Should Microsoft Corporation perform an acquisition of Yahoo Inc.?
Introduction
In February 2008, Microsoft Corporation first offered to buy Yahoo! Inc. for $45 billion at a 61% premium price (Cohan, 2014). Microsoft CEO Steve Ballmer hoped that by combining media assets, Microsoft and Yahoo would be able to compete more effectively. However, Yahoo decided not to accept the offer. Since 2008, although its stock price has risen from $27 in 2008 to $37.54 now, Yahoo’s revenue decreased 2.2% and its US digital ad market share decreased 1.0% in 2013 (Cohan, 2014). Both Microsoft and Yahoo will need to consider strategies which could give them a competitive edge in the market.
I will analyze the effect of Microsoft’s purchase of Yahoo as a tool for increasing Microsoft’s competitiveness with rivals such as Google and Apple. Analysis of the external environment, using a SWOT analysis, and Yahoo’s international possessions, using an Ansoff Matrix, will identify Yahoo’s standing in the technological market and recognize the effectiveness of Microsoft’s acquisition of Yahoo in adding to a competitive edge. Information will be obtained from American news articles, secondary analysis sources commenting on Yahoo and Microsoft, and financial data released by Microsoft and Yahoo.
Ultimately, a Force Field Analysis, supported by the SWOT Analysis and the Ansoff Matrix, will determine the feasibility of a Microsoft acquisition of Yahoo by weighing the benefits and costs.
Findings & Analysis
The External Environment
After reading the various documents I synthesized the key points by creating a SWOT analysis for Yahoo (Hoang, 2007).
SWOT Analysis for Yahoo! Inc.
Strengths
Yahoo has strong international presence with loyal followings throughout the world (Reisinger 2012).
Yahoo’s stock price has risen substantially since 2008 (Cohan 2014).
Yahoo owns important communication technologies such as Yahoo Mail and Messenger (Reisinger 2012).
Yahoo is one of the top...