Microsoft's Ultimatum to Yahoo, negotiate or else!

By: Qwaider

On:Monday, April 07, 2008 9:27:26 PM
In:Science & Technology
Viewed: (4355) times

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It's really rare to see a public show of force and wealth like what's going in the Microsoft-Yahoo deal. Today, Steve Ballmer, the CEO of Microsoft issued an ultimatum to the Yahoo board of directors. The message was clear, Negotiate or we're going to bypass you straight to the management and the shareholders.

The letter was clear, but it focused more on the shareholders and market share than it did about the customers. Which is all fine and fair since this is a business. But Ballmer who's not very well known for his customer empathy focused on the business. So what do I think? ...

This deal is going to get more and more sour to the point that it will be so sour that it will probably cause catastrophic results.

Here's what's going on...

After the Jan31st announcement, Yahoo stock skyrocketed making it "appear" more valuable. In layman's terms, the price for 62% has shot up. Making the whole thing "less" of a bargain than it was. Which means Microsoft is going to burn more cash in the acquisition stage. In return for a strategic gain that "might" be obsolete by the time it's realized. (Remember, 40billlion in 2008 are likely to be worth more than 80 by 2016 but do you think Yahoo will be worth that much in that time?)

Yahoo on the other hand has been hard at work trying to protect it's sovereignty. Foolishly I may add, because joining with Microsoft is actually they're best card on the table. Since they're already losing (lost?) the battle with Google. This might have been a small maneuver to squeeze a little more bucks. But the sad part is that they didn't get to any viable options. A merger with Comcast would be so weird, Newscorp doesn't have enough cash, vision or compatibility to take on Yahoo, and wouldn't survive the transition to take on Google.

It's becoming clearer everyday that the board of directors at Yahoo are clueless to what they do. It's quite sad to see that because these are very smart talented folks with top ivy league PhDs. Yet, they're clueless to what they want to do or how to proceed in order to serve the best interest of their company and protect it from floating.

Sadly, everything that Ballmer said is true, Yahoo continued to decline despite the frantic buy and sell movement in their stocks. If this deal doesn't go through, I'm afraid Yahoo's stock is going to scrap rock bottom and then someone like Chinese Baidu will probably be able to take over them.

What's going to be next? Well, If I was Yahoo, I would have started negotiating back in February. But since they didn't then this is the best time to do this and squeeze a few more bucks out of the deal.

Further read the NYT article: Yahoo’s Big Question: Is Steve Ballmer Bluffing?

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#1
KJ
Said
On: 4/8/2008 8:37:26 AM

This is exactly like Electronic Arts and Take-Two interactive; the former made an offer, the latter declined, then EA threatened TT and said they either be bought or they're going for the shareholders.

Seriously - it shows you how desperate they are to get rid of the competition. EA is the game's industry version of M$

Take overs like these harm the industry more than it does good. It worsens the company's image as well as liquidation and unemployment

#2
Qwaider
Said
On: 4/8/2008 9:10:13 AM

KJ, the situation with Yahoo and Microsoft is different. They have a sole enemy and neither company is able to take on Google on it's own. But with Microsoft acquiring Yahoo they can both exist and have a chance of fighting Google

Microsoft should have bought google for 1Million dollars 8 years ago :) That was the asking price when it was offered to eXite. And eXite declined!! LOL!

#3
KJ
Said
On: 4/8/2008 10:52:20 AM

exite are kicking themselves in the nuts now.

It's a good thing to have this competition. Makes you appreciate the business more. Bas still, forcing a company to be bought seems absurd IMHO.