That’s Microsoft’s stock, plummeting $2.00 after the announcement of their bid to buy Yahoo!. 

And there’s YHOO, which until the bid news had been muddling about at its lowest point in the last few years, especially after recent announcements of layoffs.

Ouch. Gotta hate acquisition bids… the bigger company’s stock price almost always gets hammered as investors worry about integration cost.

Personally I think the proposed merger would be a good thing. If the combined company could manage to hold on to Yahoo!’s customer base and integrate their online offerings — and those are two very big if’s — it would stand a real chance of competing against Google in search. More importantly, it could be great for customers: advertising clients would get a better ad platform and hopefully better pricing due to economies of scale, and end users would get a web portal and email experience that… well… doesn’t suck. (Sorry, I’ve never been a fan of MSN or Hotmail’s UI.)

Google is making noise about monopoly power and trying to stir up the regulators. That’s predictable, especially with Eric Schmidt at Google’s helm. And surely the US government will investigate, and that will take months. But I don’t think that’s going to be the real barrier.

The toughest hurdle here is culture. Or, to put it more bluntly, ego. Microsoft has always suffered from a particularly bad case of Not Invented Here. Asking MS product teams to merge their search, advertising, and portal businesses with Yahoo!’s will be extremely difficult for some to swallow. Asking Yahoo! product teams to integrate their internet properties with Microsoft services will be a similarly tough sell. For this to work, some difficult top-down decisions need to be made by execs in both companies, because you can bet that few people in the trenches will willingly step aside and see years of their hard work made redundant.

Let the games begin.