Microsoft and Yahoo : Who will be the winners?

"Google would gladly trade two competitors for one. And MS and Yahoo are both more lost than Google. So a buyout would only give Google a big advantage while MSFTYHOO figures out what to do."

That's the words of John Battelle, founder of Federated Media and astute analyst, commenting on what was then a rumour of a Microsoft acquisition of Yahoo.

Although Google is rumoured to be looking to acquire Yahoo for itself, it is highly unlikely that the Search giant will succeed in its quest, not only because Google hasn't the financial clout of Microsoft, but also because of antitrust concerns that such an acquisition will raise; Microsoft has already confirmed that it will ask regulators to investigate any Google's bid for Yahoo.

Google's Gross income for 2007 fell short of $10 billion, a quarter of what Microsoft made during the same period and would require a more complex financial transaction.

Since Microsoft has been actively courting Yahoo for over a year now, it can be assumed that plans are in place to cater for all possible scenarios and in the best of worlds, the transition will be painless.

But Yahoo has around 13,000 employees and several layers of management that will have to be integrated into the new "Microhoo"; the last mega-merger took place in 2001 when HP acquired Compaq for $25 billion through stock swap and it took years for HP to work out the synergies through cost cutting exercises, product line reduction and handing out pink slips.

But the current HP is now the largest technology vendor with revenues in excess of $104 billion, ahead of IBM; will the same happen to Microsoft and Yahoo?