Yahoo/Microsoft collapse, the morning after

I thought the Microsoft/Yahoo merger would be a disaster for both companies, but the news of Microsoft’s withdrawal of its offer should not be greeted with cheers in any quarters yet. Most reports of the story have noted the possibility that this is just a feint on Microsoft’s part. I could be wrong, obviously, but I can’t believe Ballmer and company are abandoning the field. It’s just not their DNA. They fight to win. They hate to lose. They throw chairs at walls when they’re frustrated. The antitrust ordeal made them more cautious in public, but I can’t believe they’ve become pussycats in private. If they’re really giving up, it means that Microsoft has become an utterly different company from what it used to be, and I just don’t see that.

Sure, after the last few months they may feel (accurately) that an acquisition would result in mass exodus from Yahoo because of corporate-culture incompatibility –i.e., it appears that everyone at Yahoo hates Microsoft’s guts, and everyone at Microsoft despises their counterparts at Yahoo (I’m talking about the corporate leadership — engineers tend to be more catholic in their perspective, at least sometimes). But what Microsoft wants from Yahoo is market share, not talent, so I don’t think this really matters to them.

Instead, they’re saying to Yahoo, “OK, you don’t like our price? Let’s see how you like what the market does to your share price, what the shareholder suits do to your legal budget, and what the withdrawal of our offer does to the other negotiations you’ve got going.” It’s a smart hardball move, at least in the short term. We’ll see how it plays out over the next couple of weeks.

Other interesting first takes:

Paul Kedrosky — “Yahoo (and maybe Microsoft too) reminds me of that crack suicide squad in Monty Python’s Life of Brian.”

Kara Swisher — “Kind of like Oscar Madison and Felix Unger, but not funny in any way at all.”

Mike Arrington — “Google was the big winner in a Microsoft/Yahoo acquisition attempt, no matter what the outcome. But among the possible outcomes, a broken Yahoo and a frustrated Microsoft almost certainly result in increased market share for Google.”

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