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Ballmer's comments came during an appearance in Australia and they sent tongues wagging in this country that the door has been slammed shut on a deal for Yahoo. Not so fast. A deal can still happen, and that makes the Yahoo sell-off an amazing over-reaction.
Ballmer seems to be only reiterating the position he has taken for months; that a wholesale (and let me stress "wholesale" with Yahoo [YHOO
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] shares now careening their way back to the $11 range) acquisition of the entire company is no longer an option. That's not new. He's said it before. Yahoo longs may be out there fanning the acquisition flames, but it's just not gonna happen. Yahoo CEO Jerry Yang may want a deal for the whole company but his window of opportunity has long since closed and his legacy will be tainted by it.
A deal for Yahoo's Search business, however, is still very much a real possibility. I talked to a top source at Microsoft [MSFT
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] Thursday night who told me, "It's clear Microsoft has no further interest in the entire company. But that's not to say a deal still couldn't get done for Yahoo's Search business. Plus you got (new Yahoo Board member Carl) Icahn out there screaming for a deal. I think that's still very much on the table. But if Jerry wants to get a deal done, he's gotta learn how to keep his f'ing mouth shut."
Yahoo Interest Fading
Tough words and a sign of frustration at Microsoft that this morass just keeps expanding, that Yahoo keeps trying to breathe life into deal-talk, even though there isn't one, and no overtures by Yahoo to Microsoft have been made. I simply cannot understand why Yang doesn't pick up the phone and make a call. Or why Ballmer can't pick up his own phone and make a call. Microsoft needs Yahoo. Yahoo needs Microsoft. At these prices, Microsoft can see enormous potential here. For Yang, he still has a chance to work his way out of the PR hole he's dug himself.
Meantime, Sandeep Aggarwal at Collins Stewart, says today's 16 percent Yahoo stock plunge is an over-reaction: "We do not view Ballmer's comments about no interest in (a Yahoo) acquisition as an incremental data point. What is more important and incremental is that CEO Ballmer's comments are providing clear endorsement that (Microsoft) is still very interested in a search only deal (a clear positive for Yahoo)... We believe that MSFT's search proposal can give $8 to $10 per share lift to Yahoo even based on very simple and achievable economics."
That's not to say Microsoft won't low-ball Yahoo for the entire company, at what some have told me would be a $17 a share offer. But the odds are against it. A Search-only deal makes sense and would actually create value for all involved. I just don't comprehend how Yang and team don't see this. Their backs are against the wall. Yahoo's out of options as its reputation is getting pummeled.
Oh, and there's that little thing out there called Google [GOOG
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] which continues to own the marketplace.
Look, Yang and Ballmer seem to be talking to everyone but each other. If there's a deal to be made, make it. If not, agree to go your separate ways and leave it alone. Trouble is, neither can really afford to go their separate ways. Microsoft has tried to figure out a way to make money online, spending billions these last 15 years with nothing to show for it. Microsoft is sitting on $25 billion cash, can easily afford this deal, and generate enough cash in the corresponding few quarters to cover the cost.
If Ballmer can't get a deal done, it would be a serious blow. But nowhere near the shellacking Yang's personal reputation has taken for botching all of this to begin with. Still, there will be no winners here if these two can't work something out.
Fact is, Yahoo is becoming a laughing stock. But tragically, for thousands of workers and maybe tens of thousands of investors, this is anything but a laughing matter.
Questions? Comments?
Data is a real-time snapshot *Data is delayed at least 15 minutes