Liddell's Ultimatum
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News Analysis. Microsoft executives should write movie scripts. The CFO delivered quite the performance yesterday. |
During yesterday's Microsoft fiscal third quarter earnings call, Chris Liddell made absolutely clear his company's position on CEO Steve Ballmer's three-week deadline. He issued a clear reminder that time is up this weekend.
Liddell could have been one of those stereotypical henchmen from mafia movies telling so-and-so he had better capitulate to the Don. But, here, the threat wasn't bodily harm or death. My interpretation: Microsoft is preparing to lower its bid for Yahoo.
That would be one hell of a negotiating tactic.
I've read lots of speculation this morning that Liddell's comments indicate Microsoft is ready to walk away from the unsolicited bid. Right, and Battlestar Galactica's "frack" doesn't mean the f word. Ballmer's earlier ultimatum and yesterday's Liddell follow-up clearly show that key executives support and want the deal.
The comments from both men are only partially meant for Yahoo's takeover-reluctant board of directors. Ballmer and Liddell are also speaking to shareholders, saying that Microsoft is committed to the acquisition, but that its value has diminished. If the deadline isn't met, the insinuation: Microsoft will offer even less, not Microsoft will walk away.
Seattle Post-Intelligencer Microsoft reporter Todd Bishop quickly transcribed Liddell's comments and blogged them yesterday. I am only excerpting from the conference call; please refer to his post for all Liddell's comments on Yahoo.
"Unless we make progress with Yahoo toward an agreement by this weekend, we will reconsider our alternatives," Liddell said. "These alternatives clearly include taking an offer to Yahoo shareholders or to withdraw our proposal and focus on other opportunities, both organic and inorganic."
The last statement is a threat, plain and simple. But Microsoft doesn't want to walk away. Earlier, Liddell expressed frustration that "speed is of the essence," yet "the transaction has been anything but speedy." The company wants a deal but can't wait forever on Yahoo's board of directors.
The chilling statements, at least for Yahoo shareholders pining for a deal, have to do with its value. Liddell described the original $44.6 billion offer as "extremely generous," and perhaps too much. "We've yet to see tangible evidence that our bid substantially undervalues the company. In fact, we see the opposite. Yahoo continues to lose search share, and profitability continues to decline year-on-year."
Like that mafia henchman making veiled threats, Liddell insinuates that if the original bid isn't accepted a less generous offer would be made. Such an approach could have impact, particularly if Microsoft launches the expected proxy fight. Jittery shareholders looking at a lower offer and possibly a walkaway could rally to Microsoft's cause. Later on, Microsoft could raise the bid to a higher level, but still lower than the original offer, and be the hero. Yahoo board members would become the villains.
Microsoft's negotiating tactics are legendary, and a lower offer would be a classical maneuver for pushing through a deal like this one. Microsoft could still walk away, but not without a fight—unless something else looks better. Surely, hundreds of startups have sent representatives to visit the Don, er, Ballmer and offer him tribute. Microsoft could buy a bunch of these other dot-coms, saving a bundle on Yahoo.
Liddell's statements were clearly scripted, and he delivered them with finesse and force. If there was an Academy Award for earnings calls, Liddell would deserve a nomination for best CFO performance. Maybe it's that New Zealand accent, but Liddell sent chills down my spine.
Related Posts:
- Microsoft Shoots for Outer MySpace, Microsoft Watch, April 10, 2008
- Yahoo, Is It AOL, Google, Microsoft or News Corp.?, Microsoft Watch, April 9, 2008
- Yahoo One-Ups Microsoft's Three-Week Threat, Microsoft Watch, April 9, 2008
- Yahoo Boo-Hoos Microsoft, Microsoft Watch, April 7, 2008
- Ballmer's Yahoo FUD Letter, Microsoft Watch, April 6, 2008
- Ballmer Boo-Hoos Yahoo, Microsoft Watch, April 6, 2008
- What 2007 Ad Spending Means to Microhoo, Microsoft Watch, March 26, 2008
- Microsoft Search Retreat Continues, Microsoft Watch, March 19, 2008
- Microsoft's Faulty Math, Microsoft Watch, Feb. 25, 2008
- Microsoft's IBM Moment, Microsoft Watch, Feb. 20, 2008
- Microsoft's One Yahoo Mind Divided, Microsoft Watch, Feb. 12, 2008
- Yahoo Squeaks, Microsoft Squawks, Microsoft Watch, Feb. 11, 2008
- Yahoo's Way Out, Microsoft Watch, Feb. 11, 2008
- The Real Reasons Microsoft Wants to Buy Yahoo, Microsoft Watch, Feb. 6, 2008
- It's No Flickr of Hope, Microsoft Watch, Feb. 4, 2008
- Yahoo Music Is a Real Problem, Microsoft Watch, Feb. 4, 2008
- Yahoo Bid Reveals Microsoft's Fatal Flaw, Microsoft Watch, Feb. 4, 2008
- Is Yahoo Worth the Risk?, Microsoft Watch, Feb. 1, 2008
- How a Yahoo Merger Could Screw Up Microsoft, Microsoft Watch, Feb. 1, 2008
- There's No Must in Microsoft's Yahoo Bid, Microsoft Watch, Feb. 1, 2008
- Why Did Microsoft Yell Yahoo Today?, Microsoft Watch, Feb. 1, 2008
- Will Microsoft Yell Yahoo?, Microsoft Watch, May 4, 2007
Comments (6)
Some are making the bold assumption that there is a coherent strategy at work in the executive suites in Redmond. The market is far smarter than Ballmer and his cadre of yes-men, and the market is telling anyone who cares to listen that this acquisition is ill advised.
What's that old saying? Desperate people do desperate things.
Posted by Jimmy | April 25, 2008 12:56 PM
I wonder if these theatrics are really just to divert attention away from MS's financial results. They probably prefer speculation on this rather than on whether MS revenue has peaked and might start to decline.
Posted by smist08 | April 25, 2008 1:49 PM
smist08...
Did you read anything about their earnings? Profit was above analyst expectations and they RAISED guidance for the coming year both in terms of revenue and profitability. Doh.
Posted by Mark | April 25, 2008 1:58 PM
Mark:
Yep I read them. Profits down from last year (doesn't matter that the analysts expected that). Revenue only grew .4% from the same quarter last year. Looks to me like growth is ending and we could be in for a long slow decline. What will happen when they have to correct their guidance later in the quarter? Guidance is just guessing, and sometimes just thrown in high to blunt otherwise bad news. I take it as a bad sign when they refer to lots one time charges as the cause, especially when non of them look all that significant or unusual.
Posted by smist08 | April 25, 2008 3:51 PM
Better they write scripts than write programs.
Being in IT these days is like being stuck in city traffic behind a so-called 'gross-polluter'. You can't get away from the stink of micro$oft
Posted by billy bathgates | April 25, 2008 5:04 PM
Quoting Joe Willcox; "My interpretation: Microsoft is preparing to lower its bid for Yahoo.
That would be one hell of a negotiating tactic."
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Actually, has it escaped everyone notice, that in effect, MS has already lowered its bid?
The bid was for 1/2 of the money to be paid in the form of MS stock, which has lost approximately two and a half dollars per share since, in because of the Yahoo bid offer. That translates to a huge loss for Yahoo shareholders, who should reject Ballmer's offer.
To further submit a reduce bid, would be an insult to Yahoo shareholders, and would be checkmate, Yahoo board of directors win and Yahoo remains Yahoo.
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Microsoft issues final threat to scotch Yahoo deal
http://news.yahoo.com/s/nm/20080425/bs_nm/yahoo_microsoft_dc
Quotes from the link; " In regular session trading on Nasdaq ahead of the results, Microsoft shares closed up 1.1 percent at $31.80 while Yahoo fell 2.8 percent to close at $27.30. After the report, Microsoft stock fell 5.1 percent to $30.18 while Yahoo dipped a further 1 percent to $27.01.
In order to regain the bid's full $31-a-share value, Microsoft's stock would have to rise to $32.60, the closing share price on January 29, a day before Microsoft presented its unsolicited offer to Yahoo's board."
Posted by chips | April 26, 2008 12:33 PM