During an appearance on Fox Business News this morning (following, rather frighteningly, Fox's score of Bill Gates and Warren Buffet live from Omaha), I was asked what was next for Microsoft after it failed to land Yahoo this weekend for $33 per share.
I said Microsoft would not just walk away, but that it would have to make another go-around. Microsoft CEO Steve Ballmer, I noted, cannot afford to lose this battle. Then the station cut to Yahoo President Sue Decker in a key breaking news spot interview.
What is this world I swim in? Anyway, I didn't get to finish my argument, so that's what this post is for. I don't believe Ballmer and Microsoft can afford to not take another stab at the Yahoo deal.
I'm not one of those who feel Ballmer will be fired if he doesn't make the deal, but I do believe the deal, or at least a similar deal to grab a major online footprint, is crucial for Microsoft's survival in the long run.
If the computing paradigm is indeed shifting to the cloud, I agree that Microsoft must roll up some serious cloud-based assets and I don't see that being a homegrown calzone, but something that must include Yahoo, AOL or some big provider of Web-based services.
Google may be dominant in search and online ads, but its greatest potential lies in cloud-based Internet services and being able to lure enterprises into using them on the cheap.
I was also asked if I believed Decker's comments that Yahoo is well positioned for growth in the next few years to turn around the company's flagging financials.
I really do, but it all hinges on execution and whether or not Microsoft leaves it alone, and whether it signs on to let Google sell paid search terms on its own search engine. Google had no comment on this pact today.
Yahoo's YOS (Yahoo Open Strategy) seems like a great game-changer, but just as Microsoft must rewrite its underlying code bases to port Windows to the cloud, Yahoo must rewire its underlying architecture to open up the social connections between people.
This could make Yahoo the premier social network. How hard will this be? Ask Facebook and MySpace, neither of which had to start with siloed connections.
I also said I expect Microsoft to come back to the bargaining table in the next 30 days to try again for Yahoo. Why not make the second time a charm?
Yahoo's stock fell $5 today, perhaps not as much as some expected, but still enough for Microsoft to perhaps wait to make a lower bid for Yahoo.
But don't expect Yahoo to give in. This is an emboldened company with Big Brother Google lurking over its shoulder.