Windows Tips and Tricks

At the Bits Blog of the New York Times, Saul Hansell says that Google was instrumental in derailing the Microsoft effort to buy Yahoo:

As it turned out, Google was very much the spoiler in the deal. But its most effective weapon was not threats or coercion, but its very effective, and unconventional, use of its own checkbook.

Google has agreed to sell some search advertising for Yahoo. And since Google earns far more on every search than its rivals do, this will mean an immediate increase in Yahoo’s profits.

Microsoft’s chief executive, Steven A. Ballmer, said the prospect of such a deal that could deprive Microsoft of being able to sell all Yahoo’s search ads made proceeding with a hostile takeover less attractive. And Yahoo hopes the promise of a big check each quarter from Google will placate enough shareholders to head off a revolt over its decision to turn down Microsoft’s offer of $33 per share.

The news has been full of stories about the withdrawal of Microsoft’s attempt to buy Yahoo. Now that a couple of days have passed and the initial shockwave is dying down, it’s time to begin an assessment of whatever implications there are. For one thing, Yahoo’s stock price will take a hit. Some Yahoo shareholders will almost surely sue. But what long-term results might there be? Was Ballmer’s walk wise or not? Analysis is all over the place. Some say that Ballmer pulled back from a bad decision. For example, long-time Microsoft observer Mary Jo Foley writes:

Some — probably many — are going to portray Microsoft’s decision announced on May 3 to withdraw its Yahoo bid as a victory for Yahoo and a defeat for Microsoft Chairman Steve Ballmer & Co. Me? I see this as the smartest thing Microsoft could do.

On the other hand search engine specialist Danny Sullivan says:

If Microsoft’s walkaway from the Yahoo deal is indeed a ploy to save $5 billion, Microsoft CEO Steve Ballmer may have proven himself pennywise and pound foolish. He was prepared to spend billions to finally make Microsoft a serious rival to Google. For a bit more, he may have destroyed Microsoft’s chance to get there.

Others say that Ballmer is making a bargaining ploy and that after Yahoo’s stock goes down, he’ll be back with a less generous offer. Meantime, Ballmer’s letter to Yahoo withdrawing the offer is being parsed, dissected, and interpreted by numerous commentators. Whatever develops. neither Ballmer nor Jerry Yang of Yahoo can be proud of the way they have handled the situation. Yang, in particular, is likely to come under heavy attack from disgruntled stock owners.

So, what’s Microsoft’s path now? Steve Lohr at the New York Times writes:

Steven A. Ballmer, Microsoft’s chief executive, walked away from a Yahoo deal on Saturday still looking for an answer to his company’s fundamental problem: its time-tested recipe for success isn’t working against Google, the leader in the current wave of Internet computing.

With a bid for Yahoo, Microsoft was trying to buy its way out of the problem. It was a controversial step and a gamble, but at least it was a big move. Now, there is no clear prospect of a quick fix for Microsoft, as the center of gravity in computing continues to move away from the personal computer, Microsoft’s stronghold, and to the Internet.

With apologies to the ghost of Erich Maria Remarque, who wrote the powerful anti-war novel with the above title (translated in English as “All Quiet on the Western Front”).

The deadline for Steve Ballmer’s ultimatum to Yahoo to surrender by Saturday or else has come and gone. So far silence reigns, nothing from Redmond and nothing from Sunnyvale. Steve Hansell, writing in the New York Times, says this is just the calm before Ballmer rolls out the next attack. He analyzes why Ballmer can’t give up on buying Yahoo:

Why is Microsoft taking it sweet time showing its next move in the battle for Yahoo? I suspect it is simply arranging the forces for its next attack.
Why? Because I don’t think Microsoft Chief Executive Steve Ballmer could accept giving up—that would mean Microsoft conceding that it simply could not be a leader in the leading form of consumer technology, Internet-based services.

The cast of characters involved in the takeover struggle between Microsoft and Yahoo keeps growing. As a user of Yahoo services, I am not keen on a Microsoft takeover but the prolonged maneuvering can only be damaging to Yahoo as management is distracted and key personnel start to circulate their CVs. Michael Arrington at TechCrunch writes about the Yahoo tactics to evade Microsoft’s clutches:

Their actions, which appear to be based on destroying their market value as a counter to the Microsoft bid, benefit neither their stockholders nor their employees. And by setting up Google as the only real option in search marketing, they are disrupting what little market balance and competition exists in that space today.

I can’t decide if nose knifing or scorched earth is the best way of describing what they’re doing, but I have to ask: If Yahoo “wins” this epic battle with Microsoft, will there be anything left at the end to celebrate over?

It’s time to end this thing before Yahoo ends itself. I don’t care if they throw AOL, MySpace, and half the rest of the Internet into the deal along with Yahoo. But the health of the Internet demands a counter balance to Google. Yahoo-Microsoft, given the current state of things, is the only reasonable outcome.

Many analysts have said all along that Yahoo would find it difficult to avoid being taken over by Microsoft. As Joel May pointed out in a comment on a previous post, the latest letter of response from Yahoo management left the door open to a higher offer. The New York Times blog Bits has this to say:

Despite its defiant tones, Yahoo’s response to Microsoft this morning looks like the letter of a defeated company.

Yes, the letter asserted Yahoo stands by its financial projections for the year, despite the wavering economy. And it challenges various bits of Microsoft’s letter sent Friday night. (Henry Blodget catalogs Yahoo’s specific beefs with Microsoft here.)

But ultimately the letter doesn’t even try to make the case that Yahoo is better off as an independent company. Indeed, it explicitly says the Yahoo is open to selling itself to Microsoft. All it is doing is demanding more money.

In a quick response to Steve Ballmer’s threat of a proxy fight and hostile takeover of Yahoo by Microsoft, the Yahoo top brass have sent a rejection. The details can be read at this link.