Filed under: Deals, Internet, Competitive strategy, Microsoft (MSFT), Yahoo! (YHOO)

The dust is settling after the withdrawn buy offer of Yahoo Inc. (NASDAQ: YHOO) by Microsoft Corporation (NASDAQ: MSFT). During that fascinating process, speculation ran high as to why Steve Ballmer selected the strategy that he did. People were asking what the probable outcomes could be and what would possibly be created by the acquisition. What I have found to be lacking in the realm of the public keyboard is a synopsis of what exactly Steve Ballmer has accomplished through this seemingly fruitless process.
First, Mr. Ballmer got answers to some critical questions about Yahoo CEO, Jerry Yang. Not only did he get those answers for himself, but he laid them out for all the world to see. He has determined that Yang is a gambler, albeit a questionable one. Yang gambled righteously with his counter offer (read that bluff) of $37 per share. Note that Ballmer didn’t call that bluff. He neatly folded his winning hand.

It has also been shown that Yang is nothing even close to what might be considered a negotiator. It would seem that he and his Yahoo cohorts selected not to analyze alternative options. They simply adopted a take it or leave it stance. I submit to you that Yang and team could have offered a hundred different deal proposals in an effort to keep Microsoft at the table until it softened. Instead, it seems they pushed their plates back at the cook claiming they didn’t want what was served.

Next, we’ve the wedges that Ballmer has driven, one between Yang and his company, another between the company and it’s investors. Perhaps Yang can heal the wounds inflicted upon his control as chief executive, but the rift created between the Yahoo board and the company’s share holders shall now remain a festering wound. Perhaps the deepest and most damaging wedge is that one driven between the Yahoo! brand and investors at massive. That wedge was precisely placed in the fissure begun by Yang’s phantom Yahoo turnaround plan.

Finally, we can only speculate upon what the future holds in light of past events. I think I’m safe in believing that Steve Ballmer isn’t too stressed about how this all played out. Even though he is clearly concerned about Microsoft’s Internet related losses, I think if he expected that Yahoo would be Microsoft’s salvation, he’d not have struck at that company both branch and root. Now, Yang and Yahoo are left with nothing to do but defend what was already a shakily performing platform in terms of growth. Not only does Jerry Yang need to prove that he has the ability to turn the company around as he needed to before, now he’s in the position where he has to also financially justify his inflated counter offer. This, to appease an investor base which was already growing impatient.

Note: At the time of this writing, Yahoo shares have gained over 6% for the day.

Gary Sattler is a freelance blogger. He does not knowingly hold interest in the companies mentioned in this blog post.

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This entry was posted on Tuesday, May 6th, 2008 at 4:00 pm and is filed under Latest News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.