There’s been a lot of talk today about Microsoft’s effort to acquire Yahoo and what a successful takeover might mean for various open source software work with which Yahoo is associated. I’m not sure what to make of all that, but I am struck by the fact investors seem to think that a Microsoft takeover of Yahoo will make the combined company worth about $8 billion less than the sum of the values of the separate companies. How did I get this number? Well, the merger became public information before the stock market opened this morning. At the end of today’s trading, Microsoft’s stock price had fallen by $2.15 per share, while Yahoo’s stock price had risen by $9.20 per share. Multiplying these share price changes by the number of shares for each respective company, the implied value of Microsoft was reduced by $20 billion, while that of Yahoo was increased by only $12 billion. Investors, at least, are betting that Microsoft cannot successfully integrate Yahoo’s business into its own, and that the takeover will effectively waste $8 billion.

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