Yahoo is the big loser, but Microsoft isn’t far behind

Unless you were living under a rock, you probably know by now that Microsoft decided to walk away from an acquisition of Yahoo! late yesterday afternoon. A great behind the scenes view of what happened was posted by Kara Swisher here. Earlier this week, a much smaller – almost insignificant – deal apparently collapsed as Microsoft was unable to purchase Xobni for what seem to be reasons that are similar to the collapse of the Yahoo!’s deal. Both Xobni and Yahoo! folks had an uneasy feeling of being absorbed by the Microsoft borg (of course price had a lot to do with it too). Fred Wilson seems to agree that Microsoft’s perceived pariah image in the industry hasn’t subsided. In fact, it may be getting worse under the antics of Mr. Ballmer. From my vantage point, it seemed that most technology folks were uneasy with Bill Gates’ Microsoft, but still had some respect for it as he was one of them. Steve Ballmer’s Microsoft is a different beast. Ballmer is first, and foremost, a salesman. Sales folks aren’t well regarded in this industry. Add to that Ballmer’s hard charging, and strange persona, and many techies just feel uncomfortable becoming a part of the borg. So far Google has escaped this problem, mainly because it is still a technology driven company. The famous “don’t be evil” line comes from an ‘anti-sales’ plea during the early days at Google (listen to Marissa Mayer’s interview on KQED here).

Ballmer the salesman wasn’t able to put together the package, financial and otherwise, that would have closed the deal. Sure it doesn’t make sense to bid up the price of an acquisition, especially if you just bidding against yourself, but Swisher’s post exposes the massive cultural rift between Microsoft and Yahoo…for that matter Microsoft and most other technology companies. That same cultural rift seems to have been a major factor in the collapse of the Xobni deal as well.

So, the general consensus is that Yahoo! was the big loser in the three month long saga, but I can’t believe that anyone would think that, this past week, Microsoft was a winner, at least not yet. $50 billion unspent dollars are certainly going to be used somewhere else, but Microsoft’s failures this week mean that any possible acquisition target will be looking for a higher premium to deal with borg assimilation.

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