Today, in a story headlined Microsoft, Yahoo Try to Make Nice, The Wall Street Journal, Microsoft and Yahoo spent Friday trying to agree "a last-ditch friendly deal with a sweetened Microsoft offer, according to people familiar with the matter."
Actually, nothing much seems to have changed since Thursday (below), when Microsoft leaked the idea that it would raise its offer from $29 to $33.
So Microsoft has moved, but it seems Yahoo hasn't: it is still holding out for $35-37. That's roughly $3 billion more -- and $3 billion would probably buy half a dozen more useful Web 2.0 companies than Yahoo.
But the WSJ article ends:
Despite the back-and-forth, many analysts and investors still say the two companies are moving toward an eventual deal. "As you get toward the final stages, the headlines and the negotiation tactics get more intense, but I don't think this is that out of the band of the normal," said Mark Mahaney, an Internet analyst at Citigroup Global Markets Inc.
By far the most interesting commentary on the current situation is Examining Microsoft's and Yahoo's unspoken concerns, on Marc Andreessen's blog, pmarca. He points out that a deal could be agreed and then fail to go through, for a variety of reasons. One of the risks is (lack of) government approval, where pmarca notes:
If the entire merger could be approved and closed before the new US president takes office in January 2009, that would be wonderful for Microsoft.
As he explains:
The Bush administration is known to be quite friendly to large companies, large mergers, and Microsoft. Any Democratic administration would probably be notably more hostile to this kind of merger than the current regime.
Though actually this may not matter, because as he's noted earlier:
Microsoft and Yahoo will also, as global companies, presumably need to get approval in other jurisdictions -- certainly the European Union. The EU is currently harsher on these issues, and on Microsoft in particular, than the US government. If the EU refuses to approve the merger, or imposes various adverse conditions on it, the deal could collapse.
It seems very unlikely that Dolores Umbridge in the European Commission's Department for Trying to Kill Microsoft would not try to derail the deal. The huge overlap between Yahoo and Microsoft's net-based offerings -- particularly email and search -- certainly provides enough material to justify an investigation... though you'd assume that Steve Ballmer had already thought of this, wouldn't you?
