Monday, May 05, 2008

Microsoft Man and Boy Yahoo

You know when you sit back sometimes and watch what you think could be an unfair fight, turn out to be so one sided that you think that someone should step in and stop it ? That is how I felt while watching this Microsoft/Yahoo game go down.

Microsoft have achieved one thing. They have delivered a knock out blow to Yahoo. Yahoo now have no hope of going it alone solely because Microsoft have convinced everyone that without a merger of some kind - either with them or with Google or News - that they have no long term prospect. And the share price is reflecting that. Do not forget that Google, Microsoft and Yahoo battle it out on the keyword search guerilla war that is going down. So if at the least, Microsoft have just tainted the Yahoo brand in the eye of investors and perhaps even media buyers. Couldn't be fun walking around as a Yahoo sales rep.

Here is why I think it all went down this way. All of the companies are media companies. Yahoo is being led by Jerry Yang - who is not a media guy. Imagine if Rupert had of been in this fray - the referee would have to blow this whistle for mercy. Yang just does not appear to be a media guy. Its a game of theatrics and he went down this garden path without a backup plan. Hostile or not, this was a big offer and no one cared that Jerry Yang thought it was hostile - all that means, is that Yahoo was asking first. I feel Yang was focusing on that, while everyone else was looking at the money. Which brings me to my second point.

Jerry Yang has made his money. Yang has cashed out enough to be super wealthy and even if Yahoo went down a lot, he has a fortune in Yahoo. Not including all the money he would have made in investments. So, I feel that Yang was not as motivated by the dollar in this deal - I feel that he was more concerned with winning the deal. He founded Yahoo and didnt want to just become a unit of Microsoft after all that hard work and accolade - don't kid yourself, the valley is a sub culture of tech guys who have suddenly become media guys. He wanted to be seen as making Microsoft pay BIG.

So, the outcome ? I think this deal will get done. And it will get done at a much lower price because shareholder faith in Jerry Yang is gone. He has been outsmarted at every PR post by Microsoft. I think shareholder like Legg Mason (2nd biggest yahoo shareholder) will start breaking ranks. Because I tell ya, they care about return on investment 100% - as do most shareholders. When it comes to the guys like Yang calling the shots on this go around it was probably 50% money and 50% ego.

I think this deal is a symbol of something bigger - Silicon Valley is known for tech plays - not media plays. Microsoft is in Seattle and have been playing the acquisition game long enough to know how to play it like a media company. So as tech companies become more involved in media - Google/YouTube, Yahoo, Facebook - I think you are going to see media guys like Murdoch and Moonves (if he wakes up to new media) school these guys. I mean look at what Rupert did to MySpace. If Facebook is worth $15bn now, what is MySpace worth????

Like any war, financial or battefield, its a PR game. Who would you put your money on there ? Silicon Valley or New York ?


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