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Rory Cellan-Jones

Microsoft vs Yahoo - post-match analysis

  • Rory Cellan-Jones
  • 4 May 08, 08:58 GMT

A few hours ago the , not with a bang but a whimper. So with the game over, let's assess the winners and losers.

Microsoft

On the face of it, Microsoft certainly comes out of this pretty badly. It has huffed, and it has puffed, but instead of blowing Yahoo's house down, it has walked away meekly into the night, .

Did it realise, during the three months from bid to retreat, that Yahoo was not such a prize after all? In his letter to Jerry Yang, Steve Ballmer explains why he decided not to go hostile: "Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft."

He goes on to say that it is the threat of Yahoo outsourcing a key part of its business to Google - the tactic adopted by Jerry Yang a couple of weeks ago - which has really been the killer blow.

We've been outmanoeuvred, appears to be the message from Microsoft. A Machiavellian interpretation of the retreat is that Microsoft will sit and watch Yahoo's share-price plummet - and return with a lower offer at the end of the year.

But this episode hasn't been the finest hour for a company which prides itself on its strategic nous and clear communication.

Yahoo

No wonder Yahoo sounds jubilant. Here's Jerry Yang: "I am incredibly proud of the way our team has come together over the last three months."

Proud, too, no doubt that the tactics which have been derided by many have paid off in the short-term, preserving an independence that just about everyone thought was doomed.

All Mr Yang has to do now is convince his shareholders that it's worth enduring some short-term pain, in the form of a plunging share price, in return for the long-term gain of a resurgent Yahoo.

Oh, and having tacitly admitted that Google's technology is so superior to his own that he's handed over a key part of his business to their care, he needs to explain what Yahoo is all about - to his staff, customers and investors.

Google

What a bright and sunny Sunday for those clever chaps at Google. Without spending a cent, they have stuck a spoke in the wheel of the Microsoft machine, and brought its efforts to mount a serious challenge in online advertising to a halt.

The only cloud in the sky is that the world has now woken up to the fact that Google is almost as dominant a player in web advertising as Microsoft is on the desktop - and that could mean a few knocks on the door from the regulators in the coming months.

So Google played a blinder, Yahoo was more adept in defence than in previous games, and Microsoft bottled it in front of goal. But I've a sneaking suspicion that we may get a rematch before the year is out.

Darren Waters

Walking away...

  • Darren Waters
  • 4 May 08, 08:11 GMT

How mistaken was I?

I thought too much was at stake for Steve Ballmer, for Microsoft to walk away from Yahoo.

But he was speaking the truth to staff when he said on Thursday he wasn't afraid to ditch his pursuit of Yahoo.

So what does this mean?

For Microsoft it means it has to "go it alone" in the web landscape. It has to find a way to compete with Google - on search, on services, on advertising.

No-one doubts that Microsoft has the engineering talent to match any firm in the world - but can it be nimble enough? Can it turn good ideas into compelling products?

The $44bn it would have spent on Yahoo is now available to plough into products and ideas. With initiatives like on the horizon the company is beginning a process of trying to make itself relevant to 21st Century web users.

But this is Microsoft's last chance. It failed once to adapt to the web age. It cannot afford to fail again.

080506_yahoo211.jpgFor Yahoo this brings relief all round. In the last few weeks Yahoo had done everything in its power to make the firm as unattractive to MS as it possibly could - including hopping into bed with Google to trial its rival's ad search technology.

Yahoo boss Jerry Yang, in a today, talks of the firm's "important transition". He knows that Yahoo has to make itself relevant to users once again.

Somewhere in the last few years Yahoo went from being the most important firm on the web to an also ran.

The company has already begun a process of - bringing together all of its services into one coherent whole.

I also think it would have been a painful process to integrate Yahoo, its staff and mindset, into Microsoft.

Yahoo is a much more open company than Microsoft; open in the sense of standards.

Mark Shuttleworth, the Ubuntu promoter, told me a few weeks ago that a combined MS/Yahoo would have been "healthy" for Microsoft.

"Talking to Microsoft employees I get the sense they realise they can't transform that company into a Windows-based company without killing it," he told me.

That change won't now happen. So perhaps Microsoft has missed an opportunity here to re-invent itself.

For Google it means jubilation: delight that they are now facing two firms with a smaller web footprint rather than a genuine single competitor.

The Mountain View company, I'm sure, will also say it is pleased that a firm with a poor track record with regards openness has not swallowed a major competitor.

No-one can ever say the world of the web is dull.

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