Microsoft/Yahoo: Why Can't This Deal Get Done?


It's getting nasty now. And all indications are this is going to come down to a nasty fight and long day at the Yahoo shareholders meeting Aug. 1.

By now, you've seen the coverage of last week's last minute wrangling between Carl Icahn, negotiating apparently as a kind of proxy for Microsoft's Steve Ballmer. By now you've read the particulars and have decided one way or another whether this new deal is a good one either side.

But in the end, with no new news to digest from Microsoft, and a blistering review of the new proposal by Yahoo, it all just seems like noise until the shareholder meeting.

Sure, it's possible that the two sides could reach a deal. But with every passing tick of the clock, the acrimony only deepens. I mean, Yahoo swears that a financial gun was put to its head with only 24 hours to consider and accept this latest offer. Those on the Icahn/Microsoft side say there was no such deadline.

That's an easy fact, along the lines of the phantom "high fives" when Microsoft first walked. Either there was a deadline, or not. High fives, or not. A source close to Yahoo tells me, without a doubt that, there indeed was this deadline. Period.

Microsoft released a statement to "clarify." Here's a taste: "Microsoft asked that Yahoo! confirm whether it would agree that the enhancements were sufficient to form the basis for the parties to engage in negotiations over the weekend on a letter of intent and more detailed term sheets. This discussion has been mischaracterized as a take it or leave it ultimatum, rather than a timetable in order to move forward to intensive negotiations. Yahoo! informed Microsoft on Saturday that it had rejected the proposal."

What this disagreement does show is the bitterness between both sides. And how they're both so easily distracted. He said; he said. Or didn't say. It's gotten to the point now where both sides just look bad. Microsoft enlisting Icahn to do its bidding; Yahoo unable to get this deal done for the people who really matter: the shareholders. Both sides either playing games or not engaged directly enough to understand what each one is saying. Come on.

Still, give Microsoft some credit for hanging in there. But why can't this deal get done? Why can't these two sides come to terms? Why can't Yahoo keep its shareholders as its top priority?

Yahoo sources bring up some good points to me this morning: where's Icahn's management team? Who will run this company if Jerry Yang is shown the door? What will the priorities be? Is it just an online version of a real estate "short sell?" Grab control and dump it on Microsoft? If Microsoft takes Search, who on the Icahn team will run what's left?

All good questions. Microsoft says they don't matter, that the new offer essentially gets Yahoo's share price back to $33 again. And that's all that should matter.

And in a way, that indeed is all that matters: price. And shareholders will decide if that's the best deal. That is, if there's a deal to be had.

Questions? Comments?