Microsoft Could Go “Hostile” with Yahoo Offer

Washington, D.C., February 12, 2008—Yesterday, Microsoft announced that it “reserves the right to pursue all necessary steps” to present its buyout offer to Yahoo shareholders. This statement was issued in response to Saturday’s rejection by Yahoo’s board of the $41 billion dollar offer from Microsoft. This new “all necessary steps” language from has been perceived by many to mean that Microsoft will go “hostile” in its pursuit of Yahoo.

Of course, hostile in this case isn’t all that hostile. Or at least share holders sure shouldn’t think so. Yahoo’s board has said that a price of $40 a share would be more to their liking, raising the price of the deal to nearly $52 billion. Only in the strange world of corporate-speak can the word “hostile” be applied to a company shelling out an extra 30% to another’s shareholders.

While the Yahoo board may try to resist the merger, this hostile takeover shouldn’t inspire hostility at the Federal Trade Commission. Though there is no guarantee that Microsoft will be able to successfully integrate the two companies, we can be assured that a merger will not reduce competition in the marketplace. That’s because the market is growing too quickly and is too dynamic for the merger to seriously effect competition.

With the domestic online ad market predicted to double in the next two years and global adoption rates of internet service continuing to rise, there is every reason to believe that this rapidly expanding marketplace has room for new entrants such as Facebook, Digg, Wikia Search, Mahalo, or a company that still resides in a dorm room or garage somewhere in the world.

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