to provide a nice hedge against where Google is going," Enderle said.
But Google is likely to try to block the deal, first on antitrust grounds much like Microsoft moved against Google against DoubleClick Inc., Enderle said.
"And Google will try to outbid Microsoft," he predicted, "because neither one of these guys wants the other to get this property and so this is likely to be hard fought."
Google spokesman Matt Furman said his company would have no statement about the Microsoft offer. "It would be premature for us to comment at this time," he said.
Apple and oranges
Dana Gardner, an analyst at Interarbor Solutions LLC of Gilford, N.H., said the potential acquisition is a "risky bet" for Microsoft because the two companies have fundamentally different technological heritages. Microsoft is based on its Windows infrastructure, while Yahoo is built on open-source software and open standards and has even led the way in open-source circles on a variety of projects.
"Fundamentally, we've got apples and oranges for their infrastructures and their philosophies for how to approach software," Gardner said. In addition, Microsoft is fueled by revenue from software licensing while Yahoo revenues almost entirely come from advertising sales, while both companies have very different internal cultures, he said. "These are things that are going to take time" to resolve, he said. "Anytime a merger of this size, $45 billion, comes up, it's not good. Sometimes size is too much to overcome."
Another potential problem, he said, is that many corporate IT managers may worry about such an acquisition because it takes Microsoft's focus farther away from its longtime central role of providing needed software to corporations and consumers.
With this offer, "Microsoft is betting itself on search," Gardner said. "And if you're betting the company outside your normal area, then as a CEO [who relies on your software], that would leave me concerned."
The offer made Friday "does sort of smack of desperation," Gardner said. "It would have made more sense a few years ago to have done a merger with Yahoo, but this is an unsolicited bid. It really seems Microsoft waited for Yahoo to be on one knee [financially] in what needs to be a friendly acquisition" for it to succeed swiftly. "That's why I think its risky."
Where would the deal leave Microsoft?
"It's like a multiheaded dragon," Gardner said. "You don't really know what it is. As an IT buyer and user, you might not know what to expect from them in the future. Users want companies that are there for them. I think it's going to help IBM. I think it's going to help Apple. It helps muddy the waters in a way that Microsoft competitors can take advantage of."
Guy Creese, an analyst at Midvale, Utah-based Burton Group, said the offer comes from Microsoft as a response to a changing search marketplace. "It's not a knee-jerk reaction to it, but they are saying 'OK, how do we win?'"
Watch the data centers
One area to watch in the potential acquisition is what will happen if the two companies put their data centers together, Creese said.
"They both are building these big, whopping data centers," Creese said. Yahoo's is for user services such as e-mail and chat, and Microsoft is building data centers to support its Office Live capabilities. "If brought together, Microsoft would bulk up to probably twice the number of data centers" that it has Friday, putting it in a much more powerful position.
Another piece of the unfolding scenario to watch, Creese said, is how Microsoft would approach one of Yahoo's recent acquisitions -- the open-source Zimbra collaboration suite. "It's a nice [software-as-a-service] and software-based suite with a calendar and other parts. ... It would be very interesting if it would be added to the Microsoft portfolio. ... I think this is a jewel that Yahoo has that would be a very nice extra-credit sort of thing."
David Ferris, president of San Francisco-based Ferris Research, said the deal makes
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