Microsoft-Yahoo Dance Again

Check out the interview in the WSJ with Steve Ballmer and Qi Li (the new import from Yahoo to MS). If you read this interview it is hard to imagine that the two companies are not discussing a deal. Unfortunately for Yahoo with the stock at less than one-third the original MS offer and Jerry Yang’s recent bail out, they are in a horrible position to negotiate. On the hand Microsoft could not be better placed. iIf you read Steve Ballmer’s interview he wants to get it done and move on!

We’re fully prepared to compete without any partnership with Yahoo. We don’t need to act. Would it be advantageous for both of us to make a deal? Look, the fundamental basis for doing the search deal with Yahoo has to do with critical mass in the advertising marketplace. It doesn’t have to do with technology, or any of these other things, it really is a market phenomenon. Together we would have more advertisers….which means we’d have more relevant ads on our page. We’d have higher monetization levels possible in front of us because there would be more people bidding on more key words. Most importantly, Google would have perhaps a real credible competitor sooner. I think good ideas are usually better done quickly than slowly, so it would probably be better for both us, and certainly for Yahoo, if we were to do it sooner than later. But at the end of the day, that would have be something Yahoo would be as interested in as I have expressed our interest.

At the moment it is hard to imagine Yahoo selling just its search piece. If it sold the entire company in the current climate, Microsoft is bound to walk away with a sweet deal. On the other hand, if Yahoo! chooses to stay independent they are going to quickly have to find a new CEO and come up with credible plan that satisfies share holders. That’s a tall order. Sad to see a Silicon Valley icon struggle this way.

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