If Microsoft's $44.6 billion hostile takeover bid for Yahoo is successful, sifting through their duplicate business services and deciding what stays, what doesn't, and what changes will become a necessary exercise. Yahoo last week continued to fend off Microsoft and explore its options. The Wall Street Journal reported midweek that Yahoo was in talks with News Corp. about a potential business arrangement that would negate Microsoft's come-on.
Microsoft and Yahoo offer online suites, generally for small businesses, with similar functionality. Yahoo's suite includes Web hosting, e-commerce, search marketing, e-mail, and support of custom domains. Microsoft has all that, plus contact management, project management, and document management and collaboration. Yahoo has a good reputation in setting up online stores for small businesses, but there's no question that Microsoft's Office brand carries more weight and is the better fit with Microsoft's other products.
Yahoo-owned collaboration suite Zimbra, which includes e-mail, calendaring, unified messaging, and document collaboration, has big-name customers such as Century 21 and Raytheon. Zimbra is an example of Enterprise 2.0 online tools, which Microsoft has been slow to deliver. But Zimbra is based on open source code, and it competes with Microsoft's lucrative SharePoint, Exchange, and Office apps. So while Zimbra would fill a gap in Microsoft's line, it also could present some hard decisions. Microsoft could pluck off the best pieces of code and integrate them elsewhere, let Zimbra die a slow death, or keep it alive and independent.
ASSESSING PARTNERSHIPS
In the area of enterprise search, Yahoo and IBM have a co-branded search product, but Microsoft's Search Server trumps it in terms of security and relevance to business search, since it's tied to SharePoint Server. Because Microsoft competes with IBM, it wouldn't be surprising to see Microsoft scratch that deal and shift Yahoo customers to its technology.
Yahoo provides small-business Internet access in partnership with AT&T, which Microsoft would likely continue, although it's unclear under which brand. Yahoo also owns a large stake in Chinese e-commerce site Alibaba.com. Microsoft has said it will keep Yahoo's relationships with Asian affiliates alive.
Microsoft CEO Steve Ballmer intends to keep Yahoo's brand intact, yet he envisions $1 billion in annual savings from "synergies." If the deal happens, tough choices will follow.
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