Several say the two companies need to merge if Microsoft is to gain ground on Google.CARLSBAD, California (Reuters) - Microsoft Corp and Yahoo Inc seem
to hang out in all the same places but somehow keep missing each other.
That's turned speculation over what it will take to get the two of them together into something of a CEO parlor game.
Media magnate Rupert Murdoch said this week he is "mystified" the
two have not come to terms. E-commerce mogul Barry Diller said
Microsoft should never have fired a hostile shot at Yahoo if they
didn't plan to stick it out.
Yahoo board member Bobby Kotick joked that he had tried to get top
executives from Microsoft and Yahoo together to play Guitar Hero 4, the
hit video game from the company he runs, Activision Inc.
In separate appearances at the D: Conference this week, the top
executives of Microsoft and Yahoo said no progress had been made on a
merger, though they were discussing lesser deals.
The two had held abortive takeover talks over a three-month period that ended May 3, Yahoo Chairman Roy Bostock has said.
Microsoft walked away from a proposal to buy Yahoo for $47.5
billion, or $33 a share, after Yahoo rebuffed it, saying it wanted $37
a share. Then in mid-May, the companies said they had begun talks on an
unspecified deal short of a merger.
On Wednesday, Yahoo's co-founder and chief executive, Jerry Yang,
threw cold water on speculation that they might be edging back into
merger discussions.
"Microsoft is no longer interested in buying the company, and we are
talking about other things. We definitely have to understand what
they're proposing ... they clearly have an interest in Yahoo, and we
need to understand more," he said.
In an on-stage interview at the conference, Microsoft Chief
Executive Steve Ballmer said talks had broken down largely over price.
Appearing with Yang, Yahoo President Susan Decker agreed price had
always been the biggest barrier to reaching a deal.
Diller, who runs the company behind rival Ask.com, believes a merger
of Microsoft and Yahoo is necessary to gain the scale to take on Google
in Web search and advertising.
Diller expressed surprise at Microsoft's decision to withdraw its
offer and "move on" after pursuing Yahoo at regular intervals over the
past two years.
"It seems to me if you fire a gun in a hostile offer, the bullet has
to land in the heart," he said in his own on-stage appearance at the
conference on Wednesday. "Otherwise, I can't imagining firing at all."
Murdoch agreed, saying that given the original 62 percent premium
Microsoft was willing to pay for Yahoo, Ballmer should be more patient.
"You aim the gun and you fire," Murdoch said, echoing Diller. "They are not used to big deals, so they backed off."
Murdoch's News Corp has gotten nowhere in its own efforts to talk to
both sides in recent months about alternative deal arrangements
involving his MySpace Web business.
The wily 77-year-old deal-maker ruled out prospects for an
alternative deal between Yahoo and Google Inc to succeed, saying
regulatory issues would likely derail it.
And he dismissed activist investor Carl Icahn's campaign to replace
the Yahoo board in a proxy fight at the company's July annual
shareholder meeting as "helpful noise" to Microsoft and a threat that
Yahoo shouldn't bother worrying about.
"That is not serious," Murdoch said of Icahn. "Look, he wants to make a few hundred-million dollars for himself."
Murdoch's conclusion is that Microsoft and Yahoo need to lock
themselves in a room and put their last respective offers on the table
and settle on a deal.
Speaking as if he were one of the negotiators, Murdoch said "Look, if it is complicated, we will clean it up afterward."
Anticipating the flood of free advice from other executives, Yahoo
made up its own joke video in which Yang and Decker are seen being
inundated with unsolicited advice from top technology industry CEOs,
investors and media pundits.
Warren Buffett's advice to Yang? "Buy low, sell high."
(Editing by Braden Reddall)
Copyright Reuters 2008. All rights reserved. Users
may download and print extracts of content from this website for their own
personal and non-commercial use only. Republication or redistribution of
Reuters content, including by framing or similar means, is expressly prohibited
without the prior written consent of Reuters. Reuters and the Reuters sphere
logo are registered trademarks or trademarks of the Reuters group of companies
around the world.
Enterprise Applications 
