The Wall Street Journal has published a detailed account of Microsoft's talks with Yahoo!, and the reasons for the fall-out. One of the juicier bits is that Ballmer blamed the bankers involved for "screw[ing] everything up."
Perhaps. But reading through the wreckage, it seems much more likely that the gamesmanship on both sides ultimately resulted in both companies losing. Microsoft still lacks a compelling voice on the web, and Yahoo!...well, Yahoo! increasingly does, too.
"They believed that we needed them much more than they needed us," one person close to Microsoft says. "Ultimately, we called their bluff."
Bravo. Now you can both fail together.
Again, I have been hoping the deal would go through because I think it would help Microsoft to make some critical decisions that would favor a more open, pragmatic Microsoft. Microsoft-plus-Yahoo! wouldn't be able to force a .Net future down the web's throat, and would enable Microsoft to innovate beyond its closed platform.
Microsoft needs Yahoo!, not so that it can compete in search, but so that it can compete on the web.
Microsoft and Yahoo, together forever. Could open-source offspring be the result?
According to Terry Semel, former CEO of Yahoo, the last time Microsoft approached Yahoo to buy some or all of its search business, Yahoo turned the Redmond giant down. Flat. As for an offer to acquire all of Yahoo, that "conversation has never come up."
"(Yahoo and Microsoft discussed) search and Microsoft co-owning some of our search. I will not sell a piece of search--it is like selling your right arm while keeping your left; it does not make any sense."
But that was then. Now Microsoft has put down a $44.6 billion offer for Yahoo that Yahoo surely can't refuse under present circumstances. Especially since it will give customers a new choice, and Microsoft is all about offering customers choice...or so it says:
Today, the market is increasingly dominated by one player, who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo can offer a credible alternative for consumers, advertisers, and publishers.
Yahoo would be foolish to decline, given its recent travails. What is most interesting to me in all this is how it could drag Microsoft into the next generation of open source.
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