By Rick Aristotle Munarriz
June 20, 2008
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There won't be a buying spree on the rebound for Microsoft (Nasdaq: MSFT), if you believe CEO Steve Ballmer.
"People don't understand what they're talking about," Ballmer told the Financial Times, in the wake of media speculation that the software giant will bounce back from its abandoned bid for Yahoo! (Nasdaq: YHOO) by snapping up a potpourri of rising dot-com stars.
"At the end of the day, this is about the ad platform," he argues. "This is not about just any one of the applications."
The rub is that no one could care less about the ad platform. If this is really what Ballmer believes, then he is being as naive today as Yahoo! was two years ago. That was when Yahoo! hitched its turnaround hopes on the Google-like Panama paid-search upgrade. It didn't work.
Buying Yahoo! was never about the platform. It was about the search traffic. Own the eyeballs and you control the searches. Own the searches and you control the sponsors.
It's as simple as that. It also doesn't hurt if you can gain at the expense of the top dog, and that is something that both Microsoft and Yahoo! have failed to do as they continue to fork over market share to Google (Nasdaq: GOOG).
Does anyone really believe that Microsoft won't cut a blockbuster deal or two, unless it is somehow biding its time to get Yahoo! at a rock-bottom price? Mr. Softy has proven to be a slacker in growing its MSN arm organically, and wasting time is no longer a luxury it can afford. Microsoft needs to take bold buyout steps, and that includes snapping up Google partners like Time Warner's (NYSE: TWX) AOL or News Corp.'s (NYSE: NWS) FOX Interactive for traffic, as well as the logical landing pages of lucrative paid-search areas, such as banking lead-generator Bankrate (Nasdaq: RATE) and wedding-planning hub The Knot (Nasdaq: KNOT).
Ballmer may dismiss the "Plan B" scenario that so many analysts and financial journalists have assumed to be a foregone conclusion, but I doubt he means it. He's just negotiating, trying to paint Microsoft as anything other than the desperate company it truly is when it comes to online search.
It can't buy Google. Yahoo! wanted too much money. Microsoft can't do it alone. Ignore Ballmer's words and let the logic sink in.
Have fun shopping, Ballmer.
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