Two days before its fish-or-cut-bait deadline for Yahoo expires, Microsoft (MSFT) is sending messages to Yahoo (YHOO) shareholders through the press again. But regardless of Microsoft’s ulterior motives, these messages ring true:
- Microsoft might walk away from the deal.
- Many Microsoft employees want Microsoft to walk away from the deal.
- Microsoft might stick around and fight.
The last message was delivered through the WSJ this evening, when someone (Microsoft denies) leaked the names of the some of the directors on its board slate. The first message–we might walk away–was delivered in Milan on Thursday, by Steve Ballmer himself. And the middle message–lots of Microsoft employees hate the deal and want us to drop it–was also delivered this evening through the Wall Street Journal.
And we believe it.
Because, like us, some Microsoft employees think that Microsoft has other things to worry about besides competing with Google in search and display ads. Specifically, says the Journal,
Inside Microsoft, unrest over the Yahoo deal is focused in two areas: people in Microsoft’s online services group worried about their future and people in other Microsoft divisions who believe the task of absorbing Yahoo will divert top management’s attention and other resources away from other pressing challenges, say the people familiar with the matter.
Concern about Yahoo is also fueling what some Microsoft employees say is high attrition in the company’s online services group, in particular the teams who sell online advertisements.
Mr. Ballmer and other proponents of the deal have done little to communicate their thinking on the deal internally after an initial wave of statements, say people familiar with the company.
Microsoft didn’t include this in tonight’s message to Yahoo shareholders, but we also think another constituency is lobbying Steve Ballmer to walk away from the deal–Microsoft’s shareholders.
When Microsoft announced its bid, its stock dropped, and every time cracks appear in the deal, its stock rises. We think some Microsoft shareholders agree with us that a Yahoo acquisition will be a disaster, and we think others just think it’s an unnecessary waste of $44 billion. So we expect Steve is hearing “walk away, walk away” not just in Redmond corridors but in one-on-one meetings with big institutional shareholders.
So, yes, all this is no doubt partially just a last-ditch attempt to scare Yahoo into caving. But we think there’s also some truth to it.
*UPDATE: A Microsoft source says the employee anxiety is similar to Dow Jones employee hand-wringing before Murdoch bought the company and that it won’t have any effect on the decision.
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