Background: this Sunday May 4th Microsoft withdrew its offer to buy Yahoo for $44.6bn. Saturday, Microsoft CEO Steve Ballmer had invited the two co-founder of Yahoo, Jerry Yang and David Filo for a final discussion. In a last move, Ballmer sweetened his proposal by $5bn, to $33 a share. Yang and Filo demanded $37.



So, Microsoft walks away from a bad deal. Incompatible cultures, incompatible computer systems made this a terrible idea, to say nothing of probable delays due to regulatory reviews.
Steve Ballmer could have issued a terse letter: We withdraw our offer because we couldn't agree on price. We'll continue on our own path and wish you the best of successes. Steve Ballmer.
Instead, Steve Ballmer sends a long letter to Yahoo's CEO, Jerry Yang. First mistake. Second, and much worse, this is a bitter, angry, accusatory letter. Accusations and veiled threats.

This raises a number of questions.

First. To quote Ballmer: "By failing to reach an agreement with us, you and your stockholders have left significant value on the table." If this is true, trust shareholders and their attorneys, they'll see it without Ballmer's help and sue Yahoo's Board of Directors. What does such a statement do for Microsoft shareholders or employees? It just makes their boss sound petulant, entitled. You should have seen we were your only salvation...

Second. Explaining at length (6 paragraphs) why a subcontracting some search and advertising to Google was a terrible idea. Again, is this rising graciously from a muddy playing field or is this trying to throw more mud at the adversary Ballmer couldn't bring to heel?

Third. Accusing Yahoo! and, indirectly, Google of fomenting the creation of an advertising monopoly. How does this look coming from a repeat monopolist?

Fourth. Is Ballmer angry because, after the Vista fiasco, after failing to achieve any traction in Cloud Computing (ironically called Microsoft Live), or in Search, or in Advertising, his leadership could be questioned?

Fifth. Is Ballmer secretly relieved or is he so insulted by this defeat he'll go an bomb another country?

What to expect? Perhaps Microsoft will turn to better targets: Intuit, Adobe, SAP... They'll have to do something and Ballmer will have to explain what got to him going in and going out of this ill-conceived sortie. -- JLG

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