SEO Blog

Last week I wrote a rather breathless account of how exciting the weekend was going to be. Microsoft was going to initiate extreme hostilities against Yahoo! in its bid to take over the elder search portal. Microsoft CEO Steve Ballmer had imposed a 21-day deadline that expired last Saturday and the world expected immediate and brutally forceful action. Nothing happened. When Sunday morning rolled around I felt somewhat burned…

Given the lack of events last weekend, it’s hard to get all excited about the latest round of news, rumours and innuendo but I get paid to get excited about this sort of thing so here goes…

He’s gonna or he’s not. It’s come down to a the simplest of complex choices for Microsoft CEO Steve Ballmer. An emergency Microsoft Board of Directors meeting held yesterday gave Ballmer the absolute power to make a decision to move forward into hostile territory or retreat to the relative discomfort of his Redmond Washington office. The decision is expected to be announced this weekend, possibly as soon as this afternoon.

It’s noon-ish on Monday and nothing of note has happened on the Microsoft - Yahoo! front this weekend. Observers expected to witness the fireworks of brinkmanship and brimstone as the three-week ultimatum issued by Microsoft CEO Steve Ballmer expired at midnight-ish Sunday.

Though nothing happened over the weekend, most expect Microsoft to make an announcement early this week. What that announcement will bring is another question. Yahoo!’s Board has mounted a stiff and surprisingly strong resistance to the acquisition attempt, seemingly in a bid to drive Microsoft’s offer higher. Microsoft however, has warned Yahoo! it does not intend to increase its offer.

Some financial analysts are now predicting that Microsoft could just pack up and walk away, leaving Yahoo! spinning and reeling after four months of frantic dodging.

Perhaps this period of Sitzkrieg has been part of Microsoft’s overall strategy all along. Even if it doesn’t acquire Yahoo!, Microsoft has succeeded in weakening Yahoo!’s position and in forcing Yahoo! to alter its business plans well into the future. In short, Microsoft has totally knocked Yahoo! off its game. Even it it walks away, Microsoft has won position against its #2 rival.

If you’re a Yahoo! shareholder today,
you’re in for a big surprise,
if you pick up the phone today,
prepare for a long weekend sigh,
for every Microsoft C-Level freak,
is going to invite you out for a drink,
for that’s they way that Microsoft
get’s to take Yahoo!
(to the tune of The Teddy Bears’ Picnic)

Three weeks ago, Microsoft CEO Steve Ballmer laid a 21-day deadline down in front of the Yahoo! Board of Directors. Tomorrow is the expiration date of that deadline. If Yahoo! doesn’t acquiesce to Microsoft’s acquisition bid, Ballmer has threatened to initiate a proxy fight for control of the Yahoo! Board.

There are a couple scenarios that could play out in the coming 24-hours.

The first is the most obvious. Microsoft goes headhunting in order to gain support for a Micro-hoo friendly slate of candidates to present at Yahoo!’s next annual general meeting in June. This is considered the most likely outcome, assuming Yahoo! continues to put-off Microsoft’s offer.

The second scenario is far less obvious and somewhat less likely. Microsoft walks away from the deal, leaving Yahoo! to continue the business of being second banana to Google. That outcome is possible but, after the three month effort and investment put in by Microsoft, unlikley.

“And when you’re up, you’re up,
and when you’re down you’re down,
and when you’re only half-way up,
you’re neither up nor down”.
- The Grand Old Duke of York, nursery rhyme c. 1793

Yahoo! has released Q1 2008 numbers in advance of it’s investors’ conference call which starts in about ten minutes. The report shows that Yahoo! made slightly more money in the past three months than it did in the similar quarter of 2007, but not much more. The report also shows that Yahoo!’s earnings are down slightly from the last reported quarter, Q4 2007.

Yahoo! reports revenues of $1.352billion in Q1-08, a $169million or 14% improvement over the same period last year. While still proving growth in billable services such as paid search advertising and display advertising, Yahoo!’s growth comes at a slower pace than that of rival Google. Still, a 14% increase is likely higher than expected by investors and certainly higher than anticipated by the search marketing community.

That wasn’t enough to improve the net-income per share projections which have hovered around the twelve cent mark for the past year. In fact, Yahoo!’s income-per-share declined by two cents per share from Q4-07 to $0.11/share, the same return offered in Q1-07.