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Microsoft interested in Yahoo search deal, again

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Microsoft interested in Yahoo search deal, again

Chicago (IL) – We can’t really recall how often Microsoft was quoted to have said that it either was or was not interested in getting a deal of some sort done with Yahoo. As of today, however, it appears that Microsoft would want to talk to Yahoo rather sooner than later. And realistically, few actually doubt that there won’t be an agreement between the two companies. It is more a question of when Yahoo is finally screwed enough and ripe for a deal.

The anchor for the Wall Street Journal to interview Microsoft CEO Steve Ballmer was the hiring of former Yahoo executive Qi Lu to head up its online business. However, the headline of the article focused on a different topic: “Steve Ballmer: A Deal for Yahoo Would be Better If Done Soon”. A surprise?

Not really. Any journalist with a chance to get a Yahoo executive and Ballmer on the phone at the same time wouldn’t miss the opportunity to ask about Microsoft-Yahoo for the world. What is somewhat surprising, though, is the fact that Ballmer did not reject these questions but answered them very openly. And to those who thought the possibility for a deal was gone may be very surprised to read what Ballmer had to say.

Examples:

WSJ: Steve, should a Yahoo search deal come to pass with Microsoft, would Qi’s hiring make it easier for Microsoft to integrate whatever assets it acquired from Yahoo?

Ballmer: I think a search deal makes great sense for Microsoft, and Yahoo, and I think I’ve been very open about that. That’s as true with Qi joining us as it was before Qi joined us. Obviously the logistics of any such integration…can only be simpler by having somebody who will know both sides. But, that was not a factor in hiring Qi.

WSJ:  (…) Are there any kind of talks about a search deal between Microsoft and Yahoo at the moment?

Ballmer: The answer is no, but I wouldn’t tell you if there were. But in this case it’s easy.   

WSJ: Do you feel like you’re in a situation where you can go slow with regards to Yahoo and any conversations, or do you need to move quickly?

Ballmer: (…) I think good ideas are usually better done quickly than slowly, so it would probably be better for both us, and certainly for Yahoo, if we were to do it sooner than later. But at the end of the day, that would have be something Yahoo would be as interested in as I have expressed our interest.

(You can read the full interview here)

We can’t help but wonder to think that these statements are just part of Microsoft’s negotiation strategy to end up with the part of Yahoo it wants and drop those it has no use for. Microsoft repeatedly mentioned that its sole interest in Yahoo is not really technology, but its user base and reach to be able to narrow the gap between Microsoft and Google, which would be necessary for Microsoft to become more competitive in the online advertising market. Ballmer repeated this goal in the interview with the Wall Street Journal.

While Yahoo clearly had the upper hand in the negotiations with Microsoft initially, the tables have turned. Yahoo may have gambled a bit out its league: Since Microsoft demonstrated in a very convincing way that it is willing to walk away from a Yahoo deal it finds unreasonable and since Yahoo revealed that it really wants to be acquired by Microsoft, Steve Ballmer is in a favorable negotiation position. Over the past nine months, Yahoo’s market cap has dropped significantly, Microsoft has hired key talent from Yahoo and co-founder and Jerry Yang has resigned from his position as CEO.     

Microsoft’s strategy to deal with Yahoo may be considered cruel on the one side, but as business brilliance on the other. Right now, it seems that the time is on Microsoft’s side and the company can wait until Yahoo is screwed enough to be acquired in part or as a whole.