Microsoft walks away from Yahoo: Assessing winners, losers and Plan Bs

Microsoft walks away from Yahoo: Assessing winners, losers and Plan Bs

Summary: Microsoft CEO Steve Ballmer walked away from his bid for Yahoo and left numerous questions hanging.The biggest ones: What's plan B for Microsoft?

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Microsoft CEO Steve Ballmer walked away from his bid for Yahoo and left numerous questions hanging.

The biggest ones: What's plan B for Microsoft? Can Yahoo deliver? And who are the winners in the aftermath of the Yahoo saga. Here's your cheat sheet to the aftermath (Techmeme, blog focus, Microsoft statement, Yahoo response, News.com roundup) .

Winners...

  • Google. The big winner out of this Microhoo mess is Google hands down. Let's think about this: Google benefits because schmidt54.pngMicrosoft admitted that its Web strategy wasn't up to snuff. Google also got to play spoiler and landed a search test with Yahoo that it would have never happened if it weren't for the Microsoft bid. Even better for Google: Yahoo could be forced by shareholders to outsource search to Google in a larger partnership just to improve monetization. In the long run, outsourcing search to Google is likely to be detrimental to Yahoo, which will cede search market share and perhaps mindshare too. A pact with Yahoo will likely speed up Google's march toward becoming a search monopoly.
  • rupe54.pngRupert Murdoch. MySpace just became more valuable. There are only a few companies that Ballmer has mentioned as having the scale to boost Microsoft's online advertising strategy and MySpace was one of them. MySpace is a property that is hard to monetize, but the inventory is certainly there. Murdoch has reportedly talked to Microsoft already and a big payday could be had for Rupe.
  • Time Warner, which has a few alternatives to dump AOL. AOL isn't the best property in the world, but it has two things going for it: An owner that wants to offload it and lots of ad inventory. Time Warner now has three options to sell AOL: Microsoft, Yahoo and Google, who already owns a chunk of it and could buy it just as a defensive move.
  • Any Internet property with any scale. It's clear that Microsoft will go shopping. It has a $44 billion budget. Valuations of Internet companies will melt up just because Microsoft is buying. Facebook becomes an even bigger prize.

Neutral...

  • Microsoft. Walking away from Yahoo was the right thing to do. The Yahoo deal would have been toxic for the company and a ballmer54.pngdistraction to say the least. Microsoft also showed a decent bit of discipline by not going to the arguably ridiculous price of $37 Yahoo was asking. Ballmer also made more than a few mistakes in this Yahoo negotiation and at times he looked like a lovesick teenager. Overall though, Microsoft lives to fight another day. The problem: Microsoft's Web strategy is clearly lacking. Microsoft's plan B will include acquisitions, but there's a higher level rethinking in order. To date, Microsoft has been enamored with the concept of acquiring a huge amount of ad inventory via a media company. However, Microsoft already has a massive untapped audience. Why not advertise on Windows? What if it opened Office to the Web completely? Suddenly, Microsoft would have scale and be able to stick to its knitting. Would that Plan B work? Who knows, but it should be considered.

Losers...

  • yang54.pngYahoo. The pressure is now on Yahoo CEO Jerry Yang. He has to deliver on his optimistic plan for 2010, hit his quarterly targets, navigate a deal with Google that may not be in the company's long-term interest, face shareholder lawsuits and daily second guessing. Simply put, Yang will have a lot explaining to do with institutional shareholders. Another thread: Microsoft most likely made a lot of Yahoo employees whole on their stock options. That's over now and morale is likely to fall with the stock price. While this Microhoo saga defined Ballmer it will also define Yang. Will Yang be known as the guy that couldn't let go at the expense of his shareholders?
  • Capital World Investors. On April 10, Capital World disclosed that now holds more than 10 percent of Yahoo shares, or 135,542,600 shares, up from 69,647,000 on Dec. 31. In other words, Capital World Investors doubled down in a big bet that Yang would take Microsoft's offer. Rest assured Yang will be talking to Capital World soon if he hasn't heard from them already.

Topics: Banking, Google, Microsoft, Social Enterprise

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39 comments
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  • Other winners include

    1) Office chairs producers
    2) The free markets
    fr0thy2
  • Yes, Microsoft has found a better use for their $44B . . .

    ... line lawmakers' pockets with a portion of it...

    ... encourage (financially incent) Universities to teach up-and-coming techies only the MS platform with another part of it...

    ... and buy "standards" with the remainder.

    Much better investment on their part.
    Basic Logic
  • RE: Microsoft walks away from Yahoo: Assessing winners, losers and Plan Bs

    Google is a winner? Uh no. Google has been intefering with this deal from the beginning and should be put on trial for doing so, then when found guilty have the company dissolved.
    Loverock Davidson
    • 9.0

      Well done. Dissolve anybody that stands in Microsoft's way, when MS are no longer capable of doing that themselves. LOL.
      fr0thy2
    • Message has been deleted.

      itanalyst2@...
    • 6.8 . . . But what did your MS rep say ???

      Mike Cox #2 ???
      Basic Logic
    • Google is the loser

      This merger would have destroyed BOTH Yahoo! and MS. Though you could argue that they need Yahoo! around to avoid antitrust trials and restrictions. So it's not a complete loss.
      solomonrex
  • What to do with the 44B?

    Fix the clusterf&#k Vista before they lose more market share to their competitors.
    gtdworak
    • That's not the market MS are in ...

      Vapourware is their speciality.
      fr0thy2
  • Yahoo! is the Winner!

    Microsoft would have killed the company before ever getting to the starting line. Assuming the deal would have gotten approval ... which is highly unlikely.

    I'm going back to using Flickr.
    swhiser
  • Loser - Jerry Yang

    When the stockholder law suits come in his only real option will be to resign ASAP. The board will be joining him soon after.

    Plain and simple, Yahoo's stock is in for a blood bath this coming week.
    No_Ax_to_Grind
    • Agreed - He should have taken the revised bid...

      But then again, I salute him for standing up to the Empire.
      Basic Logic
      • Stockholders don't really care abotu silly reasons

        They invest with the intention of making money, not losing it over Jerry's ego or others anti-MS religion.
        No_Ax_to_Grind
    • Loser?

      You forget that Yang in all likelihood had to have had the support of the board, and the major stockholders.

      Also, as far as predictions are concerned, eren't you one of the "EC will be spanked by Microsoft" and "SCO will win" crew?
      zkiwi
      • Sorry but no

        The major stockholders have already started a class action suit. Never said SCO would win or lose, said let the courts decide.
        No_Ax_to_Grind
        • Really?

          Do you care to name these "major stockholders.", and for that matter let us know what percentage of the Yahoo stocks they are supposed to have? Also, please explain why they just didn't take the money from Microsoft directly rather than worry what the Yahoo board was doing.
          zkiwi
          • Google is your friend

            And its even easy enough to use even you can do it.
            No_Ax_to_Grind
          • You said MS would get their way with Yahoo

            Also, you're reduced to personal insults I see.

            You also said along the lines that the EU would be stuffed without Microsoft. It's the other way round. Penelope and Rupert need Euro's right now.
            fr0thy2
          • Meaning you can't find any?

            Also, in case you didn't know, tossing lawsuits at Yahoo are about as likely to succeed as is Steve Ballmer is of admitting that OS X is much cooler than Vista.

            The key is that Microsoft withdrew its bid.
            zkiwi
    • LOL... No_Axe.. You so silly...

      Do the math No_Axe

      Where was Microsoft Stock before the Yahoo Bid and where is it now?

      Now put the other foot in your mouth and tell us where was Yahoo Stock before the Bid and where is it now?

      Yahoo was at 19.10 before the bid, it has been hovering around 24.50 all day... Long term shareholders are up 5.00 a share...

      Your turn... LOL
      i8thecat