The Pakistani Spectator

Yesterday, Yahoo and Microsoft finally announced the big deal that would transform their “search platforms into a market competitor.” Microsoft will power Yahoo Search, while Yahoo gets a revenue sharing agreement. How did Wall Street react? While Microsoft investors and shareholders had a mildly positive reaction to the deal, Yahoo shares sunk. By billions of dollars.

We were hoping that Microsoft CEO Steve Ballmer would have something interesting to say about the market’s reaction to the search deal. And once again, he does not fail us. At a meeting with industry analysts this morning, Microsoft’s leader described the negative reaction of Yahoo investors to the deal with three words:

“Nobody gets it.”

That’s probably an appropriate reaction when your partner’s stock drops two days in a row (Yahoo shares plummeted 12% on Wednesday alone). According to the New York Times, Ballmer was surprised at the market’s reaction to the deal. He tried to win over analysts by explaining how Yahoo receives a big, fat 88% revenue cut of all search ads sold on its properties. Disappointed investors preferred to get at least some cash up-front, and when they didn’t, the stock tanked.

Still, we don’t disagree with the assessment that the two companies are probably better off together than apart. And with a 10 year search deal where revenue is shared, both companies have incentive to make the partnership work in the long-term.

Will the Microsoft vs. Google battle play out any differently this time? All we know is that Yahoo investors clearly don’t think so

Source: Mashable