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Yahoo board does the right thing

There are many financial bloggers who think that Yahoo should be happy to have a somewhat generous buyout offer from Microsoft. Certainly it gives Yahoo's suffering shareholders something to be happy about.

It was reported this weekend that Yahoo's board has rejected Microsoft's offer, contending that it undervalues the company. Maybe, maybe not.

As I have written before, this is an ill-conceived merger. It is marked by duplication and overlap of functions and features. There is no special synergy, just a trust that scale will make a difference, bigger is better and some costs can be wrung out of the overall organization. I have written more on this in a previous post ("Microsoft and Yahoo - bigger may not be better").

If Yahoo were to merge with Amazon or eBay, one could say that something new and powerful was being developed. Dominant e-commerce combined with a dominant portal might be an interesting concept where some synergies may indeed be found. The synergies resulting from a combination of a dominant online portal and a dominant software developer are much less clear.

Yahoo's board is right to demand more cash. This takeover by Microsoft will merely result in thousands of layoffs and a bigger number two player in the online ad wars. Interestingly, Yahoo is already number two. What advantage do they get hooking up with number three?

If Yahoo is going to fall into the hands of Microsoft, they might as well get paid handsomely for it.

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