Just when it looked like the Microsoft deal was buried, here we go again. It looks like Ballmer has been talking to Icahn. Which kind of brings back memories…. Like we have said all along till the Suits are being talked to nothing would happen. Now the big question is how much is the Yahoo board in Yang’s back pocket?? –

In a letter to Yahoo’s board, Mr Icahn, said he had spoken “frequently” to Steve Ballmer, Microsoft’s chief executive, in the past week, in conversations that “lasted as long as an hour”.

Microsoft said that, with another board in place, it would be interested in discussing a deal either to assume Yahoo’s search function “with large financial guarantees” for the internet company, or to buy Yahoo outright.

The earlier offer for Yahoo’s search business, in which Microsoft would have taken over the service and paid a percentage of the advertising money it received to Yahoo, did not include any revenue guarantees for Yahoo.

Yahoo said it was open to negotiating an offer from Microsoft but that, after an overture of its own last month, Mr Ballmer had said he was “no longer interested even in the price range [Microsoft] had previously indicated.”

Turning Yahoo over to Mr Icahn so that he could sell the search business to Microsoft “at a price to be determined in a future ‘negotiation’” would not be in the best interests of shareholders, it added.

It now starts to get interesting. If Yang cannot keep the board intact then he is cooked. His hold on them is highly dependent on how much holdings many of them have in Yahoo itself. Oh and what is the comp package for Yahoo board members. They would lose all that in a Microsoft take over.

For the industry, like we have said before, its not a good deal. From Microsoft’s perspective yes they gain a search engine presence as Yahoo. That might be in doubt if rebranded as Live Search. Then the consequent brain drain as developers jump ship. Don’t forget that one. If I were a MS stockholder I might question the buy as paying a premium for something that will be highly devalued in a year.

This latest gambit might be the end of Yahoo.

Linky

At least the author of this piece thinks so here. To be quite honest, I have thought many in the IT business have infantile minds so maybe HS is a valid observation. Be that as it may, Ballmer having been rebuffed by Yahoo is now gunning for FaceBook? —

Which seems exactly the way to view the action these days around the Microsoft-Yahoo ordeal. Today’s news: Steve Ballmer has put out “feelers” about buying Facebook in the wake of ending his pursuit of Yahoo. Let’s parse the Reuters story with this perspective in mind.

Microsoft gauged Facebook’s interest in a possible acquisition after the software giant’s failed takeover attempt of Yahoo, the Wall Street Journal reported Wednesday. Steve, frustrated and hurt after being spurned by Yahoo, got out the yearbook, found the most popular girl of the moment, and decided to go for her whether he really wanted to or not.

The newspaper reported on its website that Microsoft’s bankers put out subtle signals to Facebook, the social networking website, to see if it would be open to a full acquisition. Steve didn’t want to be rejected again, so he got his friends to feel out her interest.

So one has to ask what is Microsoft’s motive for either of the acquisitions? The Yahoo attempt made some sense as they had a revenue stream and a vehicle for internet ad space. But Facebook? Yes they have some of the largest eyeballs on the planet but their revenue architecture is leveraged by Google/Yahoo. Were MS to use FaceBook and their own service they face a big revenue hit up front before growth is realized by ad buyers to the MS platform. So if MS just hell bent to buy somebody? ANYBODY?

Did Ballmer even earn a ‘letter’ when he was in HS?

Addendum: This posting from the psumptive mouth of Bill tends to confirm my observation of a Buy Anybody mindset. –

From way over in Indonesia, Microsoft chairman Bill Gates let it be known that Microsoft never needed to buy Yahoo to make headway in search and advertising. It just kind of wanted to.

“We have always felt we could do very well on our own and now that’s the path we are focused on,” Gates told AP in Jakarta on Friday. “The standard strategy for us is to just hire great engineers and surprise people at how well we can compete, even with a company that’s got a strong lead.”

Linky.

Well now, straight from Fox News — Microsoft walks out on the Yahoo bid. We’ve been saying here that Microsoft has been out of their element on this deal. I say that for this reason. According to a Wired article MS was willing to go as hight as $37/share. More than I would have expected. So the Yahoo board says no by measures not directly associated with the share price. Now if MS has gone to Wall Street with $37 share they might have had a different reception. Remember 84% of the Yahoo Market Cap is held by 10 institutionals. Had they been approached first the Yahoo board would have been cut down.

Now it could still happen. But the matter of trust would be key at this point with th wall street crowd.

“For a merger to work, you have to have good business strategy, a strong operating model with good numbers, and the best people to execute on that model,” said Hewlett-Packard CEO Mark Hurd, at a symposium at Castilleja, a private girls school in Palo Alto, earlier today. “With Microsoft and Yahoo, you’ve got two cultures with very different values and strategies. . . Friendly deals are hard enough to get done. Unfriendly deals are really, really hard to get done.”

And although Microsoft blames Yahoo for its unwillingness to negotiate,this was, in reality, never a deal Microsoft’s own shareholders could get behind: Since Microsoft first went public with its bid on Feb. 1, shares have fallen 10 percent.

Which brings up the question as to Microsoft’s vulnerability in the online space. I would ask, Microsoft has the technical savvy to build a presence. But do they have the business acumen to achieve the goal? And does the Yahoo bid cover a bigger hole on Microsoft’s part in this arena?

It appears that Microsoft has upped its ante for Yahoo above $31/share. The report, provided by AP does not indicate what the $$ amount is. But if Microsoft has upped it to $34-35 the deal will be done. The big stock holder will see to that. They smell profit in the water.

Sadly the AP report has this interesting piece –

The Redmond, Wash.-based software maker upped its offer beyond the original value of $44.6 billion, or $31 per share, according to a person familiar with the matter. The specifics of the new offer weren’t known by this person, who didn’t want to be identified because the negotiations are still confidential.

So the ’source’ does not know the details, only that a higher offer is happening. Sounds shaky so I will take it with a grain of salt. All we can do is wait.

We’re seeign more and more signs that Yahoo really does have a clue about computing in the cloud. On thursday, CTO Ari Balogh annouce they are opening more API’s.

“We are taking open to a whole other place,” Balogh said. “We are rewiring Yahoo from the inside out with a developer platform that will open up the assets of Yahoo in a way never done before, making the consumer experience social throughout and provide hooks to developers.” He noted that Yahoo has 10 billion latent connections across its properties, such as mail, messenger and fantasy sports. (Cnet)

This is the right way for Yahoo to grow, and maybe introduce a little more competiton in the search marketplace. By enabling developers to make use of Yahoo paltforms, Yahoo trafiic wil grow exponentially. Everyone wins, except maybe Microsoft.

Verizon Wireless is making changes. They are adding more services for use in their wireless network and cutting a deal with AOL.

The carrier introduced a $30-per-month plan that gives smartphone users “an unlimited data allowance” for e-mail and the mobile Internet. The plan supports as many as 10 personal e-mail accounts from providers such as Yahoo Inc., AOL L.L.C. and Microsoft Corp.’s Windows Live, and is available on three devices: the HTC Corp. SMT5800, the UTStarcom XV6800 and the Motorola Inc.’s Q9m.

Other devices will be added “within the next few months,” Verizon Wireless said in a prepared statement. The carrier previously charged $45 per month for unlimited Web access from smartphones.

The carrier also rolled out a mobile e-mail service for small and medium-sized businesses. Hosted VZEmail Services, as the offering is dubbed, is powered by Microsoft’s Exchange Server and gives users the ability to synch e-mail messages automatically to Windows Mobile-enabled devices as well as synchronizing calendars, contacts and tasks.

and…

Verizon Wireless has tapped AOL L.L.C.’s Platform-A as a “major advertising provider” of its online and mobile Internet destinations.

The operator said it will use Platform-A’s sales force as well as its technology to deliver display, mobile and video ad services. The deal grants Platform-A exclusive rights to guarantee placement within the carrier’s network; other sales partners will sell on a blind-network basis, which means marketers will have no control over where their ads will run.

The deal extends the carrier’s relationship with Third Screen Media, the mobile ad-serving platform AOL acquired a year ago for an undisclosed sum.

Most interesting is the AOL relationship. Wonder if Yahoo was aware of this possible relationship?

Compliments of RCR. Full articles here and here.

Like a basketball game near the half and the home team down by 20, Yahoo is to go into a 4 point stall using AOL for a cover on merger write offs. The rumor details here.

But I hate to say it — does this make sense? From a strictly financial view I say no. All you would have is two weak second tier players waddling down the street hand in hand. They would still face an uphill battle getting their systems integrated, layoffs, etc. Another words a 4-5 year effort to still be a number two.

But I will tell you where it does make sense — the board room. By Yahoo buying AOL from Time-Warner they take on debt and make the meal that Microsoft has to swallow that much bigger. Its a variant of the poison pill defense. Most likely at that point Microsoft backs off from any take over efforts. The Yahoo crowd then uses the cover of merger write offs to bury a lot of old bad decisions.

Its a merger of convenience folks, with little or no synergy opportunities to be had.

The wall paneled office types have responded to the Microsoft tender offer. Their claim — That by 2010 Yahoo will double operating income. Hmmm. With Bernacke breaking the dollar most firms might be able to do this on a year over year basis on the devaluation of the dollar. But I digress –

A presentation given to investors claims that Yahoo will be able to roughly double its operating cash flow over the next three years from $1.9 billion to $3.7 billion and generate $8.8 billion in revenue, excluding traffic acquisition costs, in 2010. Included in those numbers are $1.9 billion of revenues expected to be generated from display/video advertising as well as $1.4 billion from added search revenue.

“Yahoo! is positioned for accelerated financial growth - we have a powerful consumer brand, a huge global audience and a highly profitable operating model,” said Jerry Yang, the company’s co-founder and chief executive officer, in a prepared statement. Roy Bostock, chairman of the board, noted that these details provide “context for [the] board’s unanimous rejection of Microsoft’s unsolicited proposal.”

“Yahoo! represents a truly unique strategic platform within our industry. The board of directors and management will continue to work closely together to ensure that any strategic path we pursue capitalizes on that uniqueness and value in a way that maximizes the benefit to our stockholders,” Bostock said.

My general observation to most of these kind of things is — hey, you should have been offering this kind of guidance 3 years ago. Why didn’t you? Only when their pants are on fire to the Exec types stand up and smell the proxies. Which is exactly what they are doing right now, counting proxies to see if they win or lose.

We’ll keep you posted.

Linky.