Microsoft/Yahoo merger: so what happens now?

It's IT Blogwatch: in which Microsoft's deadline expires for Yahoo! to accept its takeover terms, and we wonder where they'll go from here. Will the offer improve, will Microsoft go proxy-fight-hostile, or will Ballmer just give up? Not to mention the top 22 geek bumper stickers...

Juan Carlos Perez sez:

Yahoo Inc. failed to agree to an acquisition deal with Microsoft Corp. by Saturday, the deadline Microsoft had set for wrapping up negotiations. Now Microsoft must decide whether to pursue a hostile takeover via a proxy fight or to drop the bid and seek other acquisition alternatives. All along, Microsoft's management had strongly indicated that it would pursue Yahoo via all available options, including the hostile route of ousting the current board by proposing its own slate of director candidates at the next Yahoo shareholders' meeting. But Microsoft CEO Steve Ballmer and Chief Financial Officer Chris Liddell softened that stance in public comments last week, saying that giving up on the acquisition would also be an option. On Sunday, Yahoo declined to comment ... In the meantime, Google would no doubt seek to capitalize on the internal turmoil within Microsoft and Yahoo by trying to poach clients and valuable employees. more

"What now?" asks Paul Glazowski:

We’ve effectively (or perhaps ineffectively, depending on one’s take on the rather ugly drama) arrived at zero hour ... What began as a public bid for the Sunnyvale-based Web giant just before the clock struck February has turned into something that is nearing its fourth month and may well run close to Yahoo’s annual board meeting, which the company must orchestrate every 13 months ... I still consider it likely that Microsoft will achieve the ends it seeks, regardless of the means taken to get there. Why? Well, given Yahoo’s release of good earnings this week, and Microsoft’s subsequent publication of its own growth trend, we’re more or less in the same place as we were many weeks ago ... Microsoft will not be forced to “artificially” increase its pledge ... if push comes to shove, Ballmer is probably very willing to follow through on his threat to do away with formalities and circumvent the Yahoo board with the promised proxy tactic. more

It's at times like these we turn to Todd Bishop:

During an appearance Friday afternoon at the University of Washington, the Microsoft chairman at one point referred to his company as if it were second in Internet search. In reality, Microsoft is in third place in search market share -- although it would move into second place, still well behind Google, if it's able to bring Yahoo into its fold ... Whether it was a slip or a sign of Microsoft's determination to finish the deal, the comment was the closest Gates came to even alluding to the acquisition drama. more

Henry Blodget watches and waits:

All eyes are on Microsoft's next move. We asked Microsoft whether that move would come on the weekend, or whether we could just forget about corporate M&A wars and enjoy a Blackberry-free weekend in spring. We were politely referred to the comments Microsoft CFO Chris Liddell made on Thursday's conference call: [U]nless we make progress with Yahoo towards an agreement by this weekend, we will reconsider our alternatives. We will provide updates as appropriate next week. So that sounds as though we have at least 48 hours or so to refine our bets (but we're taking our Blackberries). more

As a mother, Kara Swisher is here to help:

Sources tell me Yahoo’s (YHOO) board might gather Sunday to consider their options, although plans are still in flux. Microsoft (MSFT) sources indicate that it will decide on its move–fight or flight–by Monday or Tuesday of next week, even though the company set today as a deadline for initiating a proxy fight ... [but] both sides were waiting for the other to make a move on starting negotiations–Yahoo for a higher price from Microsoft and Microsoft for a meeting with Yahoo to talk about price. This is worse behavior than my two sons locked in a staring contest over who gets to be the one to hold the plastic dinosaur first. more

Eric Savitz thinks the thinkable:

Would Microsoft (MSFT) CEO Steve Ballmer actually walk away from the company’s bid for Yahoo (YHOO) rather than deal with the stresses and risks of making an unfriendly offer? It’s certainly possible ... what would happen if they drop the offer? Yahoo shares would likely drop below $20 a share ... Microsoft shares would likely stage a modest rally ... Jerry Yang will have won a Pyrrhic victory ... Steve Ballmer will be left to figure out a new plan ... Google’s Eric Schmidt can hold a celebration ... For large Yahoo holders, the prospect of MSFT walking would either be a huge buying opportunity, or a disaster, depending on your perspective. more

Joseph Hunkins is long on YHOO:

I'm certainly not envious of the Yahoo board right now. If Microsoft drops their current offer Yahoo stock is likely to drop severely - perhaps even below the 52 week low into the high teens. Shareholders will be understandably upset if fighting Microsoft has led to nothing more than a 30%+ drop in share price. Some have suggested a Google advertising partnership may help matters but I'm skeptical that the broad market views Yahoo as favorably as Yahoo seems to think. If they did one would expect Microsoft's share price to be faring much better than it has while people await the takeover verdict. In fact most stock watchers are convinced that if Microsoft announces they are dropping the quest for Yahoo MSFT will see a significant jump in share price. more

But Ashkan "froosh" Karbasfrooshan asks, "Are you people for real. Or just crazy?":

A lot of otherwise smart people are asking: “is MSFT going to walk away from YHOO” presumably because Jerry Yang does not want to lose control of YHOO to the point of torpedoing everything in sight. Nice. Score one for fiduciary duty ... Let’s look at some of the facts: MSFT’s quarter was not a grand slam, further explaining why MSFT needs to make a big, needle-moving move in online ads. YHOO’s quarter was all right, meaning it’s not as crappy of a company as the biggest critics would want you to believe. MSFT’s offer of $31 for YHOO remains the best bet for shareholders and MSFT will go direct to shareholders ... That line about the engineers? A lie. MSFT just wants the eyeballs, traffic, client deals, revenues, and audience. The people are not that important in the mix here. People, start planning for YHOO + AQNT + MSFT world wide web. more

And finally...

Buffer overflow:

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Richi Jennings is an independent analyst/adviser/consultant, specializing in blogging, email, and spam. A 20 year, cross-functional IT veteran, he is also an analyst at Ferris Research. You too can pretend to be Richi's friend on Facebook, or just use boring old email:

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