SAN FRANCISCO — As the stalemate over Microsoft Corp.'s bid to buy Yahoo Inc. enters its third week, some analysts are already pointing to a winner in the impasse: Google Inc.
Two weeks after Yahoo rebuffed Microsoft's merger proposal and the software giant's vow to explore all options, it remains unclear how the situation will play out. But the uncertainty in what could turn into a protracted battle is giving crucial openings to the two titans' common rival, Google, some analysts said.
"In the interim, we foresee disarray at Microsoft and Yahoo," analyst Marianne Wolk of Susquehanna Financial Group wrote in a note. "We believe the deal has distracted the engineers."
Representatives from Microsoft and Yahoo respectively said that they had no comment.
Nevertheless, the management teams of both tech companies have told employees that everything is going well, while urging them to keep busy.
In an e-mail sent last week, Kevin Johnson, president of Microsoft's platform and services division, told staffers that "it's business as usual, and as such, your commitments remain unchanged. ... It's important that we stay focused on our business commitments and let the process for the transaction take its course."
But Roger Kay, president of Endpoint Technologies Associates, said the internal notes sent by both companies "indicate that each feels the need to tell his troops to keep their eye on the ball."
"The water-cooler chat must be pyroclastic by now, to the detriment of any actual work that's got to be done," he added.
Wolk of Susquehanna echoed this point, saying that the distraction over the planned merger "should benefit Google over the next 18 to 24 months, providing with a major opportunity to advance in branded advertising."
She cited Microsoft's statement that it expects the process to close in the second half of 2008, which many analysts already believe is too optimistic and is predicated on a friendly merger agreement between the two companies.
"If instead Microsoft is forced to acquire Yahoo via a proxy fight, it would mean a more protracted closing process," according to the analyst.
That would mean Microsoft would have to field its own slate of board candidates and wait for the next shareholder elections, which analysts say may not happen until June or July.
"Then the transaction will not close until early 2009, when it would begin the complex integration of Yahoo's 14,300 employees, multiple advertising platforms, technology infrastructures, content sites, culture, etc," Wolk commented. "Google may not face a more competitive Microsoft-Yahoo until 2010."
By then, she said, Google could "extend its lead in search monetization" and grab a "major lead in emerging growth areas, such as video advertising, mobile and local advertising."
More importantly, Wolk pointed out, Google would likely find it easier to hire top engineers from Microsoft and Yahoo "as they fear for their jobs in a consolidation." She cited the anxious chatter on blogs by Microsoft and Yahoo employees that suggest "a growing fear of layoffs."
Analyst Steve Allen of Sierra Tech Research also believed that the process will likely lead to a demoralized workforce. "The longer the deal takes to consolidate, the more able-bodied Yahoo `foot soldiers' will desert their assigned posts," he said.
He cited America Online's takeover of Netscape which, Allen added, involved "a class of management styles and the option of going elsewhere" for employees. "Not a good recipe for success, if what you want is the people."
Allen noted that "ironically, many went to Yahoo or dot-com startups. Of course, Microsoft may not be so worried about retaining the people. They have plenty already. Which in turn is why there is so much angst amongst the Yahoo troops."
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