My colleagues are infinitely knowledgeable about the Microsoft-Yahoo search deal. So, I asked them about Steve Ballmer’s vocal defense of Carol Bartz today in comments to analysts. The Yahoo CEO has been criticized – her company’s share price battered- for not demanding more from Microsoft. Ballmer, Microsoft’s CEO, argues investors have failed to appreciate the value the deal will provide to Yahoo. “People haven’t figured it out,” DJN quotes Ballmer as saying. “Yahoo gets 88% of the search revenue they have today. They have 0% cost of goods sold against 88% revenue and they have no [research and development] expense and no ongoing [capital expenditure].”
Gabby: What’s in it for Ballmer to help out Bartz, under fire for the deal?”
Colleague A: It promotes good feelings between the management of both companies. Given the tortured history of the deal, it’s probably good for Microsoft to show its softer side. Plus, the deal’s success is dependent on the two companies working well together on search. No need for Ballmer to disrupt that with hubris.
Colleague B: A is right, I think the bottom line is that the two companies have to work together very closely now and he wants to draw a line under the bad blood of the Jerry Yang era. I think it also has to be seen in the context of his general sense of glee at having pulled the deal off…Also, as the general consensus is that Yahoo was stiffed he’s been magnanimous. Speaking of the need for good feelings between management – which is definitely important – this applies even more to people at lower levels in the two companies, particularly engineers and people working at the coalface on search and advertising technology, who are the people who are really going to have to live with the consequences of the deal.
Colleague C: I would imagine it’s intended to give clients confidence that the deal will go well. If potential clients are worried that there is a conflict developing between the partners because the financial proceeds haven’t been shared appropriately, it’s reasonable to assume that they might think twice about using Microhoo. That wouldn’t be in Microsoft’s interest (and obviously not in Yahoo’s either).
Photo credit: foxnews.com
Richard Warren
July 31, 2009
Microsoft, Yahoo, and all the other search engines together have less than 2% of search engine traffic to my blog. You may want to check yours. I suspect that Google does have more than 90% of the search market to itself, and that all the ratings that give Yahoo, Msn, et caterva anything more than a small fraction of the market are fake. Bottom line: Yahoo and Microsoft are irrelevant. Personally I believe Ballmer is a fool, and I feel sorry for however needs his support.