Microsoft never wanted Yahoo anyway
Although I wasn't planning on writing this column for at least a few months, it looks like the recent developments in the Microsoft-Yahoo merger have precipitated my need to do just that.
Allow me to say with total and utter certainty that Microsoft never wanted this deal with Yahoo and was using it to gain important information about the company before it was forced to drop billions of dollars on an acquisition that almost everyone knew was tenuous, at best.
But unfortunately for Microsoft, its plan backfired and now it's left with nothing to show for it.
Of course, the real goal all along was to initiate the acquisition phase of the deal, perform due diligence tests to see what sort of technology Yahoo employs and what it has in store for the future and once the Department of Justice found problems in the deal, back out.
Don't believe me? Look no further than Microsoft's attempted deal with Intuit for all the proof you need.
Back in 1994-95, Microsoft was being man-handled by Intuit. And although the company was riding high with Windows, its inability to compete in the financial sector became a vexing issue. After all, with such a huge sum of capital spent on trying to destroy a smaller competitor to no avail, what other reaction could Gates and company have?
Realizing that Intuit was beating it with a far superior product that appealed to more people, Microsoft decided to, in the words of then VP Mike Maples, "try to be non threatening, but let [Intuit] know [Microsoft] would do something aggressively." That aggressive stance was a threat from Microsoft that said it would either spend $1 billion on personal finance development to beat Intuit or acquire it for about the same fee.
Realizing it was up against a major competitor that had no patience for losing, Intuit finally decided to an acquisition for about $1.5 billion in Microsoft shares.
As soon as the deal was announced, the Department of Justice was finding fault. And although Microsoft knew the chances were slim that it could acquire Intuit and control the entire personal finance industry, it still performed due diligence and knew exactly what its largest competitor was planning for the future. Even better, it knew how all the software was made and realized its own shortcomings.
In the end, the Department of Justice found serious issues with the attempted acquisition and instead of fighting for it in an attempt to control yet another industry, Microsoft curiously backed away in a flash, armed with more knowledge than it knew what to do with.
Just one year later, Microsoft competed better than ever with Intuit's Quicken program and offered a number of enhanced features that had heretofore never been available in a Microsoft program. Sure, the company may have called it a coincidence, but others knew better.
And almost 15 years later, we're in a very similar situation. Microsoft is once again being trounced by a competitor and has little possibility of getting out from under its deficit. Realizing Google would be a far too difficult target to acquire, Microsoft decided Yahoo would be the next best bet.
Of course, Ballmer and company know Yang can't stand Microsoft and the very thought of being told what to do by Bill Gates' cronies makes the entire board at Yahoo cringe. But Microsoft didn't care about that.
In reality, Microsoft realized that the chances of getting the acquisition through the DoJ and even the EU were minimal at best, and decided to capitalize on a moment of weakness at Yahoo to get the company to accept the deal. In essence, all Microsoft really cared about was Yahoo accepting the deal.
Once that happened, Microsoft could relive the Intuit coup of a decade ago. Instead of worrying about dropping almost $45 billion and possibly take out a loan for the first time in years, Microsoft would have used the opportunity to see what Yahoo has up its sleeve, how it creates such a better search and capitalize on its knowledge. After all, in the slight chance that the deal would have gone through, Microsoft could have commanded a significant portion of the market. And if it didn't get through the DoJ, who cares? Ballmer could have still walked away with a boatload of knowledge that he could tell his developers to capitalize on.
Don't kid yourself. The Microsoft-Yahoo merger was never meant to happen and all the former wanted was some information to increase its ability to compete in the market. And although Yahoo didn't accept the deal and Microsoft's plan backfired, it wouldn't surprise me if the company tried again and again until Yahoo had no other choice.
And once that happens, look for Microsoft's search to look suspiciously similar to Yahoo's. Is it just me or is history repeating itself?
Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
I think Microsoft has every intention of buying Yahoo and using it to save it's own failing Live services. I don't think the game is over yet, I expect Balmer to get more hostile in the days to come, perhaps even buying out shareholders who agree for a real old school hostile take over, for less than the initial offer.
It will be interesting to see if Microsoft just backs off now....
The idea that Microsoft would make the Yahoo offer just to get a peek under the hood is equally ridiculous. You don't make a $46m offer that casually. What if it goes through? Nobody plays chicken with that much cash.
The author of this article should probably should leave prognosticating to the psychics.
- by mcooper13 February 11, 2008 1:49 PM PST
- You have to be seriously naive to think that Microsoft is not capable of this kind of thing. I think it's highly plausible. In fact it would be one the more tame dirty tricks the company has pulled off.
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