Microsoft-Yahoo Discussing "Joint Venture?" Run Away Screaming

CNBC’s David Faber said this morning that reports about Yahoo (YHOO) and Microsoft (MSFT) discussing a “search outsourcing deal” or “Microsoft buying Yahoo’s search business” are wrong and that the companies are instead discussing a “joint venture.” Unfortunately, David also says the talks are “very preliminary” and offers no additional details.

Details would be nice, but if Microsoft and Yahoo really are discussing some sort of “joint venture”–a separate entity owned and managed by both companies–we’ve already heard more than we need to know. Whatever the JV is, it might just end up being a worse idea that an outright Microsoft acquisition of Yahoo.

Joint ventures in technology almost never work: Too many cooks in kitchen, too many competing goals/incentives, uncertain future ownership and strategic direction–the fatal flaw is different in each case, but the overall structure is usually to blame.

So here’s hoping (futile, we know) that what Microsoft and Yahoo are really discussing is spinning Microsoft’s Internet business into Yahoo. In any event, the talks are good news for Yahoo–because they show how desperate Microsoft is and because they give Yahoo the ability to play Microsoft and Google off one another. In our opinion, the talks also make it more likely the companies will strike an out-and-out merger deal.

See Also: Microsoft and Yahoo Talking Again! (About a Search Outsourcing Deal, JV, or Other)

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