The entire Microsoft-Yahoo saga is now starting to look really sad for Yahoo. After Jerry Yang’s statement yesterday that Yahoo is suddenly interested in being acquired by Microsoft, Steve Ballmer now responds with a firm no.
“We are not interested in going back and re-looking at an acquisition. I don’t know why they would be either, frankly,” he said. “We tried at one point to do a partnership around search, not advertising. That didn’t work either, so we moved on, and they moved on.”
Although it’s still questionable that getting acquired by Microsoft is a good thing for Yahoo in the long run, now that it’s seemingly out of their grasp, any other deal (for example, the rumored AOL merger) will seem like a desperate move. Even if Ballmer is just trying to wreck Yahoo some more and get an even better deal, Yahoo is in an awful position to negotiate; they’ve tried several avenues, and all of them turned out to be dead ends.
Now, the best - and probably only - thing they can do is get new management, and start working hard at building value for their shareholders. The ship has been sinking for quite some time, and those who wanted to leave already left. Time to go back to the old drawing board and start from scratch.
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Talk about a 180. Yahoo’s CEO Jerry Yang spoke at the Web 2.0 Summit in San Francisco; him and his company are tired, battered and bruised. But his message is now - suddenly, and amazingly - clear: Yahoo wants to be bought by Microsoft.
His exact words?
“To this day, I have to say that the best thing for Microsoft to do is to buy Yahoo. I don’t think that is a bad idea at all…at the right price, whatever the price is, we are willing to sell the company. We were ready to negotiate, we wanted to negotiate a deal, and we felt that we weren’t that far apart. But at the end of the day, they withdrew and they since have been very clear about not wanting to buy the company.”
Perhaps I have a bad memory, but Yahoo did not want Microsoft to acquire them following their initial offer which, in the light of perhaps inevitable economic recession and current Yahoo share price, now seems generous.
In fact: they did everything in their power to block the deal from happening, including negotiating a search ad deal with Google - one that was doomed to fail because of anti-monopoly laws.
Now, they’re willing to be acquired at the “right price,” which, in light of recent events, will inevitably be lower than Microsoft’s initial offer. This is a huge win for Steve Ballmer, who showed he’s a tough negotiator, who knows when to walk away and stalk for a better opportunity, and that opportunity is now. Microsoft is now buying a much, much weaker Yahoo, and even if their price is low; severely lower than their initial offer, Yang will probably have to take it.
The stage is now set for the final chapter of Microsoft-Google-Yahoo saga. Yahoo definitely pulled the shortest straw here; Microsoft may be a winner, but whether they’re capable of doing something useful with a giant such as Yahoo remains questionable. The real winner is, once again, Google, who interfered just enough to weaken both Microsoft and Yahoo as much as possible with virtually no downsides. Well played.
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Earlier this year, as Yahoo fought off an acquisition attempt by Microsoft, it began to entertain a search advertising deal with Google. They even even went so far as to conduct a live trial of such a measure. Now the two Internet giants have effectively terminated the effort.
In June, as the US Department of Justice began its investigation of that arguably brazen move, the two companies forged an outline of what such an arrangement would look like if it were to see official approval.
But opposition steadily grew as Google and Yahoo heads stood strong for an October launch. Weeks later, they softened a bit, deciding to allow the DOJ to do its business. Yet, late last week, The Wall Street Journal reported a high potential of failure for their original proposal. Finally, today Google has confirmed the end of its agreement with Yahoo.
Google’s senior vice president of Corporate Development, David Drummond, who also sits as the chief legal officer for the company, cites government regulators’ ongoing scrutiny and concern and the possibility of a “protracted legal battle” and potential “damage to relationships with valued partners” as the key factors in its discontinuation of the search advertising plan put forth in late spring.
Drummond wrote that it was four months of review and “discussions of various possible changes to the agreement” that made it an ultimately unsuccessful venture. And in what seems to be a sort of token concession, the Google executive explained that an attempt to weather any and all conflicts “wouldn’t have been in the long-term interests of Google or our users.”
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I’m tired. Really I am. I’m tired of hearing refrain after refrain of how Microsoft played hardball with Yahoo, only to capitulate to an increase of its initial purchase offer. I’m tired of Yahoo’s CEO masking his personal opposition to a buyout by Redmond with lawyerly evasions and his clear conviction that the publicly-owned company is worth a whole heck of a lot more than its stock price shows it to be. This saga between the two tech giants went from a big-money bonanza, with pundits enthusiastically tooting their kazoos, to something that can best be describe as a fiasco. A thoroughly frustrating fiasco, at that.
Not because of the length of the journey. No, one would be foolish to assume things might have wrapped up with hugs and kisses in a week’s time. Regulatory approval would be arduous indeed. Instead, it is the course which the spectacle has taken over the months it’s waxed and waned. Or should I say the lack thereof? No one seems to be privy to where things are really headed. Organized negotiation? What’s that? There was $44.6 billion on the table, originally. Which was a hefty premium over Yahoo’s public valuation circa January 31. Now the deal seems naught but a joke liberally milked out in Opinionland for all its worth. (Or not worth, depending on one’s vantage, I suppose.)
You may have already heard; you may not have. The news now is that Microsoft and angry Yahoo shareholder Carl Icahn signed their names to a time-sensitive proposal sent over Friday evening to Sunnyvale, California, to acquire Yahoo’s search business and do a bit of a corporate shuffle. Well, okay. “A bit” is putting it softly. “Complex restructuring” is the phrase being used. Anyway, as you would now reflexively guess, Yahoo essentially offer a reply of, “Thanks, but no thanks.” They still don’t like the fact that the wannabe buyer(s) would be allowed to play in Yahoo’s sandbox and do some weeding inside the employee base.
In its public response to the Microsoft, Yahoo, among its various points made about what Yahoo is, where Yahoo is, and why Yahoo is, reiterated its openness to a full-scale buyout of the company at $33/share, one dollar less than Microsoft allowed some months ago as its final straw. As we understand, Microsoft said no to the $33 deal before. Will it refuse again? Who’s to say.
I’m going to close this one out quick, because, well, I’ve no desire to prolong the agony any longer than it’s “fated” to. Some think Microsoft has no intention of finishing out the season (or even the month) sans an arrangement, either through a Yahoo board room insurgency or through a more formal handshake session and toast to big profits to come. In short, I agree. Microsoft wants to follow through. And the pressure of Yahoo’s impending shareholder meeting in August may well be the backdrop needed to get it done with some modicum of propriety.
On the other hand, if stubbornness wins out, well, ugly plus ugly is still ugly, eh? How much bigger can the mess get, really? Perhaps I’ll regret having asked that question.
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Numbers will tell whether Jerry lives or Jerry dies. Numbers alone.
Many a pundit, in thumbing through press releases and press leaks aplenty the last two to three days, have repeatedly dealt fervent blows to the Yahoo head. Opinionators like Joe Nocera of The New York Times have done away with the garnish and are channeling Mr G. Reaper in all his ominous gloom and doom. Nocera himself today laid out a very apt prelude to Yahoo’s rendezvous with summer, saying what I myself have argued several times in recent past: Yang didn’t do as the shareholders wanted, and for that Yang might pay. With his removal.
To be sure, investors are understandably unhappy. You can see for yourself what some have said in response to mini-Microshoo in a piece by Betsy Schiffman of Wired’s Epicenter blog. They furrow their brows in just dismay. There’s absolutely no mystery as to the reasoning for their intense resentment. It’s all about advertising. That’s what it’s always been about. From the moment Microsoft publicly divulged its intentions for an out-and-out acquisition. From before that time, even.
Not only for Microsoft was advertising the chief pursuit. Yahoo stockholders themselves saw the premium given to their lagging investment and shared some smiles. Really, making the most of the eyes that Web Giant #2 serves each and every day is what Web Giant #3 had in mind, so as to perhaps better compete with Web Giant #1 and get itself some commendable ad revenue that would in turn put some plus signs beside its stolid and boorish ticker symbol. It had indeed been flat-lining for some time, and if Ballmer didn’t get to bag his wish for the original offer of $44.6 billion - which he raised a few big bucks to tip Yang in his favor, ultimately to no effect - then he might never get a good position next to Google, which has shown little sign of slowing.
Well, after a more specific attempt to put some ties between itself and its quest in the form of an ads-plus-search deal, with a good chunk of stock to boot, things still haven’t played out as the software king had hoped. What to do now?
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Only several hours have passed since Carl Icahn delivered his latest set of stipulations to Yahoo in an effort to facilitate a Microsoft takeover, and already Yahoo has sent back a response. The company said quite succinctly:
“Leaving aside Mr. Icahn’s inaccurate interpretation of our retention plan, we again note that he has no credible plan to operate Yahoo!. We believe that Mr. Icahn’s suggestion that we cancel our retention plan would have a destabilizing impact on Yahoo! and would clearly not be in the best interests of our shareholders. Furthermore, his suggestion that we put out a price publicly to see if Microsoft will alter its stated position is ill-advised. As we have stated numerous times publicly and privately, we are open to any transaction including a sale to Microsoft if it is in the best interests of shareholders.”
The points made by Yahoo are to be expected. Yahoo wouldn’t mount more than the basic defense of its retention plan, given the latest scrutiny surrounding the program. And it’s let’s-not-talk-price-out-in-the-open line, particularly when discussing the topic with a party which has repeatedly threatened a proxy fight for control of the company board, seems a natural stance to take. Which essentially make today’s round between Investor and Investee as unsatisfying as air-packed bag of Funyuns. Amusing for a moment or two, but nowhere fast we go.
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Updated: What’s a week without Carl Icahn making more noise on the Microshoo front? Yet another letter has been sent the way of Yahoo chairman Roy Bostock by the activist investor. This time Icahn is talking share price.
The number Icahn is now officially willing to see Microsoft give Yahoo to finally force control of the company out of the hands which maintain its present course is a magic $34.375.
Icahn’s prose this morning is not without its strong language. He opens quite plainly with this:
“Dear Roy:
While you may take issue with the content of my letter, I take issue with your oversight of Yahoo! Again, I stand by my characterization of your ‘poison pill’ severance plan and I find it humorous to see you attempt to defend it.
Roy, it is you who ‘misrepresents and misstates the details’ of the plan. Much like the rhetoric in many well known political campaigns, you keep repeating misstatements in the hopes that by repeating misstatements enough times it will convince your shareholders that these misstatements are valid. For example, you repeated, ‘the plan was fully disclosed at the time of its adoption and should be no surprise to anyone at this point.’ This is simply not true. The egregious magnitude of the dollar amount cost of the plan was never fully disclosed, nor was the email from your compensation advisor calling the plan ‘nuts.’ …”
Suffice it to say Icahn isn’t backing down from his original request that Yahoo return to the topic of a complete sale to Microsoft. Which, if I may say so myself, makes the man seem more and more the sort of fellow reminiscent of a stubborn village elder ranting continuously, unaware of the fact that the rest of the citizenry has come to accept that the situation has “changed,” and that the original plan has been scrapped.
Icahn finishes his latest to-heck-with-niceties spiel with this outro:
“…In my opinion, Microsoft does not believe you will ever sell the entire company on a friendly basis. So why don’t you stop dancing around the subject and publicly offer to sell the company to Microsoft for $34.375 per share and promise to cooperate completely?
Why are you still giving hope to Microsoft that there is a possible “alternative deal”? As long as there is the possibility of an “alternative deal,” isn’t it obvious that Microsoft will not make a bid for the whole company?”
Does Icahn’s volleys with the Yahoo board complicate any potential or pending deals with Microsoft? Probably not. He’s certainly infused himself as a vociferous piece within the larger narrative, but I’d take the man’s lectures of what should and shouldn’t be in the all-but-stalled Microshoo saga to be little more than spicy garnish at this point. Something to entertain and provoke Yahoo’s heads to speak a little more publicly about their strategy at the corporate and industrial levels.
Update: In his letter, Icahn did also toss in an option for a Google deal, albeit with the requirement that a window be left open to a Microsoft acquisition, should one be proferred by Redmond once more. He said:
“Fifth, to the extent Microsoft does not want to make a proposal, I will ask our new board do a deal on search with Google, but only if it contains termination provisions that would in no way impede a subsequent acquisition by Microsoft.”
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Just when the Microsoft-Yahoo drama subsided a little, Carl Icahn is back with more pressure on Yahoo’s CEO Jerry Yang. According to the Wall Street Journal, Icahn now openly says he wants Yang removed from the CEO position.
Icahn’s new rhetoric is spurred by recently uncovered proof (officially denied by Yahoo) that Yahoo rejected a $40 per share offer from Microsoft back in 2007, but it’s not really a surprise, since Icahn already said he wants to set up a new board of directors for Yahoo - one which would oust Yang as CEO and take the offer from Microsoft. Although Carl Icahn, to many, seems like a figure that doesn’t deserve to shape Yahoo’s future, he does represent a large share of ownership in the company and he is not letting this one go.
It seems apparent now that Steve Ballmer’s official withdrawal from the offer that cooked up this whole thing was a good move. While major shareholders are tearing Yahoo apart from inside, Microsoft can sit on the side, plan their next move and redraw their offer with either a smaller amount of money on the table or a smaller part of Yahoo (read: search) as the target.
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It wasn’t very long ago that Google was seen as a kind-hearted Web giant. It had its nifty search algorithm, which more and more people grew to favor. It really expanded online advertising business to allow the proverbial long tail of site owners and publishers and sales people to get some far-flung exposure, traffic, and maybe even a good bit of revenue, to boot. Also, the company’s logo was deemed cute, colorful, and friendly. Not at all threatening.
Now it’s bad. Real bad. Some even think it’s slyly switched roles with Redmond, becoming Evil Empire 2.0. … Or something to that effect.
And all this may very well be true. Whether or not Google initially intended to claim the vast majority of Web search and advertising among its big-name counterparts in the industry, it’s gotten its kingly title where it matters. It’s making lots and lots of money, amassing a workforce tens of thousands strong, and really, what’s to stop it from infiltrating more annals of the online realm?
That’s pretty much the consensus view, and the reasoning behind the very palpable support of a Microsoft-Yahoo merger, expressed both by a good number of shareholders and tech pundits. People saw Google as slowly milking the shares of Yahoo and Microsoft, the #2 and #3 Web giants on the Western side of this fairly volatile sphere, and as they started to envision - rightly or wrongly - the ambitions of Mountain View to be growing more and more hostile to competition, they more or less reflexively screamed: “Sell, Yang, sell!”
But Yahoo’s head said whoa, whoa, whoa, not so fast, not so fast, we’d like Yahoo to be Yahoo, not some subset of a suit-and-tie Microshoo. But the public persisted, and the Yahoo board eventually told Ballmer & Co that if it really wanted the keys to the front door, they’d have to pay an arm and a little premium slice of leg. A sum of $37 per share, to be precise. That would seal that potentially disastrous deal, a piece of bait that Microsoft didn’t bite. Microsoft left the room. Long story short, after some weeks in uncomfortable limbo, onlookers are about ready to see both company heads shake on some kind of search and advertising deal, without any added baggage of mail and IM services and whatnot. Which isn’t exactly what proponents of an outright purchase of Yahoo might want, but perhaps they’ll settle.
Forward to this weekend, and people ranging ranging from attendees of the Founders Forum [Telegraph] to representatives of old media companies [Times of London] in the UK are as eager as ever for a super strong tie between Redmond, Washington and Sunnyvale, California. Once again, people voice fears of Google’s continued ascent to virtual totality. And in a way, those concerns are entirely legitimate. Tim O’Reilly of O’Reilly Media may think Microsoft is just playing the role of an envious oaf, anxious over the possibility that the components that make up its historied brand name - “Micro” and “soft” - will soon carry literal meaning, but the potential for an all-but-irreversible monopolization of Web search and advertising is a premise that may indeed become realized.
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After a spending several days following Carl Icahn’s proxy threat sitting silently with no substantive comment regarding its decision earlier this month to abandon pursuit of Yahoo ownership, Microsoft today issued a statement regarding last week’s developments:
“In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo! Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business. Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo! Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties.
“There of course can be no assurance that any transaction will result from these discussions.”
What might this notice translate to? That is an open question at this point, really, but logic may place its meaning in the way of some partnership of core assets, presumably in the realm of advertising. It is no secret that Microsoft spent a great deal of money on aQuantive, with Yahoo spending considerably less on RightMedia. Given Yahoo’s rather lackluster performance of its Panama project, in which it investment a great deal of time and energy, a deal made between the giants of Redmond and Sunnyvale to bridge marketing resources sans an outright purchase of all of Yahoo Inc may prove to be a compromise both companies could make.mashable109:http://mashable.com/2008/05/18/microsoft-yahoo-2/
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