The New York Post and Wall Street Journal both reported on Friday, May 04, 2007 that Microsoft and Yahoo are in the early discussion stages of a possible acquisition or merger. There have been reports of previous discussions about this same thing but to date, but no firm plans have been made. Originally, there was some speculation about a Microsoft/Yahoo deal about a year ago. Even with a combination of these two large companies, Google would still hold the market share of Internet searches. Last month, Google executed about 55 percent of online searches while Yahoo and MSN combined for only 32 percent. Many analysts believe that Microsoft is beginning to feel the pressure while Google continues to develop and expand their product line with Google Apps which offer some of the same abilities Microsoft Office currently provides. These products are currently web based and free from Google. Yahoo has experienced Google’s dominance more directly and has been in slow decline for years. The news of a possible acquisition accounted for a sharp increase in Yahoo’s stock raising it to a near 52 week high of $33.23 per share.

With Microsoft’s losing bid of DoubleClick to Google, it is obvious that Microsoft is looking to contend with the advertising giant, Google. Making a move to the internet advertising industry would supplement the slow growth of its application software. Google has kept the ball rolling with successful new programs and consistent acquisitions of companies that will only further their online dominance. With the recent Yahoo/Microsoft news, many experts are worried that a merger of these two companies will have the opposite effect and set Google even further apart than before. If a merger between Microsoft and Yahoo turned out to be unsuccessful, there would absolutely no one that could compete with Google. There are also issues of these two companies molding together. There are obvious geographic differences in their locations but other corporate differences that may turn out to be too much to overcome. The resources and effort it would take to merge two companies of this size might set them even further back than they already are. Microsoft appears to be taking on as much as it can handle with their software products. They have obviously not done well in the online arena. Taking on a company like Yahoo will be consuming in so many ways and will have a negative impact on both of them. Their offline software products will suffer and Yahoo, the next best search option, will get caught up in the mix and fall further behind. Yahoo needs to invest in their own products and bring them up to the speed of Google. They will lose a lot of time and money doing this through Microsoft. Microsoft needs to call it like it is and scale back their online efforts in order to focus on the things that are actually making them money. Imagine the improvements that could be made to the sometime sketchy Microsoft products if they invested their online budget into their software.