Yahoo! Is Not Microsoft's Equal

Despite press reports pitting them as equal rivals, Yahoo! lacks leverage here.
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Microsoft (MSFT) - Get Report sent a letter this weekend that was akin to a frontal assault, and as the market awaited Yahoo!'s (YHOO) response this morning, and even after that response came, the realistic can agree: Yahoo!'s chances are so broken down that you might as well take them out of service.

The company has spent two months pursuing the unlikely prospect of an alternative deal to no avail. Meanwhile, the stock market, economy and even the online search business (see:

Google

(GOOG) - Get Report

) has lost structural strength, no matter how many

press releases

about new products Yahoo! issues, which are dutifully turned into articles by the business media without making any even remote connection to the Microsoft deal. (Think they might be trying to pump up the stock price here out of desperation, dudes? Or do they earnestly have yet another blockbuster product to unveil?) The Business Press Maven will give you two whole seconds to figure that one out.

They Just Don't Get Microsoft-Yahoo!

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Yahoo! is simply working in a very confined space, and with even Microsoft's stock down since the deal, collapsing the value of the original offer a bit, will be lucky (though probably likely) to get out of it with a few face-saving bucks added to the original total.

But the "we are poised for a terrific fight" articles we read this weekend were built on a far catchier story line than "the messy end game has begun." Catchy, of course, does not mean accurate. Yahoo! should not, as this morning's letter seems to all but allow, be portrayed as a company that has several means of escape here. Notice how it effectively begins and ends with a coded plea for those few more bucks?

The business media paid that no never mind though, opting instead to set up a battle of the titans -- with the same-sized battle axe.

"Yahoo Is Said to Rebuff Threat Over Bid," says

The New York Times

this morning, anticipating this morning's letter while giving the fightin' words too much credence.

Look at the lead: "Yahoo is expected to respond by early Monday to a letter from Microsoft that threatened to lower the price of its buyout offer and take it directly to Yahoo shareholders, people close to the company said on Sunday."

Take it to the shareholders? But that's tantamount to capitulation. You show me any shareholders of substance and sane mind who don't want this deal done soon, who wouldn't jump at the chance of a couple points more than the original. Given the chance of the deal crumbling altogether, they'd gladly take the original.

The New York Post

reported

sources telling them

that Yahoo! has talks still ongoing with

Time Warner

(TWX)

and

News Corp.

(NWS) - Get Report

, implying negotiating leverage on Yahoo!'s part.

With a big caveat that I will get to shortly, any consummation of these alternative deals appears the definition of unlikely. The deal with Time Warner, according to the

Post

, is a partial one for AOL to merge into Yahoo! and the parent company to take a 20% stake. It seems something on the order of a practical joke to imply that Yahoo! shareholders would approve this over a full-blown buyout from Microsoft. But here's that caveat: the

Post

ran early and hard with the Microsoft-Yahoo! rumor and though the stories appeared to be thinly sourced, they proved right and The Business Press Maven very wrong.

So I disagree with the

Post

again here for what I believe to be obvious reasons, but as a reader you should weigh the record too.

The Wall Street Journal

, for its part, seems to plant both feet firmly in the air. Its headline, "

Microsoft Ratchets Up Deal Pressure on Yahoo!

," seems to say that Steve Ballmer's letter was part of a negotiating ploy. But the lead gives credence to Yahoo! fighting back on equal footing, with real live options: "Microsoft Corp. is turning the screws to try to force Yahoo Inc. to agree to a takeover, but Yahoo remains focused on finding an alternative."

Within a few sentences, we have Ballmer's negotiation strategy set side-by-side with Yahoo!'s options:

"Some in Yahoo's camp view Mr. Ballmer's latest move as a negotiating strategy, and they believe there is still time for Yahoo to pursue alternatives to an acquisition by the software giant, say people familiar with the matter. One of the people says some members of Yahoo's management would prefer not to sell to Microsoft and are still looking for another deal that would allow Yahoo to avoid that."

Anyhow, one of The Business Press Maven's guiding principles is not to compound a mistake by repeating it. And I did not believe Microsoft would make this bid originally, so we'll see whether I'm posed to double dip on mistakes here. But if Yahoo! truly has options right now and is participating at this point in a fight of equals with Microsoft, I'll eat my hat without condiments.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven� column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;

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