Analysis of the Microsoft Decision, Part II: What's Next?
So, what happens next? Microsoft has walked away from Yahoo, or at least from its current takeover offer, and is saying it will move forward organically -- and said word with its reek of cattle feces is appropriate here. Yahoo, for its part, cites -- with less specifics than my six-year-old gives at day-end when claiming "good behavior" -- the many golden wonders ahead of it in its post-Microsoft future.
I don't buy either argument. Here is why, in two parts:
- If Microsoft could have solved its advertising and content problems organically, it wouldn't have been forced to make an outsize and humbling bid of former web wunderkind Yahoo. It's not exactly short of cash, people or need. To say that it now has the magic solution is, let's just say, the triumph of hope over recent experience.
- If Yahoo really had in place the pieces to make a run at being ... something, we wouldn't be seeing the key employee attrition and weak revenue/traffic growth that we currently see. After all, the only thing that saved Yahoo's earnings bacon in the just-completed quarter was money gifted from Alibaba gains. It wasn't a changed company that did it, and wasn't the magic of Jerry Yang.
I think what has largely happened here is we have bought time and lawsuits. If I was a Yahoo shareholder I'd be seriously pissed. Microsoft pulled us out of our recent share price slump, but management was too cutesy and territorial to take the money and run. My guess is that Yahoo's share price falls quickly on Monday, and then finds support in the low-$20, a price reflecting a belief that this is not yet over. Only then, once some key shareholders pipe up and once Yahoo has to defend itself against the inevitable lawsuits, will we know how likely it is that its brazen move sticks.
Other thoughts? Bring 'em on.
