Microsoft: Here’s the lowdown on Yahoo

July 25, 2008

ballmer.jpgSo often with these things, there’s a lot of PR-speak and dancing around. But let’s give Microsoft’s top brass some credit —  they pretty much addressed the whole Yahoo thing head on during the annual meeting with Wall Street analysts up in Washington state.

Finance chief Chris Liddel was particularly clear on the subject. Take it from his boss, Steve Ballmer.

“I think Chris was just about as black and white on that topic as we’ve ever been,” Ballmer said shortly after Liddell finished speaking.

So what did the CFO say? Have a read. Oh, and we bolded a couple of key points if you don’t want to read the whole thing.

“A few comments on Yahoo. Why Yahoo and what view changed going forward? Clearly, as Steve said, this was a tactical way of driving progress in the key areas that we see. We went into the acquisition totally genuine. We thought it was best for us to combine as companies and we believed we offered incredibly good value of the shareholders of Yahoo. What changed? We took the view — and we still take the view — that Yahoo is essentially a declining asset. We made an incredibly generous bid with a very high premium because we were looking for speed. Speed was, as I’m sure you all will agree, the last thing that we’ve actually managed to achieve with the acquisition… 

Time passed and value eroded. And we don’t have a situation now where the initial offer that we made makes any sense from economics. I get the question — I got it recently as lunch — ‘You guys need this for online strategy there’s no sort of boost you can get from Yahoo! by doing things organically?’ Yes.  Does that mean we should pay anything for it? Does that mean we should pay $31, $33, $40 whatever number you like? There has to be some economic justification for acceleration at the end of the day. If time passes and the value of what we are buying erodes for one reason or another, it stops making sense for us to do it.

In terms of going forward, I think the chances of us buying Yahoo on a full acquisition basis are so small that they are essentially negligible. I never say never. Who knows in years to come? But a full acquisition just certainly in the time frame and (with the) sort of economics that we’ve previously thought…  essentially makes no sense. We still have the possibility of doing a search transaction that we think makes economic sense.  If I had a worry (it’s that) the parallel paths continue. About the time that Yahoo decides that search deal makes sense for them, it’s about the time we’ve worked on our plan so much that it no longer makes sense for us. But we shall see.  

 As Ballmer said, that’s pretty black-and-white. 

One comment

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Thanks for posting this – I would love to see more coverage of future interactions between Microsoft and Yahoo.

Posted by Stephan Schwartz | Report as abusive