According to the Wall Street Journal, the seemingly interminable Microsoft-Yahoo dance has taken a new twist: Microsoft has apparently approached large media entities — including Time-Warner and News Corp. — about joining up for a run at Yahoo, with the ultimate intent of breaking the company into its component parts. I have to say that this makes total sense to me, and in fact, I would argue that such a deal makes even more sense than either a Microsoft takeover of the entire company or a Microsoft acquisition of Yahoo’s search operations.
If Yahoo were a patient at a hospital, the physician in charge might already have scrawled “GFP” on its chart, which to other doctors and nurses is a sign that things are not going well and the patient is “good for parts” — meaning organ donation, etc. (and yes, doctors really do that kind of thing). If nothing else, the past couple of years have shown that while Yahoo has many good assets, the company as a whole is not working. It is trying to do too many things at once, some of its strategies conflict with each other, and there’s an overall lack not just of visionary leadership but (I would argue) of basic functional decision-making ability. In other words, a prime candidate for organ donation.
If such a deal actually came to pass, Microsoft could acquire the search technology and assets that it needs to get out of its distant third-place position in search and search-related advertising, and a media partner could acquire some of Yahoo’s media-related assets — Yahoo Music, the video-related operations, Yahoo News and Yahoo Finance and so on — and other parts of the company could be auctioned off or just shut down. When a company struggles for as long as Yahoo has, it is often (but not always) a sign that it has simply outlived its usefulness, and needs to be either fundamentally restructured, sold or broken apart. I think Yahoo’s time has come. And even Fred Wilson seems to think so.