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Jerry Yang and Steve Ballmer’s love affair: I Didn’t Say No, Baby come back…

By Amarendra Bhushan for CEOWORLD Magazine Updated:November 6, 2008

Yahoo CEO Jerry Yang is in a very unpleasant spot. Yang dismissed Microsoft’s offer earlier this year, claiming that the Windows maker was undervaluing the company. Truth be told, such comments earned him no friends in Redmond and it remains to be seen just what sort of deal will Yang obtain now.

Back then, Microsoft offered to pay $33 per Yahoo share. Now, Yahoo’s value dropped to a mere $14 per share and its hard to believe that Microsoft will prove as generous as it did in the past.

A year ago its stock price closed at close to $27 per share: today it closed below $14 per share, no doubt making that final offer from Microsoft of $33 per share a very attractive one in hindsight.

Yet, for three months between February and May, Ballmer pursued Yahoo and got rebuffed, while Yang, in the eyes of his critics, seemingly tried to do his best to repel Microsoft.

He talked to News Corp. about possibly fusing with MySpace. He met with Time Warner about an AOL merger. He created an employee severance package that critics described as a poison pill. He sought a partnership with Google.

“To this day, I would say the best thing for Microsoft is to buy Yahoo,” Yang said during an on-stage chat with journalist John Battelle at a Web 2.0 summit on Internet Age companies and their business strategies.

“Did we want to do the deal? Yes.”

Microsoft has said repeatedly that it is no longer interested in buying the floundering Northern California firm.

“Our position hasn’t changed,” Microsoft said in a statement released in October. “Microsoft has no interest in acquiring Yahoo. There are no discussions between the companies.”

Microsoft walked away from negotiations May 3 after Yahoo rejected an offer it raised from 31 dollars to 33 dollars per share, which amounted to 47.5 billion dollars.

“We believed we were doing the right thing every step of the way,” Yang said. “Both sides are to blame.”

Yahoo stock was priced at 13.90 per share in after-hours trading Wednesday.

Microsoft wanted to buy Yahoo to better battle Google, which claims the lion’s share of the multibillion-dollar Internet search and advertising market.

After ending talks with Microsoft, Yahoo announced an alliance with Google to put the Internet search king’s expertise to work pumping money from its floundering rival’s online advertising.

Google said Wednesday it is ending its bid for a joint search advertising partnership with Yahoo to avert “a protracted legal battle” with regulators.

The US Justice Department vowed to file a lawsuit to block the alliance on the grounds it would stifle competition in Internet search advertising by controlling up to 90 percent of the market.

This is the same Jerry Yang who described a previous offer by Microsoft as “ludicrous”, and said that Microsoft’s behaviour was “erratic and unpredictable”; who, according to Microsoft, made changes to Yahoo’s company plan to make any takeover more costly for Microsoft and the same Yang, who claims the Google deal was scuppered by the government as it doesn’t understand their business (I think they understand monopolies well enough Jerry…)

There is a sense of tragic self-delusion emanating from the comments of this nice man. Perhaps that explains his faith in the now scuttled Google-Yahoo advertising deal. “We’re disappointed with that,” he said when asked about it by Battelle. “It was certainly very defendable. I really thought that the government in this case does not understand our industry. They have a market definition that I think is too narrow.”

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