Ballmer Drops Olive Branch, Picks Up Baseball Bat for Yahoo

Microsoft’s proposed $40 billion Yahoo takeover always had the potential to turn into an ugly street fight. Steve Ballmer’s open letter to Yahoo posted on April 5 sets a date for the street fight to start.

As Ballmer states in the letter, “If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board. The substantial premium reflected in our initial proposal anticipated a friendly transaction with you. If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal.”

While the letter reads more like one of those formal invitations to duel letters than trash talking the competition, the meaning is clear. Take the money we put on the table in February, stop the whining and be happy to make some substantial bucks before the economic recession sets in for the next couple years. Good advice for the Yahoo folks, if you ask me.

But is it good advice for Microsoft? Spending $40 billion in a hostile bid for a company full of open-source advocates running a fragmented company with an unclear strategy seemed risky from the start. That same $40 billion could buy up all the top news aggregators, vertical social networks, mobile nets, and up and coming search companies and still leave money in the bank.