SALON

Monday, Feb 11, 2008 8:03 PM UTC

Yahoo tells Microsoft to make like a banana

... and split. Microsoft, here's your chance to bow out.

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Topics: Microsoft,

The news echoed through the tech world all weekend, but today comes the official announcement. Yahoo has rejected Microsoft’s $44 billion takeover bid, to no one’s surprise.

The company says Microsoft’s offer “substantially undervalues” Yahoo, which is funny because Microsoft’s offer represents a big premium over what investors currently value Yahoo.

Yahoo’s insisting it’s worth more is kind of like those dudes you see on Yahoo’s dating site who say they’re 6-foot-2 when everyone can see they’re just a hair over 5-foot-7. The best way to deal with those guys is to avoid them like the pestilence. They’ve got issues, those guys.

Microsoft, are you listening to what I’m saying? Sure, the merger will feel good at first; these things always do. But you are so going to wish you never got in bed with this C-R-A-Z-Y tech company that, in a transparent attempt to show the world how fun and happenin’ it is, still signs its name with a juvenile ! and whose CEO, I kid you not, writes formal letters to his employees in lowercase.

Microsoft, buddy, here is your chance. In the week-plus since you proposed this crazy idea, almost everyone has panned it. Nobody can tell what you see in Yahoo, what you hope to do with it, why you’re willing to put so much on the line for … well, for that.

Not just Wall Street analysts and chatty Cathys like myself have been grumbling. Microsoft, your shareholders, they hate this idea; you’ve lost $40 billion in market cap since you floated the deal, enough to seriously reduce the offer price for Yahoo, meaning that you’ve now got to put up even more shares to do the deal at the price you originally promised — and more, still, if you want to meet Yahoo’s crazy demand that it is worth more than anyone else is willing to pay.

Why not just walk away? Once again, I’ll counsel listening to Henry Blodget: You don’t need to be in the Internet ad business. You are a software company. That’s what you do, that’s what you’ve always done, that’s what you can continue to do, and probably well, and probably for a good bit of money.

You make loads of green selling software licenses to corporations who want to keep their workers in your code. Even when code goes online — even when Office moves to the Web — these companies will still be willing to pay you for your services.

They may pay less than they’re paying you now, but they’re not going to expect to get software from you for free, in exchange for showing them ads. That’s not how your customers roll — you more than anyone else should know that.

Buying Yahoo would make sense if you needed to compete with Google in the market for advertising to consumers. But you don’t need that business. You have tried that business for more than a decade, and you’ve failed at it, but still, you’ve done fine.

Sure, no one expects Yahoo’s resistance to pose any problem to your merger plans. You can lobby the shareholders, convince them that no one’s giving Yahoo any more for its deal, and in the end you’ll probably win it, just like Rupert M. won the Wall Street Journal.

But winning is not the point. The point is to do what’s right for you. And getting together with Yahoo is just not right. With just a fraction of that $44 billion, you could invest in dozens of start-ups that could yield a bigger payoff than Yahoo. The next Google is somewhere out there, and here, I’m going to give you a big juicy hint: It is not named Yahoo! Search for innovation, Microsoft, spread our your cash on a few grand ideas. You will be much, much happier.

If you drop it now everyone will forget it ever happened. It’ll feel good. Just think about it, OK?

Farhad Manjoo

Farhad Manjoo is a Salon staff writer and the author of True Enough: Learning to Live in a Post-Fact Society. More Farhad Manjoo.

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