Change Masters Twist and Shout

“It's not every day a titan of industry eats humble pie -- at least not in public. But Steve Ballmer, Microsoft's CEO, did just that this week, climbing down from his $45 billion bid to acquire Yahoo!.

“When Microsoft announced the deal in February, Ballmer hailed it as ‘the next major milestone in our companywide transformation to embrace online services, search, and advertising.’ ...

“So why did Ballmer have a change of heart about the deal? …

“If Ballmer thought he would be greeted as a ‘liberator’ in acquiring Yahoo, he was as misguided as the Bush Administration was about Iraq. Jerry Yang, CEO of Yahoo, wasn't just coy in response; he openly repudiated the offer, and his board backed him up...

“Ballmer prophesied that joining forces would yield a bounty of synergies: bringing two of the four highest-traffic Web portals under one roof; more plentiful engineering talent; enhancements in online services; and, of course, the elimination of redundant operations and staff... But then reality reared its ugly head. Antitrust considerations made it unlikely the combined company could unite the world's two top e-mail services... Ditto for instant messaging: The merged entity would control as much as 90% of that market.

“These issues paled in comparison with the lack of cultural fit between the two players. Many Yahoo employees regarded Microsoft as the enemy. And… Yang signaled he was prepared to damage the company rather than yield to the so-called evil empire. This included striking a preliminary deal with Google to deliver ads for Yahoo's search results, essentially installing an archrival's Trojan horse in the Yahoo boardroom.

“When Yahoo rebuffed Microsoft's opening bid, Ballmer huffed and puffed. He openly scorned the ‘deteriorating’ performance of Yahoo's business, only to see his prey perform above expectations in the first quarter. He threatened to ‘go hostile,’ as they say, but Yahoo's board yawned over his menacing imprecations. Yet none of this compared with the scorn he encountered among his own Microsofties, who saw the offer as yet another chapter in the continuing saga of overpriced acquisitions, sluggish innovation [Zune anyone?], and ineffective online strategies….

“So the grand gesture to secure Microsoft's status… as a major force on the Web… quickly became bogged down and unpopular, even among his own brethren...

“Leave aside that the largest acquisition Microsoft had ever made was last year's purchase of aQuantive for $6 billion... Consider that $45 billion would be enough to buy both Ford and General Motors with nearly $20 billion to spare. More pertinently, it would be enough for Microsoft to clear the market if it went shopping for other major Net assets.

“For the same money, Ballmer could roll up AOL at, say, $25 billion; either Facebook or MySpace at $15 billion; and ValueClick at $3 billion, again with a few billion left over.”

(“Why Ballmer Bailed on Yahoo; According to consultant Jeffrey F. Rayport, there are five reasons Microsoft's chief gave up on his bid for Yahoo, including its cost and its not making sense.” Jeffrey F. Rayport. businessweek.com. May 12, 2008)

WHEN YOU'RE NOT SURE what to do, why not shake things up a bit?

"You say you want a revolution
Well, you know
We all want to change the world.

"You tell me that it's evolution
Well, you know... "