Microsoft, Yahoo! Drama Continues, But Why?

Not that Microsoft was asking, but I've got some advice for the company and its mercurial CEO Steve Ballmer: Don't do it. I'm referring of course to ailing Internet giant Yahoo!, which has spent the past year in a bizarre death spiral that was sped up in no small part by the haphazard machinations of Microsoft.

The software giant would no doubt prefer that its ongoing "will it or won't it" gambit is eventually placed in the "crazy as a fox" category by the business analysts of the future. But let's be clear here. Buying Yahoo! is just plain crazy.

Don't do it.

In January 2008, when Yahoo! was still worth $22 a share but its business was dropping off faster than the demand for Teddy Ruxpin bears, Pet Rocks, and other inconceivably hot properties of years past, Microsoft made its epic $44.6 billion offer for the company. At the time, the software giant justified the heady $30 a share offer for Yahoo! by explaining that only by combining the two companies could market leader Google be defeated.

Yahoo! responded, naturally, by rebuffing the offer and spending the next few months sabotaging any possible deal. Microsoft tried a second time to buy the company, and tried to strike an advertising-only deal as well. Yahoo! finally ran into the waiting arms of Google--did I mention they were the overwhelming market leader?--and struck a deal that, eventually, was slapped by the US Department of Justice (DOJ). Apparently, even the corporate-friendly Bush administration couldn't overlook such an egregious antitrust transgression.

During this time, Yahoo!'s stock fell another $10 and its now hovering in the $12 range. Yahoo! CEO Jerry Yang--the man most personally responsible for both Yahoo!'s poor market performance and for scuttling all three Microsoft proposals--last week announced that "Yahoo! is Microsoft's best option." For what is unclear. Microsoft CEO said he was uninterested in buying Yahoo! now, but he's said that before. Many analysts now speculate that his public disinterest is, in fact, yet another gambit aimed at lowering Yahoo!'s value even further so that the software giant can swoop in for the kill.

Don't do it.

Even at $20 a share, Yahoo! is a financial albatross. Its business is eroding and the company is seemingly incapable of getting a crucial next generation ad system off the ground. The company is also a technological albatross, and that's true at any price: The software it uses behind the scenes is completely incompatible with Microsoft's own systems and it would take several years--if ever--to make them work together seamlessly. In the meantime, the wider online industry will continue evolving, and will not wait for Microhoo to catch up, sorry.

Steve Ballmer feels that he must make a blockbuster deal to show the industry and its partners, competitors, and customers that it is serious about competing in the post-PC world that is rapidly unfolding. And its recently-announced cloud computing platform has landed with a thud, with many, myself included, wondering if even Microsoft understands how it all fits together. But buying a company that is itself failing will only slow Microsoft's move to this new future. It is a deal the company must not make.

Mr. Ballmer, I am begging you.

Don't do it.

P.S. Yahoo!, I know you're not interested in my advice either. But I have some ideas around a certain CEO of yours that's lived out his usefulness. Just a thought.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.