Monday, 7 April 2008

Might Microsoft walk away from Yahoo?

Last night Microsoft CEO Steve Ballmer gave Yahoo three weeks to begin bargaining in good faith or face a hostile takeover. Ballmer said that the original bid now looked 'generous' taking into account the turmoil in the markets since and the general decline in the value of other companies in similar markets. Ballmer indicated that if Yahoo didn't play ball, Microsoft might lower its bid - or indeed walk away completely.

I've indicated my views on this one before. To reread Click here. I think that Microsoft will face huge cultural issues in trying to assimilate Yahoo. They can't leave Yahoo as a 'separate entity' as they must make considerable cost savings if the deal is ever to make commercial sense. Microsoft has no choice but to go into Yahoo in a heavy way. And that will just destroy the Yahoo culture and its associated value. I also don't think that Yahoo provides Microsoft with what it really needs to face tomorrow's challenges.

The story goes that in the early 2000s, Carly Foirina, whilst CEO of HP, asked Geoff Unwin (whilst still CEO of Capgemini) his opinion on the acquisition of the management consulting division of one of the global Big Five accounting companies. Unwin and Capgemini had had their share of suffering because of a clash of cultures as a result of their acquisition of the consulting activities of E&Y. Geoff's advice to Carly was apparently "Don't".

If Ballmer ever asks me my opinion on acquiring Yahoo, my reply would be the same- "Don't".

Anyway, as Lex in the Financial Times this morning says, whether Microsoft goes 'nuclear', turns into a long protected battle, cuts-and-runs or has a long and damaging integration task "it is Google that will emerge as the clear winner".

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