Last Saturday, Yahoo leaked news that Yahoo (YHOO) would be meeting with Microsoft (MSFT) and AOL (TWX) this week. We assume these meetings happened as planned. Given that we haven’t heard anything about what happened in the meetings, however, we assume that the answer is “not much.”
Specifically, we assume that Yahoo and Microsoft had another meeting in which the discussion went something like this:
YAHOO: Hi, Steve, thanks for coming down again. Are you going to raise your offer?
MICROSOFT: No, Jerry, I’m not going to bid against myself.
YAHOO: OK, great, then we’re going to spend the afternoon kite-surfing.
The next big event in the Yahoo-Microsoft negotiation, of course, is next Tuesday, when Yahoo reports earnings. As we’ve said, we think Yahoo’s leisurely approach to the Microsoft negotiations under the threat of a lowered bid almost guarantees that Yahoo’s quarter was, if not strong, at least very solid.
Assuming this is the case, the question will be, “What happens next?” Or, specifically, since Yahoo has already rejected the offer, what will Steve Ballmer do?
We think the advantage shifts to Yahoo. We think you’ll probably hear about a more definitive Yahoo-Google partnership next week and that this will raise the pressure on Microsoft to raise its bid. We think Microsoft might use Yahoo’s strong quarter as an excuse to not lower its bid (or, if the quarter was really strong, even raise it). After all, one reason Microsoft threatened to cut the bid was its theory that Yahoo’s business has meaningfully deteriorated since February 1. If it hasn’t, this reason presumably no longer exists.
[The real reason Microsoft threatened to cut the bid, of course, was to scare Yahoo into negotiating. Yahoo called this bluff. Then it rolled out the Google search test, which was a brilliant move. If Yahoo can follow up the Google play by posting some strong Q1 numbers, we think the advantage really will shift to Yahoo.]
And the AOL meeting? Yes, we suppose it’s possible that we’ll get a big Yahoo-AOL announcement next week. We don’t think it’s likely, but it’s certainly possible.
Business Insider Emails & Alerts
Site highlights each day to your inbox.