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Even though his words betray no change in tune, and the words themselves are essentially the same he utters every time he's asked the question. And we in the media will always ask the question because Microsoft's plans for Yahoo have become its version of Steve Jobs at Apple: an issue that largely won't go away even though it doesn't have much to do with the fundamental issues facing the company. At Apple [AAPL
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], the Steve Jobs question has been largely dismissed, and that's because innovation continues, strong Mac sales continue, excitement and interest continue.
At Microsoft, it's a different story. Every time someone asks Ballmer about the status of negotiations with Yahoo, it calls enormous attention to the fact that the company has yet to come up with a viable strategic alternative. Ballmer still believes a Search deal with Yahoo is the most "compelling" course of action for both companies to take on Google. And while that might be the case, he and his team have had over a year to make their case. To no avail.
Terry Semel didn't want to do a deal. Jerry Yang didn't want to do a deal. Carol Bartz appears thus far to have little interest in a deal. Yahoo's board foolishly frittered away any pressure they could wield to make a deal happen that would have yielded a $45 billion pay day for its boss, the Yahoo shareholder.
And yet Ballmer still pines. And with every utterance, his shareholders are reminded that Microsoft apparently has no internal answers to the online strategy question, reminded that the only real option — per Ballmer — still has is back turned, no matter how many times he taps it on the shoulder.
Microsoft shares have been in a bit of a recovery mode lately, along with the rest of the market. That's the point. Its shares are moving with momentum, not fundamentals. Just about everyone has already built into the model Microsoft's Windows 7 release; we know the dismal outlook for its business software; its entertainment and device division is feeling pressure. Despite enormous cash generation and billions on its balance sheet, it's still laying off workers.
This is the climate now to make some magic happen. Stocks are cheap. Cash is king and Microsoft has enough to do anything it wants. Dividends and stock repurchases have been tried but haven't translated into any meaningful, long-term traction for shareholders.
Microsoft will always generate cash. Its margins will always be impressive by any measure. But this company is stodgy and in desperate need of vision. Stop "talking" about a deal with Yahoo, and make it happen.
Or come up with a better idea. Sitting back and watching the market pass you by is not an option. Leadership, guys. C'mon!
As for Yahoo shareholders, you're sitting pretty. Bartz has taken charge and if her ideas on a turnaround don't work, she apparently still enjoys an instant safety net, a big-ass backstop, in the form of Microsoft. At least for now.
Questions? Comments?
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