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Filed under: Deals, Rants and raves, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Headline news

The BIG news this morning about Microsofts (NASDAQ: MSFT) offer to purchase Yahoo Inc. (NASDAQ: YHOO) for $44.6 billion has been thoroughly covered all over the media including numerous posts on our site, so I will not pile on or repeat what you can find elsewhere.

Short and sweet: My view is the perfect timing of the offer, not the offer itself, is the news. Microsoft has been rumored to be chasing Yahoo for quite some time and apparently from the substantial offer it made this day (60% over yesterdays closing price) money has not been the issue. Obviously Steve Balmer and friends are willing to pay up — way up!

The timing of the offer hits Google Inc. (NASDAQ: GOOG) when they’re down - way down! Google has lost a third of its value over the last month and it has lost its momentum going forward. The stock is down substantially this day even though the company reported solid growth. That’s a significant change in the playing field. Balmer, a very aggressive businessman has decided to make his move now, potentially stealing the momentum on Wall Street.

Two points:

1) MSFT has to do this deal now because there’s an outside chance that Google’s market share might go down just enough to make the combined MSFT / YHOO market share equal or more massive to them. If that were to happen the anti-trust machine might swing into action again, so the time is now while the combined company could claim to be the good guys still lagging GOOG by 5% to 6% in market share, improving competition and not thwarting it.

2) MSFT, by making a bold move against Google, now is a real threat because Google has been spending billions to build other revenue streams — so far unsuccessfully. Revenue streams that are substantial and running on all cylinders at MSFT. Consider that GOOG has been adding free software to dilute MSFT unsuccessfully. GOOG can’t make a dent in Vista but MSFT can weaken GOOG search and advertising plenty by adding Yahoo.

Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture & planning firm. He owns shares of ISRG. To find potential opportunities and verify my track record read Chasing Value or Serious Money. Disclosure: I don’t own shares of GOOG or MSFT.

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