While Yahoo looks for ways to thwart a Microsoft takeover, Microsoft is already planning to integrate Yahoo. In an interview Sunday, Ray Ozzie, Microsoft’s chief software architect, told the Financial Times that the company will take its time, even if it means delaying potential shareholder benefits.
“Technology companies, if they dive in and just smash things together for smashing them together’s sake, it’s reckless, it’s just simply reckless,” Ozzie told the Times. “They have a number of different types of technologies. They have their own corporate culture.”
Realizing the Synergies
Microsoft bid $44.6 billion for Yahoo in late January. Yahoo’s board unanimously rejected that offer and said it would not even consider discussing an acquisition unless Microsoft antes up at least $12 billion more.
But Microsoft has persisted. Ozzie, who took the software reins from Bill Gates in 2006, is optimistic that the company can achieve its goals without rushing integration. He wants to avoid disrupting Internet users and advertisers rather than grabbing financial and other benefits from the consolidation.
As Microsoft sees it, the merger would create a more efficient company with synergies in four areas: Scale economics from audience size and increased value for advertisers; accelerated innovation from combined engineering talent; operational efficiencies by eliminating redundant costs; and innovation in emerging user experiences such as video and mobile. Microsoft believes these could be worth at least $1 billion a year.
To Integrate or Not To Integrate?
Ozzie has history on his side. A Booz-Allen study found that 68 percent of mergers fail because of poor integration. And according to a McKinsey study, only 23 percent of companies recover the costs of a merger.
“We can talk about the technology, but in the end this is a business decision,” said Daniel Taylor, an advertising analyst at Yankee Group. “I’d be far more concerned with merging the…