Reactions to Microsoft’s fizzled bid for Yahoo

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Microsoft Corp. on Saturday announced it has withdrawn its proposal to acquire Yahoo. After three months, and despite Microsoft raising its $44.6 billion cash and stock bid by about $5 billion in discussions this week, Yahoo in the end rejected the offer. Yahoo said it was looking for an additional $5 billion.

“After careful consideration, we believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal,” said Steve Ballmer, CEO of Microsoft, in a statement.

In a letter to Jerry Yang, Ballmer said he was also concerned about Yahoo’s pending deal with Google, under which Yahoo will carry Google search ads.

“In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo undesirable to us for a number of reasons,” he said, adding that the alliance would raise a host of regulatory and legal problems “that no acquirer, including Microsoft, would want to inherit.”

In a response issued the same day, Yahoo Chairman Roy Bostock reiterated the search engine company’s belief that the Microsoft offers undervalued Yahoo’s worth. He pointed to solid first quarter results and a positive operating cash flow outlook for this year, and said the company is still interested in deals and partnerships with other companies.

For one marketer, the “deal or no deal” didn’t make much difference.

Chad Goldsmith, e-commerce manager, marketing, search, CRM and analytics for Ergo in Demand, an office furniture and accessories company, predicted search marketing will be simplified for him either way.

“[With] the deal Yahoo is doing with Google, representing Google ads on their sites, it is easier for marketers because you are dealing with fewer channels,” Goldsmith said. “You don’t have to do keyword buys in three different places. Right now, we are feeling and managing lists with Google, Yahoo and MSN. With the Google-Yahoo [combination], it is down to two. Either way [Google-Yahoo or Microsoft-Yahoo], it is advantageous from an ease-of-use perspective.”

Goldsmith said his only concern is that with less competition, costs could increase. “I’m concerned the prices for keywords will increase even more,” he said.

George Colony, president-CEO of Forrester Research, said in his blog that Microsoft managed to dodge a bullet.

“It’s good for Microsoft that it didn’t buy Yahoo. Now it has to reform itself,” Colony wrote. “Steve Ballmer unintentionally dodged a bullet today when the Yahoo-Microsoft deal collapsed. Yahoo + Microsoft would have been a disaster—the best and the brightest from Yahoo would have gone to Google. The culture clash would have been destructive; it would have put Microsoft back in the sights of the regulators. And Yahoo wouldn’t have helped Microsoft with its biggest task at hand—adapting to the emerging executable Internet software model.”

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