MicroHoo: Visualizing Whirled Peas
Oops, I mean world peace. Or at least, some kind of forward momentum in the increasingly tiresome Yahoo-Microsoft takeover tango.
I know this is how it always has to proceed in these kind of deals. But, for some reason, this particular movie is starting to feel 20 minutes too long and without a clear ending, except for tears all around. (And please don’t say you loved “Atonement,” because that will make me cry.)
There is a way, though, to turn frowns upside down, with a fresh look at the vexing situation.
I call it: BoomTown’s Plan of Peace and Reconciliation for Jerry Yang and Steve Ballmer, aka The Let’s-Focus-on-the-Real-Enemy-(That Would Be Google, Boys) Compact.
But first, to bring you up to speed on the latest wrinkles in this less-than-riveting drama:
Over the weekend–on a Saturday, no less–Microsoft (MSFT) made public in a letter what it had been saying in a more veiled way for a while now, mostly by its very loud silence:
That it would not pay anymore than the $31 per share it offered when it first waged its takeover parry three months ago.
“It is unfortunate that by choosing not to enter into substantive negotiations with us, you have failed to give due consideration to a transaction that has tremendous benefits for Yahoo’s shareholders and employees. We think it is critically important not to let this window of opportunity pass.”
On Microsoft’s part, it finally did what it had to do–state clearly in public that it wasn’t going to up the offer or walk away either, but that it was following through on its first intention to purchase the company, by force if necessary.
Now, of course, it is Yahoo’s (YHOO) game to lose, especially if its upcoming quarterly earnings call, and especially guidance going forward, fails to impress Wall Street, which is already deeply unimpressed.
But watching its lugubrious style during this whole back-and-forth and without any uncomplex alternatives–new rumors of an AT&T (T) possibility continue to be floated, by the way–I don’t expect Yahoo to change its tune either.
In fact, many sources were reporting last night that Yahoo will send a letter to Microsoft disputing the notion that its business is cratering and that it would do the deal for more money.
Good god, this is actually worse than “Atonement,” because that was fictional at least.
Thus, it is up to BoomTown to clear up this mess, with one simple plan under which Yahoo would remain independent and Microsoft could claim its prize of merging with the Web portal.
How? Well, by keeping Yahoo as an independent entity intact, moving Microsoft Web assets into it, along with a significant slug of investment dollars, which would buy the software giant a majority stake in the new Yahoo.
In this way, Microsoft could incentivize jumpy Yahoo employees–who are already fleeing–from jumping ship, attract new leadership, give it a more flexible currency to more easily make key acquisitions and solve the main problem of Yahoo’s top leadership of not wanting the company to be sold for too little.
That’s because the value of Yahoo would be more fairly rendered by its ongoing performance and the market’s reaction to it, rather than tucked into the behemoth that is Microsoft.
As for Microsoft–which has lost untold billions (my back-of-the-envelope calculation: $10 billion) over the years trying to win in the online space and mostly failing–it would give it a major piece in what, for all Yahoo’s current weaknesses, has always been a solidly profitable Web company with a still-strong brand name and lots of amazing assets.
Now, I am no tax expert or mergers guru, so I leave it to others to discuss whether it would be the best way to do this.
But given that Yahoo has almost no chance to remain solely independent at this point, it would be a better settlement that might put the company into a stronger position to compete, give it much-needed technology and management help and make it into a truly substantial No. 2 player rather than the weak one it has become.