The Microhoo anticlimax
After the preceding crescendo of moves and counter-moves by Microsoft and Yahoo!, the deadline for moving to a hostile takeover passed without any action. Damp squib and storm in a teacup (a big one, admittedly) are the clichés that spring to the fingertips.
U-turns are often seen as showing indecisiveness, witness the savaging of Gordon Brown after he changed his mind about an election last autumn. But often a decision to stop shovelling when you’re in a hole is commendable. There is a strong case for Microsoft to halt the Yahoo! excavation.
Last Wednesday’s meeting of the MS board of directors left it up to CEO Steve Ballmer to decide whether to proceed with the takeover bid or to walk away from it. It’s a career-defining moment for Dancin’ Steve, and he is well advised to mull it over.
The ground has shifted considerably since the original offer. What was a premium bid three months ago looks less inviting now, with the real value of MS’s cash-and-stock offer having declined from $31 to about $29.5. Yahoo’s share price, meanwhile, has risen by 15 percent.
Alternatives being pursued by Yahoo! may or may not be negotiating tactics. Any closer link-up with Google than the current pilot to carry search advertising would be strongly challenged on anti-trust grounds, as would a merger with Time Warner’s AOL.
The problem with hostile takeovers is that – well – they arouse hostility. It is an open question whether the corporate cultures at Yahoo! and MS would be compatible even if it was all roses and champagne. A knock-down, drag-out proxy battle would surely make a rocky start to marriage.
In an interview on Thursday, Ballmer said he was confident MS could build a competitive online-advertising business without buying Yahoo, but ‘is there a better way to get to scale more quickly?’
He answered his own question by saying that only four companies offer the world-wide scale needed to make a quick gain ‘relative to the guy [Google] who sells the most advertising.’ Those are News Corp’s MySpace, Time Warner’s AOL, Facebook – and Yahoo.
