Roundtable: Four experts dissect the Microsoft bid for Yahoo

It may be among one of the historical milestones in the history of technology, and it may never actually become a done deal. Why is Microsoft risking so much, what could it gain even by losing, and what does it really think it would gain by winning?

For an in-depth analysis of the strategy and motivations behind Microsoft's extraordinarily bold move, BetaNews on Friday spoke with four principal experts in the industry, both observers and insiders:

Jarvis Coffin, CEO of Burst Media, which manages the Burst Network of resources and tools for advertisers and publishers -- a major competitor of DoubleClick;

Michael Gartenberg, vice president and research director of leading industry analysis firm JupiterResearch;

Carmi Levy, senior vice president of strategic consulting at AR Communications, an industry research and analysis firm based in London, Ontario;

Matt Rosoff, lead analyst with Directions on Microsoft, a firm that concentrates on all aspects of that single company.

Why now?

As Microsoft CEO Steve Ballmer confirmed this morning, Microsoft had indeed been pursuing Yahoo for the past eighteen months. The revelation of this fact implies several new things, including that Microsoft's strategy of acquiring firms such as aQuantive and Tellme Networks with the objective of achieving a par with Yahoo, may have actually been Microsoft's "plan B."

Timing, our experts all agree, was critical. The first proverbial bell probably sounded just last Tuesday, when Yahoo was forced to admit its restructuring was not going well.

"Yahoo continues to stumble in its turnaround plan," AR Communications' Carmi Levy reminded us. "They continue to lag market expectations, they continue to fail to gain traction in the online advertising space, and their growth rate was significantly behind that of Google. And if this situation had been allowed to continue, they would've eventually just fallen to also-ran status -- in fact, in many regards, they already were. Shareholders were obviously upset and they wanted something done, and done soon. So exit Terry Semel as CEO, and this week, exit Terry Semel as chairman."

That was bell #2: the surprise announcement late last night of Yahoo chairman Terry Semel's resignation.

"Shareholder patience is finite, and at some point, they will expect action," said Levy. "So as Yahoo continues to flounder and its share price continues to be battered, Microsoft saw a new opportunity whereas previously it had not existed. It's always much easier to step into a situation when you are perceived as the white knight rescuing the fair damsel, than if you are in fact a hostile bidder -- and in this case, Microsoft certainly wants to present itself as a friendly bidder rescuing Yahoo and helping it achieve traction that it was unable to achieve on its own."

"How much more dominant is the combination of Microsoft and Yahoo going to look to the world than AOL looked half a dozen years ago?"

Jarvis Coffin, CEO, Burst Media

"If you look at events that have unfolded over the last year," Jupiter's Michael Gartenberg chimed in, "the departure of Semel and the fact that as recently as the last 72 hours, people are saying, 'What is Yahoo's vision? Is this new CEO working out?' And announcing layoffs...From Microsoft's perspective, it was a question of, 'Let's get this started again,' and this time they'll go and bypass the response of [the board of directors of] Yahoo, and go right to the marketplace, and say, 'Hey, shareholders! How would you like to get your Yahoo stock price from six months ago back tomorrow?"'

Indeed, the Wall Street Journal is quoting unnamed Yahoo officials late this afternoon as saying Microsoft gave them only 48 hours to respond to Ballmer's offer, thus giving credence to the theory that Microsoft was not only ready and willing, but eager to advance its offer to the shareholder stage.

"I think Microsoft has Google on the brain, and it absolutely sees this as a way to close the gap between itself and its principal competitor in terms of size and stature online, Google," remarked Burst Media CEO Jarvis Coffin. "And this transaction, if it goes through, will surely do that."

Next: What would Microsoft gain?

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