The Microsoft / Yahoo! deal is dead. That’s a good thing, frankly. Historically, Microsoft has been better and more efficient at killing its competition than merging with it. The deal would have been a distraction, and the company has more pressing issues to focus on — for example, Windows Vista or the way that Apple is storming the barricades with iPhone.
There’s a reasonable amount of speculation that this is a tactical move by Steve Ballmer to put pressure on the Yahoo! board and Jerry Yang. Yahoo! stock will take a nose dive on Monday, and may dip lower than the pre-offer price. However, unless the Yahoo! board capitulates quickly, Microsoft is unlikely to come back to the table. This deal is all about timing — time to scale — and Google. It’s not about technology. Microsoft’s knows they have to build a credible competitor to Google quickly. Ballmer has signalled they’re going to get to work on doing that organically. In eight or ten months time, they will be well down that path, and a merger with Yahoo! will be that much more complicated and difficult to manage.
And what will be left of Yahoo! by the time they’ve finished dealing with the distraction of the inevitable shareholder lawsuits, and the continued exodus of key employees? Next week is going to be rough for Jerry Yang, but the next twelve months could be Yahoo’s own annus horribilis.