What I like about Microsoft’s bid for Yahoo

February 1, 2008

I think Microsoft is way over-paying with an offer this morning of almost $45 billion for Yahoo. It just seems like investing that same amount into their existing businesses would be a better return on investment than having to integrate the Yahoo culture and businesses into Microsoft.

Really what it smacks of is trying to prevent somebody else from snapping up Yahoo. Google, for example, doesn’t control anywhere near as much content of its own as does Microsoft (with MSN, MSNBC, etc.) or Yahoo. So Google is somewhat beholden to its content partners to generate the traffic that it then can monetize. Obviously Microsoft doesn’t want Google to be the one that picks up Yahoo. I guess from that standpoint maybe $45 billion is a bargain.

The one thing I like is in their offer letter laying out the terms of the deal. They state that 50% of this purchase, or over $22 billion, is in cash. And that the deal is not contingent on any financing. In other words, they must have $22 billion in cash sitting around. They don’t need to borrow that from anybody to finance the cash portion of this deal.

I knew Windows and Office were big cash cows for Microsoft but damn. What is it like to just have $22 billion lying around that you can spend on buying up a competitor?