Microsoft Sends a "Hard" Message

Yahoo Beach is surely getting softer by the minute, as Microsoft seems to have executed two textbook spin sorties today, each surely designed to minimize resistance once the software giant actually launches a ground war to acquire Jerry Yang's web portal company.

The first sortie came early in the morning, with the NYT"s Deal Book reporting that "people briefed on the matter" said that Microsoft's board would be authorizing a proxy fight later in the week.

In addition to revealing that Microsoft would seek to replace the current board by nominating its own slate, the strategic leak more importantly spelled out the economic logic for going hostile. It seems spending $30 million to fund a hostile offer is preferable to dishing out an additional $12 billion to meet Yahoo's espoused minimum bid requirement.

By making that logic public, Microsoft effectively put the current Yahoo board on notice that that there would be no valor in ignoring the basic economics of the deal and sentimentally clinging to independence, a reality Deal Book's Andrew Ross Sorkin and Yale's Jeff Sonnenfeld confirmed with Joe Kernen on CNBC.

The second sortie came about an hour later, as AP reported that Microsoft founder Bill Gates had said the previous day that his company would not budge on price.

''We sent them a letter and said we think that's a fair offer. There's nothing that's gone on other than us stating that we think it's a fair offer,'' the Microsoft chairman said Monday. ''They should take a hard look at it.''

As already noted, Microsoft had already made it clear that it is well prepared to go beyond the easy way of claiming Yahoo, and so Jack Flack offers the full translation of the Gates "hard look" quote.

"Jerry, this is a hard offer. You should understand we will play hardball. If we are forced to go hostile, life will get hard. We hope your board is not hard of hearing."

With Microsoft's economic logic and notorious resolve now fully displayed, do not be surprised if the Yahoo board moves quickly to make sure it pre-empts a formal announcement of a hostile bid from Microsoft, suddenly allowing that "dialogue" might now be appropriate.

And finally, all good spin watchers and scoop counters are surely wondering why the world's premier wire service waited overnight to reveal the Gates proclamation? The AP story ends with a telling note.

Gates' comment Monday was in response to a question during a phone interview about an unrelated effort to give students free access to certain Microsoft software.

Jack Flack can only speculate. But his flacky-senses tell him that reporter Jessica Mintz was likely given access to Gates only after agreeing to clear ground-rules that the conversation had to be focused on the philanthropy project, and that any other words from Chairman Bill would be off the record. Reporters will sometimes agree to such restrictions in hopes of sneaking in a news-relevant question or two during the casual banter before and after the interview itself, which apparently Mintz did.

But no reporter wants to burn the bridge back to Gates, and thus Mintz likely stuck to her original agreement. Even so, once Sorkin and company broke with their report, AP obviously knew it had to run with what it had, likely warning the Microsoft flacks that it had no choice.

(Proud of its scoop, the NYT made the point of posting the AP report, cutely tagging it with a clear time stamp.)

The AP interview's close timing with the Deal Book leak would suggest a clever wiring of multiple, loud explosions.

But then again, it could just be a coincidence. After all, what's so unusual about Bill Gates taking a break from a $44 billion acquisition to do an interview with a wire reporter about free software for students?

Add Your Comment

Add Your Comment

Report Abuse

Archive

May 2008

Categories

Links