Microsoft's Yahoo bid faces challenges, say analysts

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Analysts have said that Microsoft's $44 billion (£22 billion) bid for web search firm Yahoo is risky and complicated - and suggested the deal hasn't much of a chance passing antitrust laws.

In its announcement of the bid, Microsoft said the merger would create synergies worth a billion dollars a year.

Andrew Frank, research vice president at analyst Gartner, said: "Although the synergies between the two companies, which Microsoft asserts are worth at least $1 billion a year, are certainly great, the merger also raises the question of how effectively they'll be able to continue operating during their integration. The online advertising business requires significant levels of account service and even the perception of a diversion could wind up delivering business to their competitors."

Of course, with any deal this size - especially one featuring antitrust darling Microsoft - even if Yahoo accepts the terms, US and European Union administrators may not give their approval.

Gartner's Frank said: "Antitrust laws are also a concern with any deal of this size. While the current US administration is less likely to pose a problem, in recent years the European Union has aggressively policed similar mergers."

In its bid, Microsoft suggested now would be a big time for consolidation in the market. Some analysts agreed, but see trouble nonetheless. "StrategyEye expects to see more acquisitions from Microsoft and Google in the coming months, but the Yahoo offer suggests that there may be a series of irrational defensive acquisitions and consolidations over the short term," said Aleksandra Bosnjak, lead analyst at StrategyEye digital media.

But Bosnjak added that the move is more about taking on Google than anything else. "This particular bid is an aggressive move against Google and a concerted signal that it is determined, more than ever, to extend its brand into the search and advertising space and transition itself into an 'all-you-can-eat' content and advertising portal," Bosnjak said. "It's trying to become the equivalent of an online search and content supermarket where users go for their every online need. Currently, this is a position more closely held by Google."

Bosjnak questioned the massive bid, calling it potentially risky: "And to some extent it is irrational. Why? Because from a competitive perspective, will two bad search engines make one good one? It's very difficult to say. The bottom line is that this 'deal' cocktail may prove too 'heady' even for mighty Microsoft."

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