Yahoo: Ballmer Blew It

Finally Ballmer’s body has developed a resistance to whatever meds he’s been overdosing on.. One investor summed up what is likely to be a somber reaction among Microsoft’s supporters on Wall Street as the implications of the abandoned Yahoo talks sink in: “This is a black eye for Steve Ballmer.”

In spite of offering what appeared to be an overwhelming takeover premium and spending three months stalking Yahoo, the Microsoft chief executive has been left empty-handed, at least for now.

Mr Ballmer was already working over the weekend to counter the idea that the failure of the deal will leave his company’s internet strategy in disarray.

“Although the acquisition of Yahoo would have accelerated our ability to deliver on our strategy in advertising and online services,

“I remain confident that we can achieve our goals without Yahoo,” he wrote in an e-mail to employees on Saturday.

Yet some observers were already claiming the failure represented a big setback in Microsoft’s efforts to create a counterweight to Google in the fast-growing internet advertising business.

“It’s clearly a disappointment,” said Martin Sorrell, chief executive of advertising group WPP, who had earlier welcomed the idea of a Microsoft-Yahoo deal as the best chance of creating a significant rival.

The failure would confirm Google’s position as the dominant online advertising business, he added. For a company that has historically refused to contemplate big mergers, seeing them as a move best left to companies in more mature industries with no other options to grow, the unsolicited bid was an indication of Microsoft’s growing sense of urgency in its attempts to catch the search giant.

In spite of investing hundreds of millions of dollars in its own search business over the past five years, Microsoft has actually lost ground in the search business against its arch-rival.

That dented the software company’s confidence in its ability to catch up on its own and contradicted its familiar “fast-follower” strategy, which in the past has seen it often catch up with market leaders by copying their approach, despite entering markets late.

Other recent discussions with AOL and MySpace could lead to alternative deals to boost Microsoft’s presence online.

However, a combination of the Microsoft and AOL online advertising activities would not represent the sort of balance to Google that a Microsoft/Yahoo deal would have, said Mr Sorrell.

For Mr Ballmer, meanwhile, the abandonment of the Yahoo deal represents one of the most prominent failures of his tenure as CEO..

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