10 Things We Learned from the Microhoo Fallout

By Clint Boulton

1. Unsolicited Bids Make for Fun Chess Games

Dodge and weave. Cat and mouse. All of the familiar business war-room strategies have been put into play since Microsoft announced its intent to buy Yahoo. There have been threats. There have been denials of claims. There have been staunch exhibitions of resolve from both sides. There hasn’t been a bid this intriguing since Oracle went after PeopleSoft.

2. Yahoo Will Jump into Bed with Google

Normally unthinkable for a company trying to grow its search and advertising share, Yahoo was scared enough of Microsoft to jump into the arms of Google. Well, not officially, but the two vendors did complete a two-week test run of Google paid search terms on Yahoo’s search engine. Ultimately, this threat proved too great for Microsoft.

3. Ballmer Can Say No to a Deal After All

If Microsoft CEO Steve Ballmer is really that obsessed with killing Google, he showed remarkable restraint in walking away from the poker table. The sunny side is that he saved his company $45 billion or more–but at what cost to the future of Microsoft’s Internet business? That remains to be seen.

4. Microsoft Believes It Can Grow Its Web Business Organically

Ballmer said Microsoft can grow its business through new services and strategic transactions with other business partners. This bears repeating because no one outside Microsoft believes it’s possible. Microsoft has never lost in a market it’s targeted to conquer, but Google may have gotten too strong and too powerful perhaps even for mighty Microsoft.

5. Microsoft Will Switch Direction

Some analysts believe Yahoo’s denial of Microsoft will make Microsoft turn in a different direction. Facebook, LinkedIn, AOL and ValueClick are four vendors experts say would help give Microsoft more oomph in the social network and online advertising markets. But even a few of those companies together wouldn’t provide the overall value Yahoo could provide.

6. Yahoo’s Yang Has Major … Guts

As hard as it must have been for Ballmer to walk away, it must have been really hard for Yahoo CEO Jerry Yang to say no to the deal-

7. Yahoo Is Working on Some Neat Stuff

Yahoo Buzz. OneConnect. AMP. SearchMonkey. Yahoo Open Strategy. It’s been years since Yahoo has been this productive in a quarter with regard to deals and strategic plans. If the company is left alone to execute for a year or two (and with the cash it could make from running Google ads on its site), it may be able to start turning itself around. But will that be enough time before Microsoft or someone else steps in to take over?

8. Google Has Mad Clout

If we didn’t know it already, we became aware of Google’s power after watching the company hijack the 700MHz wireless spectrum auction to make the FCC usher in open access. But has a company ever had the authority to make Microsoft shy away from a business move? Not since perhaps IBM before 1995. On the flip side, Google’s strength may force Microsoft to make another run at Yahoo, or at least strike a deal with another Web vendor.

9. Yahoo’s All-in-One Board Could Spell Doom

If Microsoft returns to go hostile, it could be trouble. While most public companies have a staggered board, where some of the directors are up for election or re-election each year, Yahoo’s whole board is up for re-election each year (this year, at the shareholders meeting July 3). If Microsoft launches a proxy fight and wins, it takes out the entire Yahoo board a day before Independence Day. How about those ironic apples?

10. Yahoo’s Shareholder Structure Likewise Could Spell Doom

Institutional shareholders own about 73 percent of Yahoo’s stock, and they may ultimately decide Yahoo’s fate. Yahoo does not have a dual-class share structure, which gives a company’s founding managers voting control of the company even if they don’t own a majority of the total shares. If Yang and co-founder David Filo-