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Microsoft's Yahoo Pratfall
11 comments- TAGS:acquisition, Google, jerry yang, merger, Microsoft, Steve Ballmer, Yahoo
- IT TOPICS:Desktop Applications, Government & Regulation, Internet, Windows & Microsoft
In the business textbooks of 2025, Microsoft's slow collapse will be attributed to many things. The failure of Windows Vista to hold the desktop market; Microsoft's inability to successfully move from a PC product-based company to an Internet service-based enterprise; and Ballmer's inability to pull off the Yahoo buyout.
Now, buying Yahoo wasn't going to guarantee Microsoft transistion from a 20th century product-oriented company to a 21st century SAAS (Software as a Service) business, but it was a better shot than the Microsoft continuing to push its confusing mish-mash of Windows Live programs.
As it is, Microsoft's brand is losing value; Google is beating the pants off the company on the Internet; and Linux and Apple are making gains on the desktop. Adding insult to injury, open-source programs like Firefox are gaining marketshare at the expense of Microsoft's own products.
Microsoft is also losing marketshare pretty much everywhere. Yes, the absolute numbers are still tiny -- except in Web browsing -- but Microsoft hasn't ever lost significant marketshare before. Worse still, the numbers show that Microsoft's customers no longer lock-step upgrading their Microsoft products. Instead of moving to Vista, IE 7 and Office 2007 in mass, customers are hanging on to XP, IE 6, and earlier versions of Microsoft Office.
At the same time, Yahoo hasn't been doing great business either. Google has been busy transforming its search superiority into an online ad and services powerhouse. Its purchase of online ad power DoubleClick, over Microsoft's objections, now that it's finally passed the last regulatory hurdle, is expected to do damage to Yahoo's one ad revenue stronghold: display ads impressions.
Still, Microsoft needed Yahoo more than Yahoo needed Microsoft. Microsoft is growing old. It needed Yahoo, trouble and acquisition headaches and all, to renew itself.
Unfortunately for Microsoft, Ballmer blew it. His entire acquisition strategy seemed to have been to set a price, stick to it, and then bluster a lot about a hostile board takeover. It was only in the last few days that Microsoft seriously sat down with Yahoo to talk turkey. Again, though, instead of having a real give and take, Microsoft's approach seems to have been to just add $5-billion to the initial offer and once more talk about Yahoo taking it or leaving it.
Yahoo left it.
If, as some have suggested this shows that Ballmer is willing to play a waiting game for Yahoo's stock price to collapse, I believe they should have been watching what Yahoo has been doing in the meantime. Yahoo has agreed to run a trial of Google AdSense ads on its search pages. If you can't beat Google, Yahoo seems to be saying, we'll consider partnering with them.
So congratulations Microsoft. You not only totally mishandled a vitally important acquisition; you may have driven Yahoo into becoming buddies with your arch-enemy, Google. Good job Ballmer.
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