Whether Microsoft ponies up more cash for Yahoo, walks away or launches a proxy war it will be CEO Steve Ballmer's defining hour.
Ballmer addressed his troops in a town hall broadcast Thursday (Techmeme) that was attended for a bit by Silicon Alley Insider's Henry Blodget. The bottom line: Microsoft has nothing to announce today regarding its bid for Yahoo, but will in "very short order." Ballmer's key quote via Blodget:
We are absolutely 100% determined to build the most interesting position in the world in online advertising media and the kind of social connected social media experience. The future of the way people consume information is going to change in the next 10 years dramatically. We are absolutely committed to being the leading player. We are not today the leading player.
Update: Ballmer told The Wall Street Journal in an interview that Yahoo could give Microsoft the online advertising scale it covets, but also added that the software giant could go it alone if it had to. Nevertheless, it appears that Microsoft will go hostile and launch a proxy war. Ballmer argued that Microsoft had the technology, but not the scale and position to be a player in online advertising.
But making Microsoft that player is a management hurdle second to none. Meanwhile, it's not clear whether Yahoo is a miracle cure. Win or lose Yahoo, however, we're on the cusp of the most important chapter in Ballmer's career. What he decides is likely to define him.
Let's ponder the moving parts confronting Ballmer:
Vista is becoming a perception crisis for Microsoft. When Ed Bott has a series on how to fix--or at least cope with Vista--you know this OS isn't so hot. Why should this thing need so much fixing? Meanwhile, there's a growing chorus of folks that criticize Vista. And to make matters worse Vista's biggest competition is XP--its predecessor. From a management perspective it could make more sense for Ballmer to focus on Microsoft's core businesses. After all, if the core rots the rest of the company quickly follows. Vista hasn't turned into a huge problem for Microsoft yet, but when Wall Street is questioning execs about the mix between Vista vs. XP you have the makings of some serious issues--especially when I could theoretically simply wait for Windows 7.
Multifront wars are dangerous. Let's recap the markets Microsoft has gone after. Search, online advertising, video games, consumer electronics and probably a few more I'm forgetting. You can be the best manager on the planet, but no one can keep every ball up in the air.
How do you rally 100,000 people (assuming Ballmer lands Yahoo)? Microsoft has morale issues today--employees aren't so sure about the Yahoo bid--and it will have them tomorrow even if it lands Yahoo. How will Microsoft keep Yahoo employees from walking? How will it allay concerns that current employees aren't second class citizens? How will Microsoft bridge two cultures? Ultimately Ballmer will have to perform a few cultural gymnastics to integrate Yahoo.
Is Yahoo really the fix? Microsoft gets scale in search and online advertising, but couldn't its dollars be deployed elsewhere. Is scale more important than the management issues that will determine whether any merger works?
It's Ballmer's show. The pressure must be intense.