Steve Ballmer: Victim of an Eager Press

Steve Ballmer was virtually crucified in the business press in the days after he walked away from negotiations to buy Yahoo!. At the time, I was appalled at the headlines and how they were treating the guy. Dozens of articles reported on his failure to acquire the #2 search engine. It seemed presumptive because nobody knows what happened at the negotiating table. Just because he didn't come away from the table with Yahoo! under the Microsoft umbrella doesn't mean he failed. How do we know he didn't do a prudent job? How do we know the terms weren't unreasonable? If the only acceptable outcome was in securing the deal, why even go to the negotiating table? The strongest weapon in the negotiating table is the threat to walk away. It is to be brandished and displayed. And if the terms are ridiculous, you have to use it.

Jerry Yang, co-founder and CEO of Yahoo!, appears to be emotionally invested in his company. He is worth $2.3 billion so a financial incentive to sell his company isn't there. He is probably more interested in returning Yahoo! to its pre-Google glory. There is a pending class action suit against the Yahoo! board for failing to protect shareholder interests. It seems Yang required exorbitant employee compensation for Yahoo! employees who left and who stayed. Yang also organized a massive employee walkout to protest the proposed buyout. I read that, after Ballmer abandoned the talks, high fives were exchanged among many of the executives. Under these circumstances, it seems only right that Ballmer left without a deal.

After a week of Ballmer receiving a lashing in the press, I enjoyed seeing his ultimate vindication. Ballmer himself couldn't have written a better development to the story. Carl Icahn bought several million shares and started a proxy fight. Icahn accused Yang of not looking out for shareholder interest and slated a new board, up for election in August. Icahn has stated that Yang should not be CEO regardless of how the Microsoft deal turns out. The fight has started all over again and Microsoft is in an even better position to negotiate. If Microsoft ends up paying less for Yahoo! than their final offer before walking away, Ballmer will come out in a better position than the press itself could have imagined.