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Microsoft Interested in Yahoo!...Why?February 6th, 2008

Steve Ballmer Microsoft has recently been showing some interest in purchasing the search engine Yahoo!, with a reported offer of $44.6 Billion. Upon reading this headline I began to ponder exactly why a large software company such as Microsoft would be interested in Yahoo!, a company largely based on advertising. I'm sure that most people have realized that for the last several years Microsoft has been attempting to compete with Google. This deal solidifies that theory, and I think that Microsoft is barking up the wrong tree. So I figured I would investigate deeper into why a software behemoth such as Microsoft would be so interested in competing with Google.

Why is Microsoft Interested in Competing with Google?

This is the major question I have wanted to address, and I think that there are several reasons that Microsoft has this interest. The first, and probably foremost, is a strong desire to appease shareholders. If Microsoft had continued to mostly produce Operating Software or Office Software, stock prices would probably decline. Microsoft stock has been fairly level over the past several years, and this is not a good thing for a company, since it means they are not expanding at the expectations of shareholders. Since Microsoft has a 93% market share in Operating Platforms, it would not make much sense for them to spend the majority of their efforst in expanding this market.(One could speculate this to be the reason that Vista is not as great as many had hoped it would be) So, they need to find another market in which to expand.

Is the Advertising and Search Engine Market Right for Microsoft?

It is my opinion that Microsoft is a bit late in the game on this one. This is probably the reason they are looking at purchasing Yahoo! instead of creating their own search system, as $44.6 Yahoo! debating Offer from MicrosoftBillion is probably significantly less than it would cost Microsoft to build a search system from scratch. Now may not be the right time to buy Yahoo!, however, as Google continues to gain market share from the company. However, hopefully investing a large sum of money into Yahoo! can help them produce unique and interesting new forms of searching. Also, Yahoo! employees have a significant amount of experience with search systems and surely will benefit Microsoft in the bringing of new ideas to the table.

A day Late, A Dollar Short

It seems to me like Microsoft is really just trying to get a piece of the action from Google, or maybe the purchase may simply be a way to improve stock prices after difficulties with Vista, but the former seems more likely. From a technological standpoint, I wish Microsoft would invest more time in developing efficient and lightweight operating systems, but it is understandable that a company needs to expand and continue having forward momentum. We'll just have to wait and see what happens as to whether this purchase is a good thing or a bad thing for Microsoft, but either way I believe it will help Yahoo!

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