But the marriage will end either in a divorce or there wouldn’t be much action in the bedroom. Of course, two struggling companies may find the idea very tempting to band together to fight the all-powerful Google in their attempts to get a piece of the online advertising pie but two losers, when combined together, just make up another big loser.
Let’s talk about Yahoo! Inc. (YHOO) first. It never was a search company and did very well carrying Google search. The company’s problems only got worse when it bought Inktomi and tried to develop its own search technology. It has been struggling ever since and I do not have much hope.
What about Microsoft Corporation (MSFT)? It too was never a search company and actually one of the latecomers to the party. While Live Search is somewhat better than Yahoo, consumers are simply not looking at it as a place to search.
In my opinion, the combined entity is more likely to destroy shareholder value.
Disclosure: I do not own shares of any of the companies mentioned here.