Microsoft has pulled its bid. Yahoo stock tumbles. And the winner is…………. Well, to start let’s not rule out the transaction happening anyway. The Microsoft bid now looks much better than it did 48 hours ago for most Yahoo shareholders so a return to the table with or without the Yahoo management is a distinct possibility.
As for Yahoo’s options, there are many but a Google transaction cannot be one of them. The principle applied to determining monopolistic control of a market has to do with the potential to abuse a monopolistic position. It is crystal clear that such opportunity exists which is not to say that Google has any intent to excercise that potential. The more subtle question is at what point such a position can be determined to exist.
Let’s say for a moment that Chevron and Exxon Mobil decided to combine the distribution and retailing of gasoline in all states beginning with the letter D without merging the companies. Monopoly or not? What if it was all states A through D? Even if the scenario led to a benefit of lower prices at the pump it has the potential for price fixing and price increases with or without a full merger.
You can see where this is going. Imagine that all the keywords A through D on all of Google and Yahoo were subject to a single bid process the same situation exists. In my view you can no more execute this partial merger than conceive a partial pregnancy. You are or you ain’t.
Today the market is confused and that needs to stop for the benefit of all the players. The FCC, and or the DOJ, needs to show its hand preemptively. If it is minded to allow a merger then the market and marketers should be given an audience. If it is minded to stop it the market should be informed to remove a wild card from the process that is causing massive swings in shareholder value at a time in the economic cycle when focus rather than distraction are required.