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Is a Microsoft-Rogers partnership on the horizon?

Canadian Press

MONTREAL — Microsoft Corp.'s proposed $44.6-billion (U.S.) takeover of Yahoo Inc. could give the American software company a major new Canadian partner, Rogers Communications Inc., owner of one of this country's largest Internet services.

Toronto-based Rogers has a close relationship with Yahoo, which manages the e-mail service that's included with Rogers Internet subscriptions.

A similar relationship exists between Microsoft's MSN and Bell Canada's Sympatico, which is a rival to Rogers throughout many of Ontario's largest markets.

Analysts said Friday they don't expected the Canadian companies will want to change things if Microsoft is successful in buying Yahoo, even though it would mean the two rivals would ultimately be partners of the software giant.

“It's a value-added layer that Rogers and Bell would eliminate at their peril . . . although Rogers and Bell may not have any choice as to what those offerings look like in a couple of years from now,” Carmi Levy, senior vice-president of strategic consulting at Toronto's AR Communications, said Friday.

The takeover bid is seen as a way for Microsoft to challenge Google Inc.'s dominance of the lucrative online search and advertising markets.

The software company co-founded by Bill Gates — which offers everything from the ubiquitous Windows operating system, to the Xbox games console, to the Hotmail free e-mail service — has been unable to match Google's might in the search engine business.

Yahoo, one of the pioneers of the search-engine industry, has also been challenged by the upstart Google, which has parlayed its strength in the search engine business into a variety of other online products and services that challenge Microsoft's dominance.

Toronto-based Rogers said Friday it would be “inappropriate” to comment on a takeover that hasn't occurred.

“However, I can tell you that our multiyear agreement with Yahoo, should it be purchased by Microsoft, would still stand,” Rogers spokeswoman Taanta Gupta said in an e-mail.

While Microsoft said it expects the deal to go ahead, the U.S. Justice Department said it's interested in reviewing competitive issues.

Levy said he thinks Canadian presence and content will remain if Microsoft is successful.

“We're still going to see a Maple Leaf attached to whatever services come out of this newly merged company. It's only going to grow if they want to remain relevant to Canadian consumers.”

Internet author Rick Broadhead said the Yahoo brand could end up the loser.

“I think that the Microsoft brand will overshadow Yahoo,” he said from Toronto.

His advice to Rogers: “They just have to sit tight. They can't control what Microsoft is going to do.”

Iain Grant of the SeaBoard Group said while it's not yet clear if Yahoo and MSN will be maintained as separate brands, he believes Rogers could end up walking away from Yahoo.

“If Microsoft is successful, then Rogers will have very little difficulty extricating Yahoo from its site,” Grant said. “I don't think it would be any big loss.

“The idea of a home portal with a tremendous amount of import in the world has really passed,” he said.

“I think Rogers really won't lose a lot of sleep over the relationship with Yahoo,” he said, noting Rogers had past partners before Yahoo.

“I see that Bell and Sympatico as probably the brand with which Microsoft sticks only because Microsoft actually has a lot more relationships with Bell,” he said, citing small business services among them.

Microsoft has to reinvent itself to take on Google on the Internet, Grant added.

Syndicated technology columnist Marc Saltzman said nothing may happen right away on the Canadian front with Rogers and Bell.

“It makes sense given how strong the Yahoo brand is that Microsoft will likely retain both brands and search engines and mail solutions individually for the short term until they decide how to best use their new-found resources,” said Saltzman, who writes for numerous publications including Rogers UR Magazine and the MSN website.

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