Ben Metcalfe

Google would love to buy Yahoo! (so would Fox, AT&T, Microsoft…)

“I’m sure they would”, you might say.

But the reason for mentioning it is that (technically and financially) they probably could.

Looking at Google – it would be a smart buy for them – although perhaps not for us consumers. Not only would Google wipe out their nearest competition they would also bolster their many floundering and under-performing non-search properties. If YouTube is the magic ingredient Google needs for video, Yahoo! offers a veritable smörgåsbord of delights – including two different takes on photo-sharing, significant email userbase, design skills, social networking skills… the list goes on.

Down to business

The reason these noises are beginning to surface is simple: Yahoo!’s shares have taken a tumble since the beginning of the year – currently being traded at mere $24.42. That’s way off the year-to-date high of $43.66 and not much lift above their bottomed-out price of $23.57.

The reasons for the slump are numerous (Google, ironically, has a nice price-to-pressrelease chat to check out on its finance site) but anouncements back in July that new search/advertising platform ‘Panama’ would be delayed gave an already falling YHOO stock a heavy beating.

With a market cap. of just $34.15B and an annual cash flow of $2bn, Yahoo! is becoming a potential take-over target… and the vultures might be beginning to circle.

Some have mentioned access providers as potential suitors, others Microsoft (for whom Yahoo! would also be potentially a good market fit). However Google – with it’s massive revenues, generally well accepted competitiveness against it’s nearest rival, and of course it’s cash in the bank – would perhaps be the King Vulture in this instance… ever hungry despite just tucking into the fresh meat that was YouTube.

Anti-competitive and Anti-trust: welcome to the EU Effect

Alas for Google, rejoice for us (the consumer), and probably rejoice for most/all of the Yahoo!’s in Sunnyvale, it’s very unlikely to happen. Resistance, it appears, is not always futile and the Borg-like Google may not be able to assimilate this time around.

Over on the other side of the pond, my Europeans brothers can’t help but get involved in such matters. Welcome to the world of monopoly commissions and anti-competitive/anti-trust investigations.

You see Yahoogle! wouldn’t go down well in Brussels (home of the European Commission). Yahoogle! would control practically of the search market, and perhaps more importantly to the EU Trade people, most of the online advertising market.

Despite neither Google or Yahoo! being ‘European companies’, they both operate significant amounts of their business in the in the EU and have listed businesses in many EU countries – so it all applies under the EU Trade Treaties. Just like Seatle based-Microsoft and it’s Anti-Trust cases in Windows (including recent events with Vista on this front), Yahoogle would come under the same investigation.

So where do we go from here?

If a Google/Yahoo! deal is off the cards, clearly that doesn’t stop someone with deep pockets and little over-lapping (read:little perceived anti-competitive) business interests with from taking a look at Sunnyvale’s finest.

I think most people would baulk at the thought of an AT&T owned Yahoo! – but it could happen (AT&T already have a connectivity co-brand deal with Yahoo!, of course).

What about Fox Yahoo!, anyone? Yahoo! want to be a media company, and maybe Rupert Murdoch can make their wish come true?

Or what about Microsoft? Bill’s off because he knows that the page is turning on the software of his day – and now the rest of the MSFT execs need to embrace the new chapter. Can the Live.com crew be their saviours – or would the amalgamation of Yahoo!’s social and online acumen with Microsoft’s software heritage produce the definitive response to an Eric Schmidt-facilitated Google/Apple onslaught? (Schmidt now sits on both boards, don’t forget)

IMHO Yahoo! will remain strongest if it’s left on it’s own: not playing to the whims of a master who sees it as an advertising cash-cow, and neither fully understands or fully cares what Yahoo! is trying to do in the rest of the market.

But in order for Semel and Co to be fully assured of that independence they need to get cracking to make sure the stock doesn’t fall any lower – and if anything, it rallies back closer to it’s original form.

Meanwhile, it might be time to call the broker to buy some YHOO stock… Terry Semel is probably doing everything he can to get the stock price out of harms way, meanwhile a take-over offer above market rate would also yield a nice ROI.

And if you think I’m all wrong, at least I ain’t advocating cancer-stick merchants Phillip Morris buy Yahoo! “to confuse the hell out of Google”!