Unless you’ve been living under a rock for the past week (which, if you are, you have my sincerest condolences), by now you’ve no doubt heard of the latest drama to hit the technology industry: Microsoft’s attempt at grafting search-engine Yahoo onto its cold steel heart with a whopping $42 billion USD unsolicited bid, which came after Yahoo politely declined a friendly buyout agreement. If my calculations are correct (and, more importantly, if the analysts’ calculations are correct), that’s a 62% premium on Yahoo’s current worth. Now, assuming that good old Steven Ballmer hasn’t been struck with a case of the Tom Cruise crazies, the two top obvious questions are: “What is Microsoft thinking?” and “How does Yahoo feel about the whole deal?”

The cons of the proposed deal are pretty evident. Yahoo has been in a major financial slump which, despite the best efforts of CEO Jerry Yang, doesn’t seem to be improving; hell, the company decided to lay off 1000 people, or seven percent of its workforce, just a few weeks ago, and it seems like the only reason the stock is doing so well these days is precisely because of a likely hostile takeover by Microsoft. $42 billion is an enormous sum to pay out for a company whose economic future is shaky, and whose net revenue is hovering around $6.5 billion a year; at that rate, Microsoft probably won’t start seeing positive cash flow from the deal until 10 years later, a long time span for an industry so volatile.

Read the complete article at Neowin.