Will Ballmer Walk?

Posted by: Rob Hof on April 24, 2008

In a word, no. As Sramana Mitra notes, and as we’ve been saying for awhile, Yahoo’s fate as a Microsoft vassal was sealed the day the software giant made its unsolicited bid. That the merger will actually result in a stronger company is highly doubtful, but it’s clear that Microsoft thinks so. The deal will get done. It’s only a matter of when (who knows? But probably not by the Saturday “deadline”) and how much (in all likelihood, a couple bucks or so more than the original $31 a share).

So why all these seemingly mixed signals from Microsoft? They’re not really mixed at all, if you step back from the press’ need to keep pumping out stories making every new wrinkle sound like something new. Here’s what my secret decoder ring reveals about the latest developments:
decoder_ring.jpg

* Item: Ballmer could walk away. Translation: “We might pay more, but not much more.”

* Item: Microsoft employees don’t want the deal. Translation: “We might pay more, but not much more.”

* Item: Microsoft has already settled on a slate of Yahoo directors it will nominate in its threatened proxy fight. Translation: “We might pay more, but not much more.”

* Item: Justice Dept. looks at Google-Yahoo deal. Translation: “We might pay more, but not much more.” Bonus translation: “… because we have so much clout with certain people that we can get your supposed deals nixed in a nanosecond.”

In other words, it’s all negotiating tactics. Maybe there will even be a new one in a couple of hours, on Microsoft’s third-quarter earnings call, and if so, we’ll dutifully report it here.

Update: Microsoft’s just-reported earnings clearly are disappointing, sending the stock down about $1.50, or 5%, in extended trading after the market close. This can’t help Microsoft’s contention to Yahoo shareholders that its half-cash, half-stock offer shouldn’t be raised, because it’s now worth even less than the approximately $30.50 a share it was at the close.

Also, Microsoft’s online division continued to lose money, $228 million on $843 million in revenues. That’s all the more reason it may feel it needs the scale that would be provided combining those operations with Yahoo—which, don’t forget, remains consistently if not inspiringly profitable.

More to come here (or in a new post) as any comments on Yahoo surface in the earnings call….

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Reader Comments

Ervin

April 24, 2008 06:30 PM

To author: some of your sentence formulation is confusing; e.g. "whether or not ... is highly doubtful" (both positive and negative are doubtful ??). This should be: "that the merger will result in a stronger company is highly doubtful".

Rob Hof

April 24, 2008 06:42 PM

Ervin, you are so right. Grammar fixed--thanks!

The HardHead

April 30, 2008 08:19 AM

Microsoft’s online division continued to lose money - Duh it is a no Brainer! MSN stinks and MSFT can only copy no invent - Zune to Apple iPod
XBOX to Sony Play Station
and there is so much more!

Flush Ballmer and I'm a buyer of MSFT
HH

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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