Ballmer: Do Yahoo Deal Sooner, Not Later

Sick of hearing about Microsoft being interested in buying Yahoo’s search business? So am I. Just buy it already. The saga — now nearly a year old — is back in the news. Microsoft CEO Steve Ballmer is now saying that a deal should happen within the next few months, due to Microsoft and Yahoo having new “leaders” in place.

For Yahoo, that means a new CEO providing leadership. As we covered yesterday, various reports indicate that a new CEO might be named as early as next week. Meanwhile, Microsoft’s “Online Services Group,” of which search is part of, was just taken over by former Yahoo exec Dr. Qi Lu.

In Ballmer’s mind, all that fresh blood is perfect timing for a new deal. He told the Financial Times:

We now have someone in place running our online business, and Yahoo’s out looking for a CEO.

If a search deal is to be made, it’s probably to be made in the interim period for new leaders in both places.

Yes and no. It doesn’t necessarily make sense for a new CEO to decide the way to start off their reign is to sell the crown jewels of Yahoo. That mainly makes sense only because if Yahoo hangs on to search, it will continue to have Microsoft hounding away at it. Throw search to the Microsoft wolves, and maybe the rest of Yahoo will survive (or then again, decline as all other major portals that gave up their own search technology have — think Excite, Go, Yahoo, Lycos and lately, AOL).

It certainly makes sense for Microsoft to have Lu start planning as if he can tap into Yahoo’s traffic, technology and talent on the search side. Then again, that makes no sense since Ballmer himself has repeatedly said since the early attempts to get Yahoo fell apart that Yahoo is more a “tactic” than a “strategy” from Microsoft and search. He’s been at pains to backtrack that Microsoft “needs” Yahoo in anyway.

I mean supposedly, Microsoft has been spending the time since giving up on Yahoo plotting the success of its search product without needing or involving Yahoo. So why’s having a new guy come in supposed to be the right time to cut a deal? That only makes real sense if Microsoft ultimately does see an acquisition of Yahoo’s search business as necessary.

And it does, of course. The on-again, off-again stuff continues to be tiring. It’s like that classic scene in The Sure Thing, when John Cusack is imaging meeting up with the woman who’s supposed to be the “sure thing” for a hookup. She tells him:

“You want it. I want it. You know I want it. You don’t have to bullshit me to get it. And even if you do bullshit me, you’ll still get it.”

Either Ballmer or Yang could have been saying this line. Hell, both have said it at various points, that they want each other. So cut the bullshit and do the deal.

If things feel on-again, off-again, that’s also in part down to confusion between Microsoft wanting to buy ALL of Yahoo versus just the search business.

Buying all of Yahoo is something Microsoft clearly no longer seems interested in, most likely because it would attract the same anti-trust attention on the email providing front that a potential Google-Yahoo deal generated on the search advertising side. Why Microsoft didn’t realize this when it first tried for Yahoo remains a mystery — it lost valuable time there instead of negotiating a search-only deal.

Microsoft is interested in buying the search business, however — no ifs, ands or buts.

Let’s go back to November, when current Yahoo CEO Jerry Yang was widely ridiculed for saying Microsoft should buy Yahoo. He commented at the Web 2.0 Summit:

“To this day the best thing for Microsoft to do is buy Yahoo,” said Mr Yang.

Yang was slammed all over the place for this, as if he was some weakling begging Microsoft to save him. And to be fair, Yahoo is in a weaker position these days. But he also said:

“As far as a search deal goes, we are open-minded about it. The last time we felt the deal was not a good one for the company but that doesn’t mean we won’t do one.”

That didn’t make headlines. No one wrote, “Yang: Microsoft Should Cut Search Deal With Yahoo” (not even us, at least in our headline) It was all about buying Yahoo as a whole.

Soon after, big headlines came out about Ballmer saying thanks, no thanks to buying Yahoo — making Yang seem like a laughingstock. From Reuters:

“We made an offer, we made another offer … We moved on,” Ballmer told a business luncheon in Sydney on Friday

The headline was “Microsoft CEO pours cold water on Yahoo interest,” but then there was also this in the story

He added that he thought there were still opportunities for some kind of partnership around search.

Of course there is. They both want it. It’ll probably happen. But I don’t think Microsoft will be able to accelerate it with the latest “fresh blood” pitch. Instead, the company is likely to lose even more time taking on Google. Ballmer should have gotten it together with Yang back in November.

Meanwhile, Ballmer continues to worry about Google. From a nice interview with News.com, when asked what takes up more of his time, Google or the economy:

Well in general, the answer is: Google, Google, Google, Google, Google. Now, the truth of the matter is, for a period of time of a couple of months, we do have to go through and say, OK, what do we really think this economic thing is, is it a year thing or is it a reset, and then we build from a new base, and how do we parse and act on the consequences?

It’s hard to tell from the written interview if he was joking about Google being that big of a worry or not. Elsewhere in the article, he addresses the fact that Microsoft remains well behind Google in search but believes by working hard and doing “releases,” Microsoft will get there:

I like our new release. We’re making two releases a year. We continue to attract great talent, which lets us do interesting things. Our cash-back program has some early promise in terms of what I call business model differentiation versus Google, but we’ll continue to work.

Ah, yes, releases. As I wrote in Tough Love For Microsoft Search, that’s part of what I feel is Microsoft’s failure in taking on Google, the idea that search is just software where if you do enough “releases” of new versions, eventually you’ll win as with desktop software. I don’t think it works like that — but my article has about 5,000 words that go into all the complications Microsoft faces in taking on Google.

As I also wrote in that, getting Yahoo probably fixes the biggest issue, gaining more traffic. Ballmer tells News.com there are no “active” conversations with Yahoo on partnership and that things will have to wait until a new Yahoo CEO is named:

They’re out doing a search for a new CEO and we’ll just have to wait and see how all that shakes out.

That seems opposite from the “sooner” pitch he told the FT, but I’d presume he meant there’s no sense talking until a new CEO is named but wouldn’t waste time once that happened.

As an aside, it was nice to see Live Search mentioned at CES. Just a pity Live Search, from what I read, seemed resigned to being mentioned primarily as distribution deals, rather than being shown as consumer product coequal with Microsoft software and hardware products.

For more, see Techmeme here and here.