Yahoo Ignores Ballmer's Tough Talk

Jerry Yang countered Steve Ballmer's tough talk with silence this weekend, as the deadline to accept Microsoft's bid for Yahoo passed unanswered. Most analysts seem to believe that Microsoft "needs" Yahoo to better compete with Google in the lucrative internet search and advertising business and will raise its bid in order to ensure that the deal is done. The way I see it, Yahoo was an $18 stock before Microsoft's bid, giving it a $25 billion market cap. Microsoft said it would pay $40 billion for the company. If Microsoft pulls its bid, Yahoo will be forced to go it alone in its battle for web dominance against Google, unless, of course some other white knight comes along. Unfortunately, not many strategic buyers are running around with $40 billion handy and problems in the credit markets make a deal this size unlikely for a financial sponsor. Perhaps only Google could digest an acquisition this size. If you ask Sergey and Larry what they think about making a bid for Yahoo they'd probably reply solemnly with: "Too many antitrust issues," before breaking out into hysterics and adding "Are you kidding? We're crushing those guys!" Does Microsoft really need Yahoo or does Yahoo need Microsoft? This question will be answered within the week. I'm betting on the latter. Feel free to mock me if I'm wrong.