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by Timothy Lee

Filed Under:
acquisitions, hostile bid, integration

microsoft, yahoo

A Hostile Microsoft Bid For Yahoo! Would Likely Be A Pyrrhic Victory

from the culture-clash dept

Marc Andreessen has an interesting post looking at the consequences if Microsoft officially goes hostile in its bid for Yahoo! Thus far, the two firms have been engaged in a careful dance where each side has left the door open for a negotiated settlement. But with neither side showing any sign of backing down, it's looking increasingly likely that Microsoft will be forced to make an overt bid for control of Yahoo's shares. There are two basic strategies Microsoft could pursue. One would be a tender offer, in which Microsoft attempts to purchase a majority of Yahoo!'s stock. The other would be a proxy fight, in which Microsoft nominates a competing slate to Yahoo!'s board of directors, on the understanding that the new slate would accept Microsoft's existing offer. Either of these options would spark litigation from the losing party. Then, it would have to clear regulatory hurdles, and after that would come the hard work of actually integrating the two companies, something that will be made more difficult if Yahoo's senior management is still bearing grudges from the takeover fight. I've pointed out before that culture is extremely important in high tech firms. Companies need to attract the best talent, and talented programmers want to work where the most innovative work is being done. Right now, Google already has an edge over Yahoo! and Microsoft on that front, and the gap is only going to widen if they spend the next two years beating each others' brains out. It's not at all clear that the Microsoft-Yahoo merger would make sense even if it were done with the support of Yahoo's current management; it's a doubly bad idea if it involves all the nastiness that would come with a hostile takeover.

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  1. identicon
    Shohat, 1 May 2008 @ 1:58am

    No idea

    Timothy, I sincerely believe you have no idea what you are talking about, on any level.

    1) How can litigation be sparked by the losing party, when the losing party's directors board (and/or shareholders) are on the side of the winning party ?

    2) Really ? Two giant tech companies beating each other's brains out for two years will cause less innovation ? Perhaps you didn't notice all the things Yahoo did over the past three months.

    3) An engineer that really wants to work on innovative things is far more likely to work for Toyota, IBM, Sun, Nokia, Cisco (due to actual innovation involved, and not just Internet psudo-innovation) or just work at CERN, MIT, Technion institution, or the military.
    95% of all Microsoft/Yahoo positions are irrelevant for such people, regardless of your imaginary "gap".

    reply to this | link to this | view in thread ]

  2. identicon
    Shohat, 1 May 2008 @ 2:15am

    Re: No idea

    Erm, replace Nokia with Qualcomm in that list.

    reply to this | link to this | view in thread ]

  3. icon
    rwahrens (profile), 1 May 2008 @ 3:25am


    I think Shohat doesn't know what he's talking about.

    1. Until the merger legally takes place, there are still two sides.
    2. Perhaps your remarks indicate that you have no idea how long such work takes to do behind the scenes, and you don't realize that the last three months' 'work' you speak of is the result of probably a couple of years of behind the scenes work.
    3. you really don't understand innovation, or reality, do you? Software work is as real as it gets. Just because it's on the web, doesn't make it less real. Software runs a lot of stuff, and most of the companies you mention use it to run their basic processes, much less their own products. And more and more of that will run on the web in the future. There is a lot of internal, collaborative software that runs over intranets now.

    The only thing about your post that makes sense is the last sentence, because the more innovative software engineers will find the top 5% of Microsoft/Yahoo positions just fine, assuming the company doesn't just implode.

    reply to this | link to this | view in thread ]

  4. identicon
    John Duncan Yoyo, 1 May 2008 @ 4:33am

    Yahoo prepared to abandon ship

    I heard on the latest TWIT that the Yahoo software engineers resumes are starting to circulate in anticipation of M$ taking over. What is Yahoo worth without it's best programming talent? I'd guess it would just be real estate, trade names and portal doors.

    reply to this | link to this | view in thread ]

  5. identicon
    Anonymous Coward, 1 May 2008 @ 6:07am

    This acquisition is simply stupid. Microsoft doesn't need Yahoo because Microsoft shouldn't even be in internet search advertising. Instead, Microsoft should focus its efforts on the following:
    1. Dump search and search advertising. Microsoft sucks at it but that's OK. Their core competency is in Application and O/S software, not advertising. They would be better off selling their search business TO Yahoo.

    2. Re-engineering O/S. Vista is a failure and will likely remain so. Adoption rates are abysmal - only about 6% of the business community has adopted it. Microsoft should admit is made a mistake, reset, then concentrate on re-engineering all it's various O/S offerings into one O/S architecture that EASILY scales across platforms - Zune, Mobile phones, Handhelds, Appliances, PC's, Servers.

    3. Concentrate on moving the desktop to the webtop. Microsoft has taken steps in that direction but they need to make it their core strategy rather than what a appears to be a 'me to' reaction.

    4. Split the company. Microsoft made a lot of money by dominating the PC software market but that very success is working against it now. The regulatory scrutiny it faces around the world is turning that success into liability. Split the company into independents: O/S, Applications, Entertainment, etc. As it stands now the whole is not greater than the sum of its parts. Splitting the company will allow the new entities to focus on their respective core competencies, become more entrepreneurial, innovative and competitive.

    reply to this | link to this | view in thread ]

  6. identicon
    Improbus, 1 May 2008 @ 7:15am


    I will watch the up coming train wreck with unmitigated glee.

    reply to this | link to this | view in thread ]

  7. identicon
    sonofdot, 1 May 2008 @ 7:59am

    Re: Great

    Me too. Bring some popcorn!

    This latest attempt by Mickeysoft to be all things to everyone will move M$ up in the search rankings all the way from distant third to distant second, and for only $40+ billion. It's sure to work out just as well as AOL-Time Warner.


    reply to this | link to this | view in thread ]

  8. icon
    ConceptJunkie (profile), 1 May 2008 @ 8:00am


    1. Yes, Microsoft should focus on doing one kind of thing well since right now they are doing a whole bunch of things poorly. The problem is that their sources of revenue are drying up and they are more and more being forced to come up with more and more heavy-handed ways of extending them.

    2. EASILY scales? Like Linux? It runs on anything from watches to supercomputers. I'd love to see a Windows OS (or technically, kernel) that could do that, but we'll probably never see it.

    3. Microsoft has always been years behind on Internet technologies from the get-go. It is only be sheer dint of them being able to throw insane amounts of money at any problem that they have made any headway whatsoever since they have consistently been late to every party on the Web.

    4. I'm not so sure this would have any effect (as I said with the DoJ was threatening it). Clearly the left hand already has no idea what the right hand is doing and Microsoft is already dozens, if not hundreds, of little companies with little real integration and no overarching vision. Having to pull XP SP3 at the last minute for one of their own apps is just the most recent of a plethora of examples of this. And let's face it, this would eliminate the last vestiges of their unfair competition by undocumented features, which while greatly diminished from the Bad Old Days, still goes on. Microsoft would much rather be a bully and a cheat than compete on a level playing field, even when it's likely they could actually do well at it.

    reply to this | link to this | view in thread ]

  9. icon
    ConceptJunkie (profile), 1 May 2008 @ 8:03am

    Re: Re: Great

    It is likely to be good for Google who would certainly profit from the exodus of engineering types unwilling to work for the chair-throwing monkeyboy.

    reply to this | link to this | view in thread ]

  10. identicon
    Ballmer Swan song?, 1 May 2008 @ 8:27am


    I found your commentary extremely enlightening!

    Did you see the professionalism earlier this week when Continental turned down United Airlines offer?

    UAUA dropped it, and looked elsewhere. They were very professional.

    Proxy fight? Do you think the Business Community would want to be associated with such a hostile company for very long?

    Your right with splitting the company into multiple, focused businesses. It allows concentration of each part's true core.

    I wonder if Hotmail is still worth what MS paid for it years ago when it was king of email.

    reply to this | link to this | view in thread ]

  11. identicon
    Ballmer Swan Song?, 1 May 2008 @ 8:36am

    Re: Re:

    >>Having to pull XP SP3 at the last minute for one of their
    >>own apps is just the most recent of a plethora of examples
    >>of this.

    What the hell is a "Dynamics" anyway? Is that some sort of MicroSpeak for "Let me manage your financial records"?


    reply to this | link to this | view in thread ]

  12. identicon
    Anonymous Coward, 1 May 2008 @ 9:15am

    Re: Re:

    None of my ideas are new, they've been bandied about by various talking heads for years. My point is Microsoft needs to do something really radical if it is stay relevant in the long term. I think back to Billy-boy forcing the entire company to focus on the web. It was a radical (and profitable) departure from their strategy at the time. Microsoft needs the same type of 'radical' strategy changes now.

    It's a behemoth that can't be tamed with incremental changes nor can it sustain growth through acquisitions. Microsoft has been snapping up companies for several years now yet none of those acquisitions has significantly improved Micorsoft's position in the competitive landscape. It has to take to large of a bite (see comment 7 - "will move M$ up in the search rankings all the way from distant third to distant second...") to make any real difference to the bottom line and those large bites almost always fail (See Time Warner/AOL).

    Ballmer can't do it. He's led Microsoft to a screeching halt and stewarded a O/S rollout that is almost universally panned as a bad design, poorly implemented. It is time for the chair-chunking chump to leave.

    reply to this | link to this | view in thread ]

  13. identicon
    BRADLEY STEWART, 1 May 2008 @ 10:27am


    Folks as I understand this deal Microsoft is putting approx. 43 billion dollars on the table. I really believe that with a lot less money they could build a comporable system and have money left to burn. Pretty much this whole thing comes down to the collection of advertising revenues. I am pretty sure the way not only the US economy but the rest of the Worlds economy will be going over the next 10 years if Microsoft gets what it wants It will be a financially loosing proposition in a really signifigant way.

    reply to this | link to this | view in thread ]

  14. identicon
    Haggie, 1 May 2008 @ 12:04pm

    Acquiring Y! thru a hostile takeover would be like being the top bidder for a Members Only jacket on eBay...

    reply to this | link to this | view in thread ]

  15. identicon
    Iron Chef, 2 May 2008 @ 12:03am

    Want More money? How about More Performance?

    I think Microsoft has given enough leeway. Obviously Yahoo is scared, but before opening the checkbook again, consider additional stock offer or a bonus based on organic growth or revenue as a term or condition of the merger.

    So find some business or performance-based item to key on and set 6 12 and 24 month goals.

    Granted, not a new concept, but how it's executed could be one of those "Tipping Point" items. If they don't accept, Well, let 'em go!

    reply to this | link to this | view in thread ]

  16. identicon
    Iron Chef, 3 May 2008 @ 6:07pm

    Steve, Steve, Steve!

    Steve, what happened buddy?


    Saturday, May 03, 2008 5:16 PM
    "Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo has not moved toward accepting our offer," said Microsoft Chief Executive Steve Ballmer in a press release. "After careful consideration, we believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal."

    Ah, man!

    reply to this | link to this | view in thread ]

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