Microsoft and Yahoo: Let's get it on!
04-05-2008: The Microsoft (MSFT) and Yahoo! (YHOO) saga continues to get interesting. This morning, hot headed Steve Ballmer got up on the wrong side of bed and decided to exercise his wide mouth. In today’s letter to Yahoo! Board of Directors, Ballmer’s tone got even more hostile. Microsoft is now officially threatening a proxy battle if Yahoo fails to engage in a formal negotiation in three weeks. For some reason this reminds us of when George Bush gave the ultimatum to Saddam Hussein in 2003 (we all know where that has gotten us). Microsoft is at it again, doing what it does best in these situations, blowing smoke and using scare tactics to gets its way.
Let’s step back a bit here and look it from Yahoo’s perspective. Yahoo never wanted this deal in the first place. So why are these Microsoft people and analysts so surprise that Yahoo is putting up a fight? Why shouldn’t they try to get more money from Microsoft? That’s the primary duty of the Board of Directors. We applauded Yahoo for their resistance. After all, this is a company that still makes close to a billion dollars in profit and still in the number destination on the internet. People often forget that because Google gets all the attention.
If we were Yahoo, we would tell Steve Ballmer to go and F himself. His tone has been hostile and disrespectful from the start. It’s no wonder the Yahoo people are not jumping on his offer. Microsoft’s tactics is nothing new. As a company, MSFT utilizes its power to push around smaller competitors. Usually they will get their way due to their size and deep pockets. Their common tactic is to use their monopoly power to destroy anyone who gets in their way; nothing more than a torch and burn tactic.
Part of the problem is people expect Yahoo to deliver like Google. This is not a fair expectation because when a company dominates an industry like Google; it is normal to see explosive growth in the beginning. This was true for Microsoft in the 80s and 90s. It was also true for Yahoo in the early 90s. Comparing Yahoo and Google just because both sites have a search engine is not fair. By the way, Google’s growth is beginning to show signs of slowing. According to Comscore, paid clicks from Google has basically flat lined in the first quarter of 2008.
Despite what the pundits and analyst are saying, we believed Yahoo simply needs a little more time to execute their new strategy. The rollout of various new products and services shows they are making progress. The problem is Wall Street has pretty much given up on Yahoo and wants their money. I guess we can’t blame them as we must all answer to someone. How will Yahoo respond? We suspect they'll give Ballmer the finger and let Microsoft go ahead with its proxy battle.
If Microsoft prevails with its unfriendly tactics, they’ll be little left of Yahoo because most employees will be heading out the door. Sure, some will stay until they get their bonuses or whatever the incentive is, but we doubt many current Yahoo employees have any plans of retiring with Microsoft.
Steve Ballmer needs to take a chill pill. Someone should send this man Son Tzu’s book, the Arts of War. Perhaps he’ll learn that pushing your opponent into a corner without anyway of escaping will only embolden them to fight to the death. Buying a technology company is nothing like buying your tradition company. In a traditional company, you’re buying the physical assets such as factories and equipments. In technology, you’re buying the talents within the company. If these employees decide to leave, all of Microsoft’s efforts and money will not amount to much. Some folks in the media might say something to the effect of “Let those Yahoo employee leave”. That’s because these folks have no idea how hard it is to find technology talents. The fact of the matter is both Yahoo and Microsoft will need to find a way to do this on a friendly term if they expects to topple Google.
