Microsoft Must Up Its Ante

By Steven J. Vaughan-Nichols  |  Posted 2008-02-12 Print this article Print

For more than a year now, Group B has been doing its best to get Yahoo to radically change course. They believe that Yahoo's former CEO, Terry Semel, and current board, have been driving the company into the ground. Given Yahoo's lousy track record for the last few years, it's easy to see their point.

Eric Jackson, the leader of the group of 100 current and former Yahoo employees that own 2.1 million shares, are in favor of taking the best offer on the table. And, for now, that's Microsoft. As Jackson said in his blog, "We have no desire to see Yahoo! continue independently with the current board and management team in place."

For better or worse, though, Group B, while looking for others to join it, owns only a tiny fraction of Yahoo's total stock holdings. Microsoft is hoping that others will join with them.

I suspect, however, that Microsoft is going to have to up its ante before it can make a deal. I still think Microsoft needs Yahoo. I also agree that it's a potential disaster. And I also agree that it's going to take a tremendous amount of work to pull these two companies together. On the other hand, what other choice does Microsoft have?

As my Microsoft Watch colleague Joe Wilcox recently said, "Microsoft's bid, assuming that it is sincere, reveals that the services platform is vaporware. Sure, Microsoft has built out something, but it's not nearly enough to compete with Google. Microsoft has tacitly admitted that it's even farther behind Google than anyone suspected."

I agree completely. In chess, there's a horrible situation you can end up in called zugzwang. It's a German word that means that you've got to move but that any move you make is only going to make your situation worse, usually a lot worse. Welcome to zugzwang, Microsoft. You've got to buy Yahoo to try to improve your online position, but, for now, no matter how you do it the move is going to hurt.

I'm editor-at-large for Ziff Davis Enterprise. That's a fancy title that means I write about whatever topic strikes my fancy or needs written about across the Ziff Davis Enterprise family of publications. You'll find most of my stories in Linux-Watch, DesktopLinux and eWEEK. Prior to becoming a technology journalist, I worked at NASA and the Department of Defense on numerous major technological projects.

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