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Microsoft-Yahoo Combo Would Involve Product Overlap--And Choices

Yahoo would fill some gaps, but don't expect Microsoft to mess with its flagship products.
For most of Yahoo's consumer-oriented online services, there are corresponding Microsoft services. That's also true when it comes to the companies' business offerings.

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.

How Yahoo's Small-Business Services Compare With Microsoft's
Product Yahoo Microsoft The Rub
Search IBM Omnifind Yahoo! Edition Microsoft Search Server 2008 Express Microsoft has better security, more business relevant tech
Web hosting Yahoo! Small Business Web Hosting Office Live Small Business Yahoo offers unlimited storage, but Microsoft's free
E-Commerce Yahoo! Small Business Merchant Solutions Office Live Small Business, Commerce Server Yahoo has a respected online store service
Custom domains Yahoo! Small Business Domains Office Live Small Business, Windows Live Admin Center Duplicate services are both like GoDaddy
E-mail Yahoo! Small Business Business Email Office Live Small Business, Exchange Microsoft's cheaper for larger companies
Search marketing Yahoo! Small Business Search marketing Office Live Small Business, adManager, aQuantive Execs have talked of combining Microsoft and Yahoo search/ad capabilities
Internet access AT&T Yahoo! High Speed Internet None ISPs represent co-branding opportunity
Collaboration Zimbra Office Live Small Business, Exchange, SharePoint, Office Live Workspace Open source Zimbra a tough fit at Microsoft
E-commerce, small biz apps and collaboration Alibaba.com Office Live Small Business, Commerce Server, Exchange, CRM Live, Office Accounting Express 2008 Chinese e-commerce site gives Microsoft new in in developing world