Wednesday, July 2, 2008

Countdown to August 1 (Yahoo's D-Day): What's Microsoft Seeking Now?

We are on the homestretch towards Aug 1 shareholder meeting at Yahoo. Yahoo is fighting Carl Icahn and that seems to be intensifying on a daily basis. Now, WSJ has written a detailed article on the moves, counter-moves and gamesmanship in the Microsoft-Yahoo takeover saga. As I blogged earlier, Microsoft's interest in Yahoo is far from over. Why?
Microsoft's obsession with Google is strong and deep. WSJ reports that:
Yahoo executives were unimpressed with Mr. Ballmer's vision. If anything, they regarded the Yahoo pursuit as a crude solution to quell his obsession with Google. They would later refer to Mr. Ballmer's plan as "filling his Internet hole." Indeed, Mr. Ballmer spent much of the meeting discussing the threat Google posed to the two companies.
So, the end game is not about walking away from Yahoo but also figuring out how Google may gain or lose with (or without) Yahoo.
The interesting part of the WSJ article beyond illuminating some of the inner workings of the deal is about what Microsoft is pursuing now. Not happy to be a passive participant, Microsoft is pursuing to put together an ecosystem involving Time Warner, News Corp and others. It appears that Microsoft is not responding to overtures from others but is taking the role of the orchestrator of such an ecosystem. Why? Again, to ensure that if it cannot beat Google by acquiring Yahoo, it can at least create a credible alternative by pooling together online advertising strengths (and weaknesses) of second-tier competitors.
Yahoo has about four weeks to show its shareholders that its current management team is capable to lead the company and has a credible and compelling vision. What Yang & Co. need is cold, hard facts (financial and operating numbers) that support the clear vision. What Microsoft is trying to do is to make sure that it scores a minor victory. Will that minor victory come at the expense of Yahoo's market value? Or will it be a central part of Yang and Decker's compelling vision? I doubt that July will be dull and boring--at least from Yahoo and Microsoft vantage points.


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