Yahoo! execs cower

Microsoft's relentless pursuit of the world's number two internet search provider, Yahoo!, gathered fresh pace last month, driven on largely by the spectre of Carl Icahn's hostile bid to oust the latter company's board of directors.

Icahn, who has been labelled an "aggressive investor" by The Observer, stepped up his campaign against Yahoo! CEO Jerry Yang and his fellow directors, proposing to replace them with allies friendly to talks of a Microsoft deal.

When Microsoft's initial over-the-odds bid of US$47.5 billion was rejected by Yang and co, the self-proclaimed pragmatist Icahn snapped up 10 million Yahoo! shares, demanding action from the company's board.

72-year-old Icahn, who reportedly doesn't even own a personal computer, has no interest in Yahoo! other than seeing through a deal which places the interests of the company's shareholders first and foremost.

In reality, it's difficult to argue against such logic, particularly when Microsoft's bid represented a 72 percent increase on Yahoo!'s concurrent share price index.

While any such deal between Microsoft and Yahoo! would come under the intense gaze of US regulators, let's for a moment consider the long-term ramifications a potential tie-up would have on both companies' fortunes and the broader media landscape.

It's a little-guarded secret that Microsoft harbours ambitions to become a fully-fledged media company, producing and delivering content across multiple platforms to as many devices.

Yet, for every ubiquitous software application in Microsoft's arsenal there lurks a Zune: a mediocre consumer device that fails to fire. Microsoft's commercial success continues to be based largely on the dominance of its software apps. Despite any claims to the contrary, it's no Apple.

Which leads us to Yahoo!: one of the few internet pioneers to have not only survived but thrived following the dotcom bust. Despite playing second fiddle to Google, Yahoo! has carved a hugely profitable niche delivering internet search tools supported by innovative advertising sponsorship applications.

While this is little more than what Microsoft's own MSN search portfolio delivers, the combination of both platforms would throw up unrivalled opportunities in terms of advertising sponsorship and the development of new media content delivery applications.

The development of a fully-integrated new media platform could also invigorate demand for Microsoft's maligned consumer hardware technologies, such as Zune.

Undoubtedly, the biggest loser in the bargain would be Google, which has largely dominated online advertising spend to date, enabling it to surreptitiously make good on its own global media ambitions.

Aaron Greenwood is the group editor for IT, broadcast & communications of ITP Publishing Group.

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