If Microsoft buys Yahoo! to try and muscle its way on-line, why should Google even care, let alone be worried about it?  Reportedly, the search-engine firm has been maneuvering behind the scenes to thwart the deal, lobbying for antitrust scrutiny and chatting up Yahoo's CEO about some joint projects. But this simply doesn't add up for a company as aggressive and imaginative as Google. More likely is that they are secretly thrilled that their nastiest potential competitor is about to pour $44.6 billion dollars down a virtual rat hole. After all, when has Microsoft ever added value to an acquisition, especially one so beleaguered as Yahoo!? Microsoft has been behind the curve in nearly every big acquisition it has made, paying through-the-nose for a catch-up strategy that has come to define, as well as constrain, its global ambitions. To take one particularly important example, when Google bought DoubleClick last April for $3.1 billion, buttressing its digital marketing prowess, Microsoft paid twice as much a month later for a firm with similar capabilities, aQuantive.

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So what, for $44.6 billion, is the irresistible appeal of Yahoo!?  The company's core business has been declining for two years, and Google has been eating its lunch. Jim Cramer called the deal a master stroke, but he is living in the past if he thinks paying that kind of money for mere market share will allow a geriatric case like Microsoft to close the huge gap with Google in online marketing. Innovation is what gets investors' juices flowing these days, not acquisition-driven growth, and the ever-clueless Microsoft could not innovate its way out of a soggy paper bag. 

Micro-Minestrone

This is after all a company whose idea of “innovation” is Windows Vista, yet another gratuitously enhanced retread of a PC operating system that should have been scrapped ten years ago and which a hundred million PC users curse every time they power up.  If Microsoft sold soup rather than software, it would announce the “invention” of a low-sodium minestrone with an $80 million advertising campaign. To think that by teaming up with a has-been like Yahoo! Microsoft will produce anything more than mere corporate bigness is to ignore the lessons of the TimeWarner/AOL deal and all of the other misbegotten mega mergers since.

Our hunch is that Google is only feigning concern over Microsoft's designs on Yahoo!  Why? For one, the company has grown so fast and succeeded so well that it no longer enjoys the upstart's advantage of having everyone in its corner. In fact, because Google appears capable of overwhelming every business category it enters, there are probably more than a few detractors who would enjoy seeing the firm fall on its face for a change. What better way for Google to reclaim the public's sympathy than to make people think Microsoft is about to train its huge Howitzers on Google’s Mountain View headquarters?  

Tech Glue-Horse

In reality, Google could take Microsoft’s best shot without even flinching and knows it. So if they look like they are running scared, realize that this is merely an act cynically calculated to make the enemy underestimate them. Google is a company that thinks too big to care what a technological glue-horse like Microsoft might be planning. 

If Microsoft is to be feared at all, it is only for what its huge cash hoard could conceivably buy. So far, though, Microsoft has failed to impress with the bets it has made on the future. The company once evidently thought it would be able to station toll takers along every imaginable pathway to tomorrow’s goods and services, and it struck deals willy-nilly in an effort to achieve this. But Microsoft failed to foresee how the Internet would change things, even to the point of making the computer operating system itself superfluous. To suggest that Microsoft is now going to overtake Google on the Internet while its core software business is headed toward obsolescence is to ask visionary miracles of a company that has succeeded so far only at the mundane. Microsoft’s vaunted ruthlessness has played a major role in its dominance of the PC world, to be sure, but the firm will never be able to muscle its way to dominance of the infinitely larger world of products and ideas continually a-borning on the Internet.

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Become a Pivoteer!

The Hidden Pivot seminar scheduled for February is full, so I’ve added an additional session on March 8-9. If you’d like to attend, click here  for further details and instructions on how to register. The class will be held on Saturday/Sunday from 9:00 a.m. to 12:30 p.m. Mountain Time.  If you want to learn how to forecast stocks and commodities as confidently and precisely as top pros, this is an opportunity you should not pass up.

Oz-Hours Class

I will also be offering a class in February that is tailored to the scheduling needs of students from Australia, New Zealand and Singapore. If you live in Sydney, this seminar will take place on February 21-22 (Thursday and Friday), from 3:30 p.m. to 7 p.m. These hours will also work for early risers in Western Europe.  For further details, click here.  You can also register directly by clicking here, then on the “Upcoming” tab.