Microhoo or Screw You?

Microhoo or Screw You?

Microhoo or Screw You? – Yahoos Option 1

Yahoo Should…

1. Deal with News Corp.
Several reports suggested Yahoo and Rupert Murdoch’s money machine were considering a tie-up. News Corp. would take a 20 percent or greater stake while Yahoo would take MySpace and run with it. Flickr, del.icio.us and MySpace could make a powerful social networking trifecta.

Microhoo or Screw You? – Yahoos Option 2

Yahoo Should…

2. Go in with Google
The rumored deal was that Google would supplant Yahoo’s ad system with its own. This might not be the most attractive scenario after pumping millions into Panama, but Yahoo would continue operating and receiving substantial revenue.

Microhoo or Screw You? – Yahoos Option 3

Yahoo Should…

3. Do Something Magical
With Yahoo’s second-largest shareholder Legg Mason all but blessing the deal, Yahoo’s management may have a tough time convincing the shareholders to stick with it. Yahoo needs to do something to make shareholders believe it can bring back the glory days. Okay, here’s one gamble: Fire Jerry Yang, who isn’t exactly General Patton, and hire a fresh CEO. Scott McNealy? Eric Schmidt?

Microhoo or Screw You? – Yahoos Option 4

Yahoo Should…

4. Fight Microsoft
“Do not go gentle into that good night. Rage, rage against the dying of the light.” Probably the most improbable scenario, but just as PeopleSoft did with Oracle five years ago, Yahoo could find some way to get Microsoft into court on the grounds that it is hurting its business. Such a case would likely drag on for years, with Yahoo ultimately capitulating after suffering operating losses and a tarnished brand. If this happens, no one wins, because Microsoft will get damaged goods.

Microhoo or Screw You? – Yahoos Option 5

Yahoo Should…

5. Best-Case Scenario
Yahoo should swallow its pride, stop quibbling over the value of MySpace as reports have suggested, and take the News Corp. deal. Giving up a fifth of the company is better than giving up all the goods or agonizing through a long, painful legal process.

Microhoo or Screw You? – Microsofts Option 1

Microsoft Should…

1. Host a Sit-Down with Shareholders
Microsoft CEO Steve Ballmer should be putting the major shareholders at Legg Mason and Capital Research and Management on speed dial and requesting in-person meetings to profess to all of the goodness that could come from a Microhoo when it’s all said and done. Ballmer must paint a rosy picture of life after the deal, painting Microhoo as a desktop-Internet software powerhouse catering to most of the world’s consumers in the same affable way that Google tries to present itself.

Microhoo or Screw You? – Microsofts Option 2

Microsoft Should…

2. Forget the Meetings; Just Up the Ante
Since Yahoo rejected Microsoft’s offer Feb. 11, the popular opinion is that Microsoft will lob the ball back into Yahoo’s court with a higher bid than the original $31 per share offer. Consensus among financial analysts puts the counteroffer at $35-$40 per share, driving Yahoo’s cost over the $50 billion mark. Legg Mason principal Bill Miller said $40 sounds about right. Shareholders tired of Yahoo’s underperforming stock will have a tough time looking this gift horse in the mouth.

Microhoo or Screw You? – Microsofts Option 3

Microsoft Should…

3. Talk to Regulators … Now
Microsoft General Counsel Brad Smith needs to get in front of FTC and DOJ regulators and convince them that the deal will be good for the Internet economy, saving Yahoo from a slow, painful slide into oblivion, while creating a more formidable challenger to Google. The key for Microsoft will be convincing regulators that Google with DoubleClick will turn into a Web monopolist that could harm consumers and that Microsoft could provide balance. But how to do it in a way that doesn’t smack of the pot calling the kettle black?

Microhoo or Screw You? – Microsofts Option 4

Microsoft Should…

4. Swallow Its Pride and Walk Away
This is probably the most improbable scenario with all that’s been said and written, but Microsoft could shake out the cobwebs and realize that rationalizing the Yahoo assets would make the aQuantive buy, Microsoft’s largest purchase to date, feel like Easy Street. There’s too much overlap and difficult integration. In the meantime, Google will be in position to fire FUD missiles at will to denigrate the combined companies.

Microhoo or Screw You? – Microsofts Option 5

Microsoft Should…

5. Best-Case Scenario
Microsoft needs to combine 1, 2 and 3 to ensure a successful deal. But the elephant’s stomach will burst if it tries to swallow the water buffalo too quickly. Assuming the deal is consummated, Microsoft will have to throw out overlapping pieces, carefully integrate Yahoo properties with its own, and decide which search engine to keep and how to position the brands.