Microsoft rules out Yahoo acquisition (again)

I'm not so sure it was a mistake. If you want to put on a tinfoil hat for a minute we could speculate that Microsoft wasn't genuinely interested the first time. That botched acquisition was a media circus and effectively destroyed Yahoo. Since then, consumer and shareholder confidence in both the business and leadership has completely eroded to the point where Yahoo is simply unable to compete effectively. Perhaps that was Microsoft's intent all along. It certainly costs a lot less money than having to win with superior product development.

Even without conspiracy theories and speculation it is impossible to deny that Yahoo is a much different company than it was just six months ago. Top talent has been jumping ship. There have been layoffs. Marketshare and mindshare have been on the decline. Those are all of Yahoo's most valuable assets.

Not only is there now less value in any partnership or acquisition but public perception of such a deal will be much less positive than it would have been before. In fact, it could be seen as very negative. There were already a few naysayers asking why Microsoft would want the Yahoo monkey on its back. Since then, the situation has become much worse. It can no longer be perceived as two worthy competitors to Google forming an alliance to create something great. Now, it's more like Yahoo is having a going out of business sale. The point was to display strength and now it appears weak.

Microsoft may still acquire Yahoo, but the point I'm trying to make is that it's a different type of deal now and one that would be made for different reasons. I think they're going to weigh their options and not do anything too hasty. It's not like they have to jump on this right away. I don't think anyone else is going to be in a big hurry to buy Yahoo. Even at $18 a share it's a very expensive deal that not many companies can afford.

In the end I think Microsoft probably will end up buying them, but I wouldn't be surprised if it's several months from now. I think the first deal was more about marketshare and public perception than it was about technology. Now that that's no longer a viable strategy they're probably going to want to take a serious look at what they'd be getting for their money. Besides, Microsoft's shareholders need to be convinced it's for the right reasons so it's not such a bad thing if they let things quiet down a bit and then snatch up Yahoo for even less money next year. By then it will appear much more like they're taking advantage of a great deal than betting the farm trying to beat Google.