Ballmer Confirms Microsoft-Yahoo “Dialogue"*
At a news conference in Germany, Steve Ballmer seems to confirm SVP Jean-Philippe Courtois's remark last week that Microsoft (MSFT) and Yahoo (YHOO) are in talks. Or at least that's how we read Steve's latest remarks (via Reuters).
Context & Ripple Effects
Talk of a Microsoft-Yahoo pairing has been circulating for the better part of a year — a New York Times piece ran on exactly this rumor in May 2007 — but until this week nothing had come from the top of either company on the record. Now Steve Ballmer, at a news conference in Germany and via Reuters, has echoed SVP Jean-Philippe Courtois's remark from the prior week that the two companies are in 'dialogue', turning a year of speculation into a semi-official negotiating posture.
The confirmation lands on a company that has been openly signalling appetite: Ballmer told the Web2.0 crowd in October 2007 he wanted to buy companies ([[a:1180757]]), and the surrounding coverage frames this squarely as Microsoft versus Google — with Microsoft described as squabbling over control of parts of both Facebook and Yahoo while still drawing billions from desktop software. A public 'dialogue' from the CEO is how those appetites start converting into leverage.
First-order effects
- Yahoo's board and management lose the comfort of deniability: with Ballmer confirming talks on the record, any extended silence from Sunnyvale now reads publicly as a negotiating stance rather than independence.
- Courtois's earlier offhand remark is validated, which hardens expectations among investors and press that the contact is substantive enough for Microsoft's chief executive to defend it abroad.
Second-order effects
- Google — cast in the coverage as Microsoft's real adversary in a battle 'only beginning to show itself' — faces pressure to respond to the prospect of Yahoo's search and ad inventory aligning against it, whether through its own partnerships or pricing moves aimed at keeping Yahoo advertisers loyal.
- Other potential Yahoo suitors and partners (the Facebook stake is already contested territory between Microsoft and Google, per the coverage) must price their own interest quickly before a Microsoft-Yahoo axis forecloses the options.
Third-order effects
- If the pattern holds, the consumer web consolidates into a two-bloc structure — a Microsoft-aligned Yahoo versus Google — shrinking the set of independent portal-scale players and making alliance-or-sale the default strategic question for anyone left in the middle.
The trend: Portal-era web companies are being pulled into a two-camp structure organized around the Microsoft-Google contest, with Yahoo's eventual alignment the swing factor in search and display advertising.