Beware Microsoft's Mistake: Looking Desperate - TheStreet

Beware Microsoft's Mistake: Looking Desperate

In its eager takeover plot of Yahoo!, Microsoft looks like the bad guy while its rival, Google, shines.
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CHICAGO -- You remember that old dating wisdom about playing hard to get? Turns out it might apply to the business world, too.



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, which opened the door this week on yet another possible takeover of



. Just when it seemed like Microsoft had finally walked away from a potential deal, the company admitted they're still open to negotiations -- provided Yahoo! ditches its current board of directors.

How do the maneuverings of two tech giants apply to small business? The lesson is in the way this ongoing back-and-forth is affecting Microsoft's reputation. It's fine to be aggressive in going after what you want. But act too desperate -- or come across like a bully -- and you'll lose the battle of public opinion. Microsoft can afford to look like the bad guy, but can you?

Since early this year, Microsoft has been openly coveting Yahoo!. The flirtation and haggling went on for months, until even the most dedicated technophiles began hoping for a resolution -- any resolution.

Then, suddenly, it all was over. Microsoft made what it said was a final offer, and Yahoo! held out for more. Microsoft walked away, and Yahoo! said good riddance, even as its stock price plummeted. (You can get my previous take on the

story here


Case closed, right? Not exactly. Recently Microsoft confirmed it would be willing to begin a new round of negotiations to buy all or part of Yahoo! if a new board is elected at Yahoo!'s Aug. 1 shareholders meeting.

The impetus was financier/provocateur Carl Icahn, who publicly implored shareholders to kick out the current board, which would open the door to a Microsoft buyout. Microsoft followed up by releasing its own statement; among other things, it revealed that Microsoft's prime objective is Yahoo!'s search function, which it would be interested in buying separately (thereby splitting up the company).

Yahoo! fought back with its own feisty statement: "If Microsoft and Mr. Ballmer really want to purchase Yahoo!, we again invite them to make a proposal immediately. And if Mr. Icahn has an actual plan for Yahoo! beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it."

Desperate Micro Move

"There's a good movie script here somewhere," laughs Joe Wilcox, editor of the Web site

Microsoft Watch

. A close observer of the Microsoft-Yahoo! drama, he says that the longer it plays out, the worse it makes Microsoft look.

When it comes to Internet search usage, "Microsoft is a distant number three," says Wilcox. "They want to catch


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, and for whatever reason, the executives have decided they'll do whatever it takes. They're willing to buy all of Yahoo! just to get their search function."

As the saga to get its hands on Yahoo! drags on, Microsoft not only looks increasingly desperate, it also reveals a lack of confidence in its own search engine. "It's not good for Microsoft's public image," says Wilcox. "It undermines their confidence."

Another downside for Microsoft is how the potential deal looks to the general public. "Yahoo! is one of the original dot-coms," says Wilcox. "It's still a popular brand, and in many ways, a beloved company. Microsoft is like the guy coming in with a big club to beat a baby seal. They're willing to break up Yahoo! to get what they want, then leave the remains to rot."

True, business is not for the faint of heart. But if you're going to put your reputation on the line -- by bullying a weaker but beloved competitor if necessary -- you'd better make sure the results are worth it. In the case of Microsoft, grabbing Yahoo!'s share of Internet searches still won't bring them close to Google. (According to the most recent data from ComScore, Google gets 60% of all Internet searches, Yahoo! 20% and Microsoft 9%.)

Remember, this kind of protracted, ever-more-snippy infighting only benefits your rivals. "The big winner here is Google," says Wilcox. "It's like Christmas every day for them right now."

Elizabeth Blackwell is a freelance writer based in Chicago. She is the author of Frommer's Chicago guidebook, and writes for the Wall Street Journal, Chicago, and other national magazines.