Michael Arrington posted an interesting take on the Microsoft-Yahoo conversation today, and I think he’s mistaken in both his assumptions and his conclusions. The full post is here, but I’ve pasted his final paragraphs below:
“Yesterday’s shenanigans, however, clearly crossed a line. Microsoft and activist Yahoo shareholder Carl Icahn jointly announced that they’ve been talking, and that Microsoft may be willing to entertain a full buyout offer once again. But only on the condition that Yahoo’s board of directors is replaced: “We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo!, such as either a transaction to purchase the “Search” function with large financial guarantees or, in the alternative, purchasing the whole company.”
“Icahn explained further, saying that Microsoft can’t be expected to let Yahoo stay in current management’s hands during the months-long closing period after a transaction is consummated. He added: “Jerry Yang and the current board of Yahoo! will not be able to “botch up” a negotiation with Microsoft again, simply because they will not have the opportunity.”
“This is largely complete nonsense. During the transition period after a merger agreement Microsoft and Yahoo would be working closely and Yahoo would be unlikely to take any actions that jeopardize the deal. What’s far more likely is that Microsoft, led by CEO Steve Ballmer, have taken Yahoo’s rebuffs entirely too personally. It’s no longer just about business, it’s about destroying and humiliating the people who embarrassed Microsoft. And sadly, that has nothing to do with creating a balance of power in search.
“Just as I criticized Yahoo for not quickly accepting Microsoft’s offer in early February before the mass executive exodus and destruction of shareholder value, I now point the finger at Microsoft. Yahoo is standing at the alter waiting for you to say “I do,” Microsoft. Time to put up or shut up.
I’m all for a merger. But I won’t stand by quietly while Microsoft destroys what’s left of Yahoo just because it can.”
I posted my own, unofficial views on this deal a while back. Again, I remind folks that both Steve and Jerry have fiduciary responsibility to their respective shareholders. There is absolutely no reason for Steve to try and “destroy what’s left” of an asset for which he may consider paying billions. It just doesn’t make sense. For the entire duration of this conversation, however, Jerry’s behavior has fallen right in line with classic founder’s syndrome. Let’s face it: Jerry & Co. tried to play hardball, and it didn’t pan out. So now, according to Arrington, Steve should just play nice and violate his own fiduciary responsibility to Microsoft shareholders? I don’t think so.
Hey, we all like Jerry. What a guy. But does anyone expect to see him ever run a multi-billion dollar company again? No. Now ask that question about Steve. Steve has the experience to step into any multi-billion-dollar company and run it. It’s a straightforward comparison that really doesn’t need a lot of elaboration. And to be honest, what you're seeing right now is what happens when someone with far less experience and a personality not suited to the situation tries to play ball with the pros on the court. I know that I have been in similar situations, in some cases as the hack, and in other cases as the pro. We all know how this story goes.
Arrington is suggesting that Yahoo should somehow get a reward—an “A for Effort”—in its negotiations with Microsoft, in the form of an offer to the same management team that created the current situation. From my unofficial perspective, that doesn’t make much sense to me—nor to Steve, it appears.
