I'm not a native Californian, but after eight years of residency, I often find myself in the position of having to defend or explain aspects of life in the Golden State: the improbability of Gov. Schwarzenegger, the unnatural obsession with Britney Spears, or the latest woo-woo, crystal snorting trend, to name a few.

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I'm not a native Californian, but after eight years of residency, I often find myself in the position of having to defend or explain aspects of life in the Golden State: the improbability of Gov. Schwarzenegger, the unnatural obsession with Britney Spears, or the latest woo-woo, crystal snorting trend, to name a few.

But here's one I recently fielded that I didn't see coming: Why is Yahoo playing hard to get with Microsoft?Since I don't regularly attend Yahoo board meetings, I'm left to guess why $44.6 billion isn't enough to get a merger deal done. But in no particular order, here's what I came up with recently when a New Englander pressed me to explain what the problem was:

  • Basic greed.

  • It's not a good cultural fit.

  • As a defensive strike against Google, a merger doesn't really help Yahoo or Microsoft.

The greed issue is fairly self-explanatory; Yahoo's board wants $40 per share, $9 more than Microsoft's asking price, which would add about $10 billion to the value of the deal. I agree -- why take $31 a share when you can get more? Except in this troubled economy, it appears Yahoo shareholders might want to override the board and settle for what they can get.

Culturally, these companies aren't as far apart as they might appear. Working backward from the Seattle versus Silicon Valley stereotypes, Microsoft is the mainstream purveyor of average products; Yahoo is the leader of New Media with multiple portals and downloading and hosting galore. In reality, they both have armies of developers, big data centers and massive storage requirements, and free Web mail services that keep customers (and advertisers) coming back.

Ironically, all the things they have in common also comprise a good reason to keep the two companies apart.

Does a merger make sense as a check against Google? It does if you think Web mail is the battleground. But what Microsoft is trying to do is somehow blunt the search engine's agility and innovation, especially where new applications and Google's wireless aspirations are concerned.

Yahoo's a wonderful company, but it's no Google killer. And Microsoft has a mixed record with regard to its ability to derive real synergies from the companies it acquires. Maybe the real reason for Yahoo's coyness lies well beyond California's borders. But Arnold, Britney, and I have been sworn to secrecy. We'll see how or if Microsoft counters this latest rejection, and if a few more billion can make any real difference.

About the Author(s)

Terry Sweeney, Contributing Editor

Terry Sweeney is a Los Angeles-based writer and editor who has covered technology, networking, and security for more than 20 years. He was part of the team that started Dark Reading and has been a contributor to The Washington Post, Crain's New York Business, Red Herring, Network World, InformationWeek and Mobile Sports Report.

In addition to information security, Sweeney has written extensively about cloud computing, wireless technologies, storage networking, and analytics. After watching successive waves of technological advancement, he still prefers to chronicle the actual application of these breakthroughs by businesses and public sector organizations.


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