The end of Microsoft & Yahoo?
Well the internets were atwitter with talk of Microsoft and Yahoo officially breaking up this weekend. I believe that this is for the best for both companies, although I was definitely surprised. I’d been reading all along how it was more or less a done deal and not knowing anyone on the inside, I was sad. But I think this was the best possible outcome.
The problem is that all the synergies talked about probably seemed awesome on paper, but in practice? It wouldn’t have worked. Both companies at this point are big companies with very specific cultures and significant problems executing. The first problem would have been meshing the cultures (that’s right, I said meshing). But the primary problem would be that combining two gigantic ships without direction isn’t the best way for either one to find their direction. Sure, maybe it was a good price for Yahoo (I have no idea), but what’s the long term value? Did AOL buy Time Warner for a good price? The new monolith would have spent years working out the integration instead of focusing on what would make their businesses better even assuming it would ever work out - in the meantime Google and Apple and probably a few other startups would be eating their lunches.
There would be, I suspect, many ways to work together and reap many of the paper benefits between the companies without an outright merger, though given the acrimony they probably won’t happen. And now comes all the craziness. First TechCrunch pondered if Steve Ballmer should be fired for this. Well, yeah, duh. But not because of this. On the flip side of the fence, Matthew Ingram asks the same of Jerry Yang. I’m not sure, maybe, but again not for this.
Both companies are staffed by tons of brilliant people. They have excellent products that are truly differentiated from the crowd. But their leadership lacks, they list without focus. They need a real mission statement and they need something to change fast, empower the executives, empower the management, empower the rank and file - I have no idea, but empower someone fast. Empower real change in the companies to start effectively executing on whatever non-ambiguous mission statement they come up with. Do something and do it right.
Here’s how the leadership of the respective company broke the news. Jerry Yang posted on Yodel Anecdotal in advance of the crate of whoopass that’s about to be opened on their market cap. Here’s the salient graf:
So, what’s next? With Microsoft’s withdrawal, we’ll be better able to focus our energy on growing our industry leadership and maximizing value for stockholders. We’ll continue to execute on our plan — making your Internet experience as personal, relevant, open and social as possible, serving advertisers so well they insist on working with us, and opening up Yahoo! in a way that developers dream of.
I’ll admit that it bothers me that he says “We’ll continue to execute…” - it hasn’t really been working before so continuing doesn’t necessarily seem like the best plan. But, I have been seeing some interesting things happen, so who knows. Maybe it’s just getting rolling. I hope so. They bought themselves some time, but they need to stop making mistakes.
And here’s Ballmer’s email to all Microsoftees.
Although the acquisition of Yahoo would have accelerated our ability to deliver on our strategy in advertising and online services, I remain confident that we can achieve our goals without Yahoo. We have a strategy in place to do so and we will continue to expand on this strategy and accelerate our progress.
And there it is 2 for 2. Just continue life as usual. I guess we’ll see how continuation works for both these companies - it would have been heartening to see change promised. My guess, though, is that this really does shake up Yahoo and I’d guess in the next couple years we’ll be seeing a new company emerge. What do you think? Think YHOO should have taken the MSFT offer?
And since everyone’s all prognosticating, I’ll go and say I think YHOO’ll bottom out at 21 or 22 today and bounce back up to close at around 24. Fake Steve says it’s all a Microsoft tactic to get YHOO’s stock to tank and make a future purchase cheaper. And here’s Fred Wilson’s poll of its closing stock price, at this point the money’s on $22.
