Microsoft and Yahoo create Synergy or culture clash

Implications: 1. Yahoo and Microsoft together are not as big as Google in search 2. Will the culture clash of two companies outweigh the search market share gains?

Analysis: The Yahoo and Microsoft merger is supposed to put pressure on Google.  In the long term it is hard to disagree that Microsoft and Yahoo create a formidable competitive foe for Google.  But my concern is the next one to two years (meaning short term).

From a perspective of history, lets remind ourselves what happened with Dell and the competitive merger of HP and Compaq.  At the time of the merger, HP and Compaq combined were bigger than Dell.  But Dell took advantage of the merger of two different cultures of HP and Compaq to regain the overall market lead which has since been recaptured by HP thru efficiencies.

So, you could reason that the merger of Microsoft and Yahoo should eventually mean that Google's business in now at risk.  But I would suggest that there are several differences between a the merger of HP and Compaq and the merger of Microsoft and Yahoo.

The most important difference is that the PC business was very much a commodity business when HP bought Compaq.  What this meant was that the culture clashes that occurred were short term issues, but that the future hardware commodization would eventually win the deal for HP. 

My hypothesis today is that the business of Google's search and web mashups is still in its infancy.  If this is the case, then the culture clashes that occur in such a merger could actually undercut efforts of both Microsoft and Yahoo to the point that Google will actually move further ahead.  The merger will create a period of loss of focus.  The loss of focus in a first mover scenario could be disastrous for Microsoft and Yahoo.

I also question Microsoft ability to abandon its desktop software to loaded onto PC's to that of providing a service on the internet that Google is working to accomplish.  It was just a few weeks ago that Microsoft just announced their earnings and their exciting future upgrades to Vista and Office 2007.  Would Microsoft really risk this revenue stream to begin selling a web-based mail competitor. 

My gut reaction is no.  I still find that Microsoft sales professionals (and they are very well trained and seasoned professionals) still have a difficult time in selling their CRM and ERP solutions.  Because of this, I would see it a challenge for their sales teams to successfully sell Yahoo services.

My bottom line is that I see too many differences and cross currents in this merger to offset the blending of two of the leading search tools and internet properties into one company.