The Microsoft-Yahoo Blame Game
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News Analysis. Let the blaming begin. The failed Microsoft-Yahoo marriage is somebody's fault. |
If I were scoring PR tactics, I would rank 5-0 in favor of Microsoft. Microsoft has been preparing for the possibility of withdrawing its bid since its April 24 earnings call, when CFO Chris Liddell issued an "ultimatum" to Yahoo's board. Yahoo's strategy has been one of silence, giving Microsoft free voice to shift the blame away from itself.
Leaks over the last couple days foreshadowed Microsoft's withdrawal and presumably increased pressure on Yahoo to deal. There are no leaks when merger discussions are going well, only when there are troubles. For example, the Wall Street Journal got plenty of inside information over the last couple days—all of it quite favorable to Microsoft. Now why is that? Some highlights from the leaks:
- Microsoft's willingness to raise its bid to $33 a share.
- Yahoo's unwillingness to take less than $37 a share.
- Microsoft's board meeting that reached no decision but gave CEO Steve Ballmer full authority to make one.
- Various statements, mostly from Steve, asserting Microsoft's commitment, acknowledging readiness to walk away and blaming Yahoo's board for the deal's potential collapse.
I suspect that Yahoo will dearly pay for its silence. The company's silence on Microsoft's unsolicited offer shouldn't have been Yahoo's final words in public. Strangely, Microsoft has done the better job communicating with Yahoo shareholders. Microsoft effectively took control of the messaging and in withdrawing the bid struck a decisively damaging competitive blow. Yahoo has used up any goodwill it had with Microsoft, which will now turn into a fierce competitor—unless there is renewed opportunity for a merger.
The merger could yet resurrect, if Yahoo is divided, and Microsoft's messaging is effectively divisive. The blame game means:
- Some major Yahoo shareholders will come out against the board's resistance to the merger, particularly with a higher offer on the table.
- Some shareholders will sue Yahoo's board for negligence, for not acting in their best interest. Microsoft has done plenty to point fingers for any shareholder uncertain whom to blame.
- Some Yahoo employees will flee rather than fight. Microsoft has made its competitive intentions clear, particularly through Steve's letter to Yahoo CEO Jerry Yang.
- Yahoo will receive some pressure not to formalize its trial ad/search deal with Google.
Other than making stupid public comments, I can't see how Yahoo could have more poorly managed the messaging. The company's early response was good, as it sought to show the growth potential. But for weeks, Yahoo has given more than just Microsoft the silent treatment.
Yahoo's first-quarter earnings were strong enough to justify a higher bid. But instead of strongly making the case, Yahoo let Microsoft set the agenda. Its CEO and CFO dismissed the earnings' significance on the offer—and Steve got his comments in proactively before Yahoo's first-quarter announcement. Yahoo lost control of messaging; Microsoft managed it remarkably well.
Today's letter from Steve to Jerry is a great example of Microsoft's control and Yahoo's lack of it. Microsoft released the letter, which is personal, addressed CEO to CEO. Steve opens with warm thanks and reviews personal discussions. Yahoo's response: A coarse and dry press release. Why isn't there a personal response from Jerry to Steve? Stupid! Stupid! Stupid!
Attributed to Yahoo Chairman Roy Bostock:
"We remain focused on maximizing shareholder value and pursuing strategic opportunities that position Yahoo! for success and leadership in its markets. From the beginning of this process, our independent board and our management have been steadfast in our belief that Microsoft's offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view. Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market."
Blah. Blah. Blah. My car exhaust makes more meaningful noise.
The statement from Jerry:
"I am incredibly proud of the way our team has come together over the last three months. This process has underscored our unique and valuable strategic position. With the distraction of Microsoft's unsolicited proposal now behind us, we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users."
Gee, Jerry, will the team be "incredibly proud" of you? I don't see how with Microsoft managing the messaging so effectively, particularly to your now shell-shocked shareholders.
Jerry, if Yahoo is worth so much, why aren't you blaming Microsoft for offering so little—and doing so in an effective and emotive way? Microsoft's brilliant PR handling might yet trigger a shareholder revolt. Division can help Microsoft competitively push hard against Yahoo or get another chance at the merger (depending on shareholder response).
Microsoft executives won't sit around playing fossball while Google cuts a major ad and search deal with Yahoo. Microsoft has enough trouble with Google search and advertising without the services being extended to Yahoo. The competition already has started, and Microsoft is ahead five to nothing. Are you listening Yahoo?
Comments (24)
This 3-month negotiation has made a few things crystal clear.
1) you want SOLID people at the top. MSFT has them, and Yahoo does not. Obviously.
2) pride gets in the way of even the smartest people (aka Jerry Yang)
3) Boards of Directors (BOD) aren't worth a S&^t regardless of what company you are discussing. Yahoo's BOD was absolutely worthless, and MSFT's BOD was equally as useful. BODs are nothing but symbols, with no real usefulness beyond the illusion that they are somehow keeping an independent eye on management. Its a farce, every time.
4) I don't envy Yahoo. Alot will be written about MSFT targeting Yahoo more fiercely from now on. But the truth is that Google will be targeting this lame antelope (yahoo) for the same reasons as MSFT. Yahoo is roadkill. Its just a matter of which predator gets to chew on the carcass now.
Posted by uhura | May 4, 2008 12:20 AM
uhura, Yahoo's CEO Jerry Yang is VERY SMART, Much smarter than Ballmer!!
VERY interesting quote by Yahoo's CEO Jerry Yang on February 14th
Yang told stockholders the company is "a faster-moving, better-organized, more nimble company than it was just a few months ago."
http://biz.yahoo.com/bizj/080214/1590978.html?.v=1
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"NOW" just what could have happened to em"POWER" Yahoo? Don't forget Microsoft is currently in a lawsuit with lil' VCSY.
FRIDAY, APRIL 20, 2007
Vertical Computer Systems, Inc. Files Patent Infringement Lawsuit Against Microsoft Corporation
Fort Worth, TX, April 20, 2007 (PRIME NEWSWIRE)? Vertical Computer Systems, Inc. (OTCBB: VCSY)(www.vcsy.com) announced today that on April 18, 2007, Vertical Computer Systems, Inc. filed suit for patent infringement against Microsoft Corp. in the United States District Court for the Eastern District of Texas. VCSY claims that the Microsoft .Net System infringes U.S. Patent No. 6,826,744.
Posted by I-Man | May 4, 2008 12:41 AM
Interesting, awhile back, Yang and the board were thought not possible to resist the MS onslaught. But still the Borg could not as simulate them, even with all their power (money) and PR (crap).
Yahoo has escaped the Borg for now, long live Yahoo! But what of Microsoft?
Where does Microsoft go now? If Yahoo was the best chance (Ballmers own words) to further its online advertising future, what does that leave Microsoft? How about a declining desktop market share for both Windows OS and MS Office. Stock Prices that will decline the same way. Dinosaur, old, outdated, software that nobody can say why its any better than the last one (XP). Yep, no future without buying Yahoo.
Posted by The Hand | May 4, 2008 1:16 AM
Well maybe with this behind them, MSFT can finally put their collected efforts into making a decent operating system. Its been seven years since they made a decent desktop OS, so hopefully they haven't lost their touch.
Posted by Ralph | May 4, 2008 8:24 AM
Ha, ha, ha
The Fox And the Grapes (Aesop)
For some time Ms is masquerading its defeats with sweet words, perhaps it was best for Ms (don't get Yahoo), but Ballmer couldn't ever have bid for Yahoo-that's a loss of prestige, Mr Ballmer (remember it was a HOSTILE BID).
IT IS A DEFEAT-and why? because Ms didn't buy Yahoo (and Yahoo has now improved its productivity, becoming more competitive) and Google is now further away from Ms' reach (as you'll remember, that was Ballmer's main objective: to reach Google)
This has made Yahoo closer to Google and it makes Ms' task harder. Yahoo is still a wedge between Google and Ms, only more hostile.
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It was a very hot and sunny afternoon. A fox, which had been hunting the whole day, was very thirsty.
"How I wish there was some water," the fox thought to himself.
Just then, he saw bunches of fat and juicy grapes hanging from a vine above his head. The grapes looked ripe and ready to burst with juice.
"Oh, my! Oh, my!" the fox said as his mouth began to water. "Sweet grape juice, quench my thirst!"
The fox stood on tiptoe and stretched as high as he could, but the grapes were out of his reach.
Not about to give up, the fox walked back a short distance and took a running leap at the grapes. Again, he could not reach the grapes.
The fox jumped and leapt, again and again, but each time he could not reach the grapes. Until, at last, the fox was tired and thirstier than ever.
"What a fool I am!" said the fox furiously. "These grapes are sour and not fit for eating. Why would I want them anyway?"
With that, the fox walked away.
Moral: Some people disdain and underestimate what they cannot have.
Posted by Marco | May 4, 2008 8:38 AM
Speaking of communications, I suspect that Wall Street will have a strong message for Jerry Yang on Monday.
Yahoo! is a sinking ship, that just threw away all of it's lifeboats.
Posted by JohnJ | May 4, 2008 11:20 AM
Now for the real question Joe, who is going to replace Ballmer at MSFT? CEO's don't survive a screw up this big, especially with the stench of Vista still lingering in the board room. This could be a huge turning point for the company and a welcome change for shareholders.
Posted by Ed T | May 4, 2008 11:47 AM
The Hand says it very well. Others are stating the same.
Microsoft didn't "walk away". They were driven away. Yang wanted more. Ballmer would not pay more.
Could Yang justify asking for more? The apparent answer is "yes". Thus Ballmer knew he could not fight the words and demonstrations Yahoo could produce to justify their request for 37... and Ballmer GAVE UP.
That makes it a defeat for Ballmer. A defeat for Microsoft. And a death spiral for those developers casting their career lot with Microsoft tools.
Don't like that assessment? Let's all revisit the situation over the next few weeks and watch what Microsoft is supposed to be able to do on the web. Let's then compare their words and actions (if any actions at all beyond promises and delays) against the words and actions of Yahoo.
Yahoo made more advances on the web in the short weeks leading up to the dealine than Microsoft has been able to make in three years.
I don't think the future weeks and months will be any better.
Microsoft has a technology gap preventing them from actually building and working usefully on the web.
If they did NOT have such a techology gap, they surely would have produced much more by now.
So far; not.
Posted by portuno | May 4, 2008 12:02 PM
And, might I point out, Joe's assertion: "Microsoft's board meeting that reached no decision but gave CEO Steve Ballmer full authority to make one." gives no information.
That board has done nothing but give Ballmer a pass for years. I believe they know the nature of the technology gap because they were all onboard for years with Ballmer's strategies for filling the gap.
They have no choice but to give Ballmer a pass and a blank check to pick Microsoft up out of the hole they've dug for themselves.
Now, we'll all wait for Microsoft to show just what they can do without Yahoo.
I suspect they can do nothing with the technology they own. They need somebody else's technology to pull it all off.
Posted by portuno | May 4, 2008 12:05 PM
I-Man how can any of us miss that your stupid OTC junk company is not in a lawsuit? WHO CARES!?! No one else in this forum does.
Posted by JM | May 4, 2008 12:25 PM
Be nice JM. Small things bring about huge changes.
Remember that Microsoft settled with Eolas Technologies one business day before they rolled out Silverlight 1.0.
The connection is plain to see although it hurts to look, I'm sure.
Do YOU think Microsoft develops their own technology? Have they ever?
And if your anser is "yes" then let's see it after 6 years and billions in "R&D".
And if your answer is "no" then which small company will Microsoft get their technology from now?
Posted by portuno | May 4, 2008 12:46 PM
MS for all their bluster, did not elect or nominate a slate for the Yahoo board in its hostile takeover bid. Mostly because they could not win, the numbers of shares were on Yang's side. Ballmer showed just how bad a CEO he is, and Yang, a great one.
So where do Ballmer and MS go next, perhaps AOL? Do not think that MS has given up on internet advertising, they must "acquire" web advertising market share, as MSN/Live is almost a total failure, at least it is, as far as growth.
Ballmer, fired? As one here put it. Yes, he should be, but remember, Barth Ballmer does his Master's bidding, and between them, they own a lot of voting stock. Ballmer will never leave, until he wants to.
The future at this point belongs to Yahoo, not MS.
Posted by chips | May 4, 2008 1:16 PM
Ballmer didn't screw up. If you honestly think so you don't know anyting about negotiating. The fact of the matter is that you must have a walk away position or you aren't negotiating. Steve had a walk away position. These were based on dollars and time. When he couldn't get Jerry Bozo Yang to agree he left. That's what he's supposed to do. To continue to raise the price just because Jerry Yang thinks the company is worth more is ludicruous and absurd.
Yahoo's stock is going to plummet tomorrow and Microsoft's is going up at least 10%. So before we talk about the "future" belonging to Yahoo walk up and watch the share price because that's were the real voting occurs.
Posted by Rob | May 4, 2008 9:44 PM
Rob says:
Ballmer didn't screw up. If you honestly think so you don't know anyting about negotiating. The fact of the matter is that you must have a walk away position or you aren't negotiating. Steve had a walk away position............
Actually, I think Ballmer got what he wanted all along, to know the price at which Yahoo would sell, $37 a share, maybe even a little less. Ballmer is looking for a bargain price, no doubt. But Yahoo, really doesn't want to sell, especially to Microsoft. Yang founded that company and has pride in it, once he sells it to Microsoft, any pride he has in it is gone. Better get a good price for selling out to Microsoft, because your pride and your love for your past work is gone for sure.
Expect that this deal is not done yet. The walking away is temporary at best. Ballmer and company had been trying to buy Yahoo for a year before this takeover bid. AOL will now come into play as another possible buy from Yahoo, Microsoft, and Google. You just know that Ballmer has to buy either Yahoo, or AOL. How else can they take over the world, without the internet?
Posted by sam | May 4, 2008 10:12 PM
Ballmer's avowed walk away position was "Never and not a dime more".
What happened?
Posted by portuno | May 4, 2008 10:28 PM
Looking forward to seeing the stock prices Monday morning ... for both companies.
Posted by Partners in Grime | May 4, 2008 10:32 PM
sam, you make alot of sense. what are you doing commenting on this board?
The Hand "best chance (Ballmers own words)" oh really? show me that quote.
Posted by sumsum | May 4, 2008 10:35 PM
sumsum: "you make a lot of sense. what are you doing commenting on this board?"
Err..and you, what are you doing here? ...Ha! reading nonsense...comment nonsense...
Posted by Marco | May 5, 2008 9:11 AM
I don't see how this can be seen as a good thing for Microsoft or even a good PR stunt. On the contrary I think Jerry's silence is a good thing. Instead of loud talking he keeps quiet and moves ahead.
Any talk prior to today would have been speculation. Now we see a drop in a bit over 20% for Yahoo. Leaving it at $22.62 (pre market) still above the closing value of $19.18 prior to the MSFT announcement in February. Yahoo today is worth more than it was prior to Microsoft's offer. The value in between was pure speculation. Congrats to those who sold at that price.
Getting back to Microsoft I see a few things which I find troublesome. Microsoft not being able to "purchase technology" as it has done previously marks is top on my list. It could not purchase and repackage Yahoo.
The bid shows there is potential in Yahoo. Well at least Microsoft sees it and is willing to pay for it. If they gave that much money per share it would only mean it is worth more. Don't you think? This shows that today Microsoft stands disarmed in a new market. Simply put it is dead in the water of todays ad market.
Jerry's silence is good when playing against Microsoft. I think there would be no point in responding and feeding the fire. What would a response lead to? More "vacuum speak" from Balmer? With no real money to act (he has to borrow to buy Yahoo) Balmer has only "harsh language" to use. By keeping quiet Jerry dismissed the letter for what it is. Just typical Microsoft PR speak. Just like they do with their product line, promising so many nice things in the near future.
Balmer should learn from Jerry's letter. He is not talking too much. He is not bluffing about all the great things he is going to do it and how is is going to do them. He just said, lets get back to what we do and back to delivering products. Something Balmer should turn around and do. Don't say you're going to deliver the next best thing in the software market place, just deliver it.
Posted by Gerardo Tasistro | May 5, 2008 10:04 AM
"Ballmer didn't screw up. If you honestly think so you don't know anyting about negotiating."
Sure Rob, the MSFT share price certainly bears out your claim. In hospitals, a flat line on a heart monitor usually spells trouble. For the MSFT fan club, a flat line on the share price apparently means all is well.
Put away the Xbox and learn something before it's too late.
Posted by Ed T | May 5, 2008 11:54 AM
Yahoo's Trial Ad Deal with Google was the Proof in the pudding that Yahoo wasn't worth $30 a share. I think it was proof it wasn't worth $20 a share.
If Yahoo knew anything about the Online Ad Space it wouldn't have needed to cut a deal with Google to get its Search engine Revenue up.
Microsoft Culture doesn't often merge well, and often acquired companies lose their culture. If MSFT is ready to admit they don't understand the space then they need to start fresh.
12 step program for beating AA. What Microsoft's Plan B Should Be: Building an Adsense/Adwords Competitor in Minimal Time
Posted by Brandon Wirtz | May 5, 2008 2:57 PM
Another useful marco response.
Move along troll
Posted by sumsum | May 6, 2008 12:47 AM
Hi, my 'Australian friend'
Ha,ha,ha
Posted by Marco | May 6, 2008 1:16 PM
Australian?
Posted by sumsum | May 7, 2008 1:19 AM