The Rooney Report

AllThingsDuplicitous

Microsoft's CEO once again reiterated that he is looking to do a deal with Yahoo -- and an outright buy of the online service giant is still on the table. 

In a chat with Wall Street Journal staffers Walt Mossberg and Kara Swisher at AllThingsDigital conference Tuesday, Steve Ballmer, on stage with Microsoft Chairman Bill Gates, said anything is possible.

"We made a bid. There was a difference of opinion over its size. We walked away. We’re now talking to Yahoo about a new deal that doesn’t involve a full-on acquisition. But we reserve the right to rebid for the company if we choose to."      

It's strange. Microsoft's top brass continue to set expectations publicly that they are seeking an "alternative deal" with Yahoo -- that is, an alternative to acquisition -- but  at the same time continue to reserve the right to make a full buy."

Why the duplicitousness? Why not just say all options are back on the table?

Yahoo Chair Jerry Yang balked at Microsoft's first offer of $44.5 billion and scoffed at its version 2.0 $47.5 billion offer earlier this month. Following the last rebuke, Microsoft issued a public statement stating that it was taking the offer off the table and would not attempt a hostile and likely pricey takeover. Gates chimed in at a Tokyo press conference that indeed the deal was over -- for real.

But it's not. The smooth talking belies the heavy politicking going on behind the scenes between Microsoft and Yahoo's shareholders and board of directors, which has delayed its annual meeting as multiple parties negotiate a mega deal. Certain shareholders, namely Carl Icahn, have threatened to replace Yahoo's board of directors if the deal with Microsoft ultimately fails. Looks to me like a MicroHoo deal is very probable. Besides, Gates and Ballmer looked way too happy on stage today.

Microsoft now looking to buy "parts" or "all" of Yahoo?

Not surprisingly, Microsoft is still trying to acquire some parts of or all of Yahoo!

The Redmond, Wash. company issued a statement Sunday confirming that it has not entirely given up on a deal with Yahoo and is considering buying some parts of the Internet search and advertising company.

Yet also on Sunday, a memo written by Microsoft online chief Kevin Johnson and published by the Wall Street Journal says that the company is looking at a variety of alternatives with respect to Yahoo! and that an acquisition of Yahoo is not out of the question.

All of this follows published reports late last week that Yahoo mega-investor Carl Icahn may stage a proxy battle to unseat Yahoo's board of directors as a way to get the Microsoft deal done. On May 3, Microsoft put the lid on negotiations after Yahoo! Chair Jerry Yang rejected the software giant's "version 2.0" $33 per share buyout offer.

On Sunday, Microsoft officially confirmed it is still interested in doing a deal despite public insistences by both CEO Ballmer and Chairman Gates recently that negotiations with Yahoo are dead.

Right.

“In light of developments since the withdrawal of the Microsoft proposal to acquire Yahoo! Inc., Microsoft announced that it is continuing to explore and pursue its alternatives to improve and expand its online services and advertising business," according to the statement, posted on Microsoft's web site. " Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo! 

"Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time, but reserves the right to reconsider that alternative depending on future developments and discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties."

Is Microsoft insinuating it will try to breakup Yahoo! if a deal is not reached amicably?

Of course not.

"There of course can be no assurance that any transaction will result from these discussions," the statement read.

Smart manuevering on Microsoft's part. The statement formally re-opens the discussion, puts the squeeze play on Yang and gives Carl Icahn and other Yahoo shareholders the leverage needed to persuade the board to reconsider Microsoft's offer.

Reports suggest that Microsoft and Icahn have not spoken but this reporter gives those two parties a thumbs up for shrewd partnering. I'd bet some deal is done before Yahoo's annual meeting on July 3.

Microsoft, RIM cooperate on Live Mail, IM Services

Microsoft is reaching out to serious mobile rivals -- including RIM-- to get its Live services platform aloft.

Today, the company announced its customers will enjoy enhanced use of Windows Live Hotmail and new use of Windows Live Messenger on their BlackBerry smartphones.

The service is expected to go into operation sometime this summer. Users can and take advantage of Blackberry's seasoned real time push technology and have a dedicated inbox for Windows Live Hotmail messages, and as well as e-mail from other services in a single Inbox.

I can recall the days not so long ago when Microsoft was scrambling to get it own push e-mail service working on Windows Mobile and (Exchange Server) and gunning hard for RIM customers. It was no small feat and partners grumbled when Microsoft finally came out with a push solution and there were problems running it with Exchange. At the time, the Windows company was not interested in helping Blackberry and the Blackberry Enterprise Server in the marketplace.

As Mary Jo Foley pointed out last quarter, Windows Mobile is slipping. According to Canalys, which tracks mobile platforms, Research in Motion led the market with 41 percent in the fourth quarter of 2007, with Apple at 28 percent and all devices based on Windows Mobile at 21 percent.

Microsoft's Live platform and Windows Mobile need all the help they can get. Given the fallout with Yahoo!, and Microsoft's longstanding mobile challenges, it must increase adoption of Live services on any mobile platform. Ensuring its Live services work well on Blackberry is a good first step.

Will the Apple iPhone be next?   

Are merger talks with Facebook for real or a jolt to Yahoo shareholders?

The WSJ is reporting that Microsoft bankers have contacted Facebook about possibly buying the company -- but it's not clear what's behind the report.

The Redmond, Wash software giant acquired a 1.6 percent stake in the social networking site last year. Following its failed talks with Yahoo this week, such a deal with Facebook is possible. But is it plausible?

It's no secret that Microsoft could use a social networking site , as much as it needs paid search.

From my filter, the "news" could also be a well placed rumor planted by Microsoftees or analysts to jumpstart talks with Yahoo.  What do you think?

Microsoft-Yahoo deal over? Think Again

It's rare that Microsoft doesn't get what it wants, and it really wants Yahoo!

The Redmond brass withdrew its $33 per share offer this week after Yahoo king Jerry Yang balked at its updated proposal - but the negotiations are far from over.  Yahoo! Investors are fuming, so much so, that some pundits claim that negotiations are already back underway with Microsoft CEO Steve Ballmer -- and reportedly without Yang at the table.

And who could blame shareholders in such an unpredictable and uncomfortable economic climate? Microsoft's latest $33 per share offer was less than the $37 ante proposed by Yang but still a lovely premium for the $25 Yahoo! stock is selling for today. Microsoft's $47.5 billion offer for a company with a $33.7B market cap -- a 70 percent premium on the $44.5 billion originally offered -- is nothing to sneeze at and investors know that.

Jerry Yang is right in saying that Yahoo! is a premium brand but the online service's future success is not guaranteed. Former portfolio manager and BigTrends analyst Bob Lang points out correctly that Yahoo! had Geocities, Broadcast.com and search services up and running long before its rivals but failed to convert those Internet properties into hard cash. In the interim, newcomer MySpace snatched up the lucrative social networking business and Google ate Yahoo's lunch with YouTube and paid search.

C'mon Jerry: it's not the dot.com days before the bubble burst. The money actually has to be on the books or darn close to it before Wall Street will crown you king. Given Yahoo's track record on that front, Yang should have considered the $5 billion "enhanced offer" more seriously. Yahoo insiders may not love Microsoft but they know that flirting with the enemy -- as Yang has done with Google -- is dangerous and could translate into more customer defections than paid clicks.

Ballmer was no doubt pleased and quite clever to illuminate (and enumerate the negative impacts of) this foible in his withdrawal letter, a sudden and somewhat unexpected about-face to a rocky courtship that many thought would lead to a hostile takeover.

Microsoft's sudden passivity (especially on such an inordinately strategic deal) is suspect at best, and suggests to this humble observer that it is merely a prelude to -- or part I of -- negotiations 2.0. It appears many on Wall Street wanted this deal to happen and Microsoft's savvy and skillful walk from the deal has generated far more good will than a hostile takeover.

Ballmer's publicly-released Dear John letter to Yahoo! was belittling to Yang, no doubt part of a thinly-veiled campaign to have him removed from the negotiation table. And the tone of the note was far too cordial for a guy who hates to lose.

Bill Gates' reiteration of Microsoft's "firm" decision to retreat from the Yahoo deal at a Tokyo press conference today only reinforces my suspicion that there's chatter going on between Redmond and the other financial powers that be in Sunnyvale.

Microsoft's top brass are extraordinarily smart businessmen and skilled negotiators, and if they can't get something done publicly, they get it done quietly. When they were unable to persuade VMware to join the team, for examply, they moved on and did the next best thing, first striking a deal with VMware rival XenSource, and then ensuring that its closest software partner -- Citrix -- made an acquisition Microsoft simply could not do. XenSource is open source, after all. 

Bill Gates' day-to-day activities at Microsoft will end in July. I don't think a failed merger with Yahoo! is the way he wants to go out. And I'm sure it's not how he wants historians to cap off his business biography. A deal with that online services giant, or an acquisition of Facebook or other Internet property, is still in the cards.