Ballmer, Yang Agree to See Other People

Its not you, its me . . .


Is that it? After all that sturm und drang, the chase ends like this? Microsoft sweetened its offer to $33, knowing full well that Yahoo was going to stand firm at $37 a share, and reject the sweetened bid. Hence, Ballmer got his face saving way to walk without further humiliation.

Why am I not surprised?  Two of the least sexy internet names end not with a bang but a thud. Could we have seen at last the end of the dinosaur mating dance?

My friend Paul at Infectious Greed observes:

"This has a been a risky and poorly managed affair from end-to-end. Both CEOs deserve immense blame — Ballmer for vacillating; Yang for running a public company without the foremost regard for shareholders — and they are likely to be the two people who suffer the most indignities (including possible termination) over the coming weeks and months."

Not a bad sentiment, but I doubt either board has the stones to fire their execs.

I have an idea for everybody involved: Why doesn’t the Fed kick in the additional $8 billion or so to make this happen? I mean, isn’t that the role of the central bank?


Microsoft Withdraws Its Bid for Yahoo
NYT, May 4, 2008

Microsoft withdraws offer for Yahoo   
Anupreeta Das
Yahoo Finance, 26 minutes ago

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What's been said:

Discussions found on the web:
  1. Barry Ritholtz commented on May 3

    By the way, the Yahoo sign is 2 blocks from my office

  2. Rich Shinnick commented on May 3

    So much for the revival of M & A, this was always a special case but still, it was a “deal” and lots of work for lots of consultants, bankers and other whizbangs now will not happen. So, what will Microsoft do with its cash horde?

    Special $40 billion dividend thrown on top of those stimulus checks?

  3. Eric commented on May 3

    “…running a public company without the foremost regard for shareholders” Having lived, worked and attended business school in Silicon Valley, I can tell you that this quote describes the daily attitude of most tech company employees. Frankly, they see public shareholders as a nuisance at best, and a tool to be exploited and taken advantage of at worst.

  4. JMH commented on May 3

    The Yahoo board is going to have a rather unpleasant week. Yahoo will probably be destroyed by this, and Microsoft will move into split the majority of the ad market with Google. Google has to worry about the DOJ, so they won’t be going after Yahoo. But they probably won’t mind having Microsoft as their primary competitor; Google can lobby the DOJ, too, if Microsoft gets a bit too successful. Dropping the bid was a smart move by Ballmer. I have no clue as to what was going through Yang’s mind, this move seems pretty illogical, but he is wealthier than I am.

  5. yoshi commented on May 3

    I am always amused that anyone would suggest that Steve Bahlmer ever be fired. The stock price would have to dip below $1 / share and he would have to be catapulting kittens out of his office window before the board would ever fire him. The last (and only) strategic business decision that Microsoft got right was to buy DOS and lease it non-exclusively to IBM.

  6. John Borchers commented on May 3

    To sell YHOO for $31 or $33 would be a loss for most shareholders. The problem is the internet advertising business is going to lose pricing power. It’s already occuring. GOOG is outgrowing this and it’s the only reason it isn’t visible yet but GOOG will see it soon especially during a slowdown.

    MSFT is now a flat business at best.

    They are both losers and stocks that should not be owned long or short.

  7. Agoracom commented on May 3

    I’m glad this saga is over. Much like watching two ugly birds playing hard to get. The deal never made sense from the outset and, no matter what the price, would have been a disaster of epic proportions, making AOL/TW look like Cleopatra and Mark Antony.


  8. John Borchers commented on May 3

    People are speculating that MSFT did this on purpose to buy the shares on the open market Monday for cheap. That idea is interesting but I truly believe what Balmer put in the letter about sharing info with GOOG ruined it.

    I don’t think he can lie in a corporate letter and publish it just to force the share price down to buy it. That’s got illegal written all over it.

  9. Johnnyvee commented on May 3

    Barry: when you basically said that a takeover would be a non-event and concluded with the dino-sex remark,even the rubber neckers lost interest. Cheers.

  10. John Borchers commented on May 4

    I found this on the Yahoo Message Board for YHOO. Too funny.

    In response to recent events Federal Reserve Board voted unanimously to authorize the Federal Reserve Bank of New York to create Yahoo Lending Facility (YLF) to avoid significant stock market distruption and to support Yahoo! Inc shares. Yahoo! Inc and its authorized agents will be able to borrow from the facility to support stock price.

    This facility will be available for business on Monday, May 5. It will be in place for at least six months and may be extended as conditions warrant. The interest rate charged on the credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.

    In addition, Yahoo! Inc shareholders who are unable to sell their shares at or above Friday, May 2 closing price, will be able to swap Yahoo! shares for the US Treasuries at the set price of $29.70 per share.

  11. maximo commented on May 4

    The Fed comment is hilarious Barry!

  12. sk commented on May 4

    That comment about the Fed is brilliant ! It reminds me why I’m in the software biz for 30 years and only in this crappy shitty disgusting crap that the Fed and the rest of their cronies are in and one that negative interest rates have forced me into over 15 years.

    Way to go…


  13. Steve Barry commented on May 4

    It’s a shame this deal fell through…you would have been amazed at how big of a disaster this would have been. I could go on and on about these two companies…but to make it short, Microsoft’s Money software cannot even keep track of my mortgage payment number properly and this bug has existed for several “uprades”…the Yahoo portfolio I use on my cell phone has taken to adding 25 or so symbols at random that are not in my portfolio and repeated complaints to tech support are met with utter cluelessness.

  14. Richard Kline commented on May 4

    This deal was, from the first, the stupidest and most unsexy play I can recall in many, many years, and that’s _before_ factoring in the price. Having made the offer, Ballmer gets egg blown back all over his face, but no, there’s no way his Board ever fires him—and by failing, he saves his company from throwing away the $40B he had convinced them to put in motion, consider that. Yes, _throwing away_ that money on the rotting, tawdry opera house that is Yahoo, a non-competitive, foundering outfit run by nincompoops who have, from the day they went public, never been able to capitalize on their concept or first-mover advantage. Jerry Yang still thinks he’s ‘a player,’ and couldn’t bear to be kicked upstairs, perhaps. He just lost his shareholders not only major money but all future: it’s his intransigence which will make the record books for Worst Business Decision of the Decade. I don’t know what Yahoo will sell for come the day it finally does in a few years, but I’d be amazed if it was in double digits per share.

    Microboss hasn’t clue one how to run ANYTHING on the internet; they don’t get it. Why? Because they have, as always, total contempt for the enduser, and never, never, ever shape any product decision with the user’s goals or needs in mind. They’ve got the King Augeus touch in the consumer arena. Regarding Microdufus’s last best move, nah it wasn’t licensing DOS; that only made them mountains of money: it was signing a partnership agreement with Apple and then stealing Apple’s product while the judge said “I don’t get it, what product?” That move made MS into a financial Gozilla, eating everyone’s lunch for years, it was Windows that went kudzu not DOS. But in the twenty years since, it’s hard to think of a single, good strategic decision made by anyone in the top tier at MS. Now that they have to compete on product in the consumer marketplace rather than force crappy updates upchannel into the nether orifice of every IT VP in business, MS just can’t get any traction. They desperately need to convert their flagship product into a lean, seamless, platform agnostic computing fulcrum; they can’t do it because they have never been No. 1 or No. 2 at operating system or software design. To the extent they have ever had good products, these were ones they _bought or stole from bit players_ and monetized with scale efficiencies through their re-seller base.

    Consider this: While Microsoft’s softheads keep thinking how nice it would be to be Google (without having any of Google’s products, but), Apple has turned _it’s_ OS into the seamless fulcrum of the new generation of Personal Communicators. They have a great chance to turn the result into the most profitable consumer electronic since the television set. When was the last time (answer: never) that Microgoof made a strategic product decision of that potential?

    Microsoft is so yesterday. Like Western Union, they will hang around long after their concept is past it’s expiration date, ‘reinventing themself’ as declining simulacras of exactly what their product concept was before. But for now, they have $40B to work with that they were about to stack into a heap of bales and set on fire so that they had enough light to make kissyface with BYoohoo.

  15. sk commented on May 4

    Gawd I don’t want to get in a religious war about MS – but I want to ensure a balance record given Richard Kline’s comment:

    1. MS-SQL works. MS-Analytic Services works.
    2. VisualStudio works – better than Eclipse IMO but I’ll settle for equivalence.
    3. .NET works as well as to open-source Java based internetworking.
    4. The whole interoperability model that MS has in place has a sound footing.
    5. VB and C# are pretty good and certainly just as good as Java.

    I’m not agnostic in this debate – I switched out of Java and Linux, painfully so, into VB and Windows 2 years back – it works for us.


  16. Greg0658 commented on May 4

    What business connections do Yahoo and MaBell have? I noticed from friends with AT&T DSL, that they use Yahoo email. Is there a relationship? Who owns the web server electronics of Yahoo? Any concept of the cost to fabricate the electronics side of Yahoo? Just lazy curiosity.

  17. Blisex commented on May 4

    «I have an idea for everybody involved: Why doesn’t the Fed kick in the additional $8 billion or so to make this happen? I mean, isn’t that the role of the central bank?»

    This is a Communist style comment. The new Fed case law is that they give free money only to companies that have managed to become threats to the financial system via a strategy based on massive fraud and widespread counterparty risk. These are the heroes of Usian Capitalism and thus they need to be rewarded along with those other heroes who lent to them, because fraudulent and widespread speculation is to be encouraged by the government as it rewards the most productive people in the USA, like Mozilo, Cayne and ONeal and Prince.

    Microsoft and Yahoo are still sort of profitable, and they still sort of do and sell useful things; they are bad apples that don’t deserve that kind of support from the Fed. That Microsoft is still a monopoly and Yahoo is still a is not enough for that kind of reward from the Republicans.

  18. John commented on May 5

    I’m not sure why everyone is getting on Ballmer’s case. Taking a lead from talking heads in the media again I guess. He made a reasonable offer that offered a 60% premium over Yahoo’s price at the time. Even with the slippage in Microsoft’s price it’s still about a 55% premium. He appear to be being criticized for vacillating, whatever that means. What was he supposed to do. Immediatly launch a hostile bid which would probably have been disastrous, pay too much which would have been the same. In my book he’s done the right thing. This whole thing has foundered on Yang’s ego and some Yahoo shareholders who thought Ballmer was bluffing when he said he wasn’t going to overpay. Now it’s all come unravelled they can watch Yahoo shrink back to the high teens while Yang flounders around trying to deliver on his complete baloney forecasts by amongst other things outsourcing a a major part of his core business to his major competitor, assuming the govt let him. This is the dumbest play I’ve seen in a long time and as until recently a Yahoo stockholder it shows I did the right thing jumping ship.

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