Maybe I'm missing something, but I don't believe I've ever seen a negotiation handled, with all due respect, as dysfunctionally and amateurishly as the way Yahoo has handled its negotiation with Microsoft.
Saturday's shenanigans seemed more like a reality television show than two industry giants sitting down to negotiate a deal.
Unfortunately, negotiating with Microsoft is not a job for amateurs. There was a time when the two companies were more-or-less evenly positioned in this dual, but that time has come and gone. The weekend's activities have left Microsoft holding all the cards.
As executives go, Steve Ballmer isn't hard to read. He's a pretty straightforward guy. Just last week he was quoted as saying: "I know exactly what I think Yahoo is worth and I won't go a dime above."
His original offer of $31 a share notwithstanding, the number Ballmer had in his head was clearly $33. And I'm relatively sure that he was straightforward about that when he met with Jerry Yang and co-founder David Filo over the weekend.
By reciting the now-familiar refrain that Microsoft's offer undervalues Yahoo, and holding pat at $37, Yang sent a very clear message to Ballmer. Not just that a deal wasn't going to get done that day, but that Yahoo's board maintained an overinflated view of the company's value.
Of course, I think Yahoo's board overplayed its hand, especially if it's basing its valuation on the three-year financial plan it released back in March. That pitch wasn't even worth the Microsoft PowerPoint license Yahoo paid to create it.
But that's not what's bugging me. What I find disturbing is all the remorse and CYA-talk coming out of the Yahoo camp since Microsoft took its offer off the table. Ballmer walked away. Microsoft didn't put $33 in writing. We never discussed $33 with our major institutional investors, just $31.
I haven't heard that much whining since Al Gore lost the 2000 presidential election.
Did Yang and Yahoo's board not know the stock would plunge? Did they not know that institutions with billions of dollars on the line would be upset? Did they forget about their fiduciary duty to maximize shareholder value? How could directors and officers of a leading public company so dramatically misread a critical situation?
Ballmer, on the other hand, proved he's a professional negotiator by walking away. Watch Yahoo's shares tumble. Watch Yang squirm under pressure. Let the remorse sink in. Time is on Microsoft's side. Sure, the software giant needs Yahoo, but not as badly as Yahoo's investors need that 60-something percent premium over the "pre-Microsoft offer share price."
As I said before, these companies do need each other. We may see new nuclear power plants in operation before they consummate a deal, but the courtship is far from over. A deal will get done, but not before Yang and Yahoo's board start behaving in a manner more deserving of the responsibilities shareholders have vested in them ... with all due respect. Updated 5/07/08 9:47 AM: Yang and Filo - not Decker - met with Ballmer.