The price of failure; Microsoft and Yahoo!

Steve Ballmer, CEO of Microsoft, has worn an interesting expression on his face of late.
He has an expressive sort of face– not the sort you’d want to take into a poker game.

If he’s asked a question about Google, you ca–n tell how he’s feeling by the look of unmitigated rage boiling across his generous forehead.

It doesn’t matter what words he says – the face says it all.

If he’s asked about Microsoft, boyish exuberance is the name of the game.

He got the right roomie at college and he knows it. He. Loves. That. Company.

If you ask him about Yahoo!, you’re greeted with a look of ruminative perplexity.

An expression not unlike the look of a man trying to untangle the cables at the back of his home entertainment system without touching them.

It is a look of incomprehension, but more than that – it is the look of a man who cannot even comprehend why he does not comprehend.

I recognise this look on Ballmer’s visage, because it resembles, to a certain extent, the expression greeting me in the mirror lately. But less hairy.

To recap: At the start of February Microsoft offered Yahoo! $US28 per share in an attempt to take over the company and inherit its strength in online advertising.

A few days later, Yahoo! said no.
Or perhaps it said no! in the unnecessarily exclamatory way that company does things.

In the ensuing weeks, while speculation raged as to how the inevitable merger would affect the rest of the industry, Yahoo! embarked on a program of explaining to the world why it is still relevant and independent and shouldn’t be bought by Microsoft. Most of the reasons were related to social networking rather than online advertising, but still – nice to see actual activity.

It did do at least one thing related to online advertising.

It started running Google ads through its own search engine.

How this helps Yahoo! in the online advertising space is unclear.

How it is supposed to prove that Yahoo! can continue as an independent entity also is unclear.

Maybe there’s something I’m missing.

At any rate, after all this activity, Microsoft raised its bid, to $US33 a share. Yahoo! continued to claim the bid was low, and that not a penny less than $US37 a share would be accepted.

For the record, before Microsoft announced its bid, Yahoo! was trading for around $US19 a share.

It takes a certain amount of chutzpah to declare, stony-faced, that your company is worth almost twice as much as it is, in fact, worth.

Which is where the perplexity comes in.
Ballmer has folded his cards and walked away from the table, not prepared to raise the bid further and sensing that the takeover was going to be more trouble than it was worth (which it most certainly was).

The directors and CEO of Yahoo! are no doubt slapping each other on the back at having fought off the titan’s grip.

In the coming weeks, as the stock price slides back to its pre-offer equilibrium, expect them to realise, gradually, what they just rejected — a $US50 billion-dollar offer for a company the market values at about half that.
The looks on their faces will seem familiar.

Matthew JC. Powell would welcome a corporate takeover.

Bids above $US50 billion to mjcp@optusnet.com.au

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