So, then, it may start the wave of mega-mergers, almost inevitably expected as another cycle of prosperity is drawing to a close. I was told by Jonathan that mergers and acquisitions work in 10 year cycles - and the activity will peak somewhere in 2009. He is possibly correct - this one, and the ones which will follow this [there is a rumor on Google-AOL, which could be bigger] - will invariably push this cycle to its peak.
However, indeed, whether this merger will impact the long term future of the world/business/web, remains to be seen. Even if this is big news, this is big news because Yahoo! is up for grabs and not because how brilliant Microsoft's strategy is. In fact, this is indeed an admission of panic and necessarily a defensive move by Microsoft.
Besides, as Vic Keegan observed in The Guardian: "Academic studies indicate that most mergers fail because they are entered into for the wrong reasons (defence against a predator, buying market share or just management aggrandisement). It is not immediately obvious why this one will be any different. If this is a plan to use Yahoo's vast networks to protect Microsoft's monopoly base it will almost certainly fail. If it uses Yahoo as a vehicle to drive the combined company into hosting services - from photographs to documents - on the web rather than your hard disk (which is where Microsoft is powerful) then it could be a success... But to succeed this time (Microsoft) may need to make this a reverse take-over by letting Yahoo lead the way. That is not Microsoft's style."
Besides, Microsoft just does not get the web. Remember, Bill Gates was a defender of 'paying for software' phenomenon. It is one of the founding faith of the company. As that business model became successful, Microsoft became the largest software company in the world. But this 'product' model is obsolete on the web, and Microsoft still fails to get it [I am asking: Can Microsoft scrap its Windows division, and make the software freely available?]. From a classic Microsoft view, Yahoo!'s assets, content, network and users, is supposed to make this deal worthwhile. But, on the web, vision, technology and brand count a lot more. After this offer, Yahoo! will be a minnow - a discredited brand and a second best technology - and value a lot less than it does today. This would actually make the merged company an yesterday's giant, a huge behemoth valued at $327 billion, in someone else's garden.
There is talk about AOL-Google merger [as I mentioned before] but I am not sure that will make any more sense than this one. AOL is also a thing of the past [when I read this bit of rumour, I had to think whether all M&A cycles will have to end with AOL] and Google has been pursuing acquisitions which fit their vision of aggregating world's information. In the context of that vision, Amazon makes more sense than AOL. Well, no, this isn't a tip-off, just that Google and Amazon are both trying to do the same thing, and [realities permitting] mergers should happen not just to attain efficiencies [read - to cut workforce and expenses] but to farther business vision. This will make so much more sense to see Google amazoned!