NY Post says Microsoft offering $50B for Yahoo… I think Yahoo + AOL is better.

Update: Charlene Li from Forrester has an excellent overview of why it can and won't work. A must read.  

The NY Post is reporting that Microsoft has offered upwards of $50 billion to acquire Yahoo. Pete believes this is a good marriage. He notes, "think it would be an awesome pairing, and (if executed well), it could provide a powerful challenger to Google’s web dominance."

Duncan says, "It certainly is a strange time when Microsoft accuses Google of anti-competitive behaviour one day, then activily seeks to acquire a leading competitor for the sole purpose of trying to compete with Mountain View based uber company the next."

For both Duncan and Pete… why would MSFT + Yahoo do better against Google vs. each one alone?

My belief is that MSFT + YHOO /= perfect marriage. I would rather see Yahoo acquire AOL first. On the financial side, YHOO is up almost 20% in early morning trading.

Here is my take… Microsoft is doing some good things but I hear there are still a lot of poor executions of Web applications. I would prefer to see them get their internal house in order first. Then look at acquiring. Of course, acquiring Yahoo gives them a strong competitor to Google. But will the Yahoo loyals remain? Will Flickr users want to stay if the company is owned by Microsoft? Certainly would be an interesting time!

This acquisition would also confirm my belief that 2007 is a consolidation year. I expect to see another 3-5 deals in the billion-dollar range this year as companies use buy over build.

Check out some of our previous Yahoo and Microsoft coverage.