Microsoft/Yahoo: Why is Microsoft Slow-Playing a Strong Hand?

One thing I don’t get about the Microsoft offer for Yahoo is the way Microsoft and its advisors are slow-playing the hand. If they simply jacked the offer to $35 this deal would likely be done now, with everyone else at the table simply folding. Instead, however, they are allowing Yahoo to go ’round and ’round the economic block talking to anyone — anyone! — who will save it from Microsoft.

In Texas Hold’em poker terms, that’s like letting people see free cards. While it’s possible that Microsoft sees its own hand as so strong, and Yahoo’s so weak, that it doesn’t care about free cards for Yahoo: Microsoft seems sure no-one else will show up. And admittedly, Microsoft is likely right, but isn’t the risk that a cornered Yahoo does something silly and uneconomic, forcing Microsoft to do something costly and time-consuming to yank Yahoo back to reality?

And there are other problems with slow-playing this. Perhaps most importantly, you end up buying a shell. Good people are leaving Yahoo in droves, as recent headlines have shown, and slow-playing the deal just makes things worse, because people hate uncertainty. As much as Yahoo sorts (allegedly) don’t like Microsoft, they like utter fuzziness about their future even less.

Microsoft has a strong hand and it should end this. While there is an ego boost in letting Yahoo discover it actually has no outs, there is also unnecessary risk. Up the offer and end it.


  1. I don’t think Microsoft needs to raise to $35. I would simply employ Le Chiffre’s line from his introductory scene in Casino Royale, spoken after he’s raised a large sum after the flop. “I have two pair and you have a 13.7% chance of hitting your straight. Your call.” The guy folds – wouldn’t anyone?

  2. Still waters run deep…
    Microsoft is icing the kicker here. I think what’s probably going on right now is a world tour of meetups with the largest institutional shareholders in Yahoo. If MSFT can round up enough institutional support, it’s going to be hard to tell them no.