Ballmer's swan song

Take 1 flailing Internet company, add a 2nd flailing Internet company, and what do you get? A bigger flailing Internet company.

Accentuate the positive The proposal isn't all bad. :

• It is an OK deal for Yahoo shareholders. Yahoo was trading above $30 just 3 months ago, so today's big premium is where the stock was much of last year. It makes up for the damage a dithering Jerry Yang has done.
• Jerry Yang can quit pretending to be a CEO. There are a lot of rich people in Silicon Valley. Most of the them are lucky rich - people who just happened to be in the right place when big money arrived. Then there is a much smaller group of smart rich - people who figured out how to generate big money. Jerry is lucky rich, just like 99% of Googlers.
• The industry needs to consolidate. Companies need to merge to develop economies of scale. This will be Microsoft's excuse to shut down major chunks of money-losing MSN.

Yahoo has a strong base in the email market and other web portal services. They're profitable - no small thing on the Internet - and a well-known, if not well-respected, brand. All real assets.

The downside Where to start?

• Both companies are clueless on Internet strategy. To be fair everyone else is clueless too. The Internet is new and still evolving. The only certainty is that old models don't work. And the avatars of the old models are least likely to come up with new ones.
• This looks like AOL plus Time Warner all over again. Why Microsoft thinks it needs to be in the Internet business is beyond me. They are a software company with no demonstrated Internet smarts. How will buying Yahoo change that? It is a Gates/Ballmer ego thing.
• Neither company is cost-competitive with Google. Integration costs will be huge.
• Internet advertising isn't turning out to be quite the money machine everyone imagined - not bad, but not change the world either. As a content provider I can tell you that Google's pay-per-click model sucks. As new media networks with a pay-per-impression model develop, Google will be left selling ads on content that no one cares about.
• Paid web-services are the future. Google's non-economic model for most of its services has depressed prices. But as services like SmugMug demonstrate, the best customers are willing to pay for quality. But you have to be really good. Microsoft is mediocre at best and Yahoo not much better.

Ballmer's swan song Pity poor billionaire Steve Ballmer. His entire career has been spent in the shadow of Bill Gates. For years he was the world's richest man who worked for someone else. Since his elevation to CEO he's done nothing to fix Microsoft, instead pursuing one ill-conceived venture after another. This is his biggest yet.

If the Yahoo deal goes through, Steve will have one last chance to show that he is an executive on par with Chambers, Jobs, Hurd or Palmisano. He is, sadly, too smart. Lucky smart.

Comments welcome, of course.