Ballmer reveals Microsoft was “lucky” not to buy Yahoo [video]

By Tom Warren, on 19th Oct 11 1:30 am with 39 Comments

Steve Ballmer at Web 2.0 summit

Microsoft CEO Steve Ballmer took to the stage at the Web 2.0 Summit on Wednesday and revealed that Microsoft was “lucky” not to buy Yahoo.

Ballmer explained that times have changed since Microsoft’s initial bid for Yahoo. “You know, times change, times change,” said Ballmer. “The market really kind of fell apart. Sometimes you’re lucky,” he added. Microsoft famously offered $44.6 billion cash-and-stock to purchase Yahoo in February, 2008. The deal was an intense one for both parties, valuing Yahoo’s stock price at $31, a significant premium on its true value at the time. Despite the offer, Yahoo declined and wanted more cash. Microsoft upped its offer to $33 a share but Yahoo believed the company was worth $37 per share.

The failed deal surfaced as a search deal between Bing and Yahoo. Microsoft secured a 10-year deal in July 2009 to push Bing as the exclusive algorithmic search and paid search platform for Yahoo! sites. The agreement ended Microsoft’s talks with Yahoo which had lasted nearly two years. Yahoo has failed to make an impact with its various web properties, despite acquiring popular photo sharing site Flickr. The once popular web portal and search engine has struggled against Google and Facebook in the new world of social networking.

Image Credit: Andy Evans / itproportal.com

  • http://twitter.com/LachlanCMcLeod Lachlan C McLeod

    lol @ yahoo.. they failed so bad by not accepting the bid and now they are getting double teamed by google and bing.. (i know yahoo search is powered by bing but they are still losing market share).. they are just the next version of myspace where they will reach a critical mass and totally dissapear

    • Guest

      Most of the share that Yahoo has lost has gone to MS, who is losing billions in search. So really the only winner here is Google.

    • phil jay

      Theyre investing, not losing

    • Tuxplorer

      Bing is eating away at Google’s market share every single month. Plus Google makes very little money from all of its products. Compared to Microsoft, Google’s profits are peanuts.

  • http://profiles.google.com/elmsoftware John Lueders

    Thank God.  That $44.6 billion would have evaporated.  The Skype deal looks way better in comparison…just hope they implement it successfully into their products…I feel as though they will.

    • Guest

      Skype has never made money in its history as a company. Yahoo has and is.

    • http://twitter.com/LachlanCMcLeod Lachlan C McLeod

      they made 850 million in 2010.. thats not bad

    • Guest

      I’m talking about profit, not revenue.

    • Tom

      It’s the “net income” that counts. Otherwise known as GAAP income. Anything else is just window dressing.

      Skype had revenue of $860 MM.  Operating income of $264 MM.  Net income of -$7 MM.  Yes, that’s a minus sign.

    • Anonymous

      but i think operating efficiencies obtained through the acquisition would reduce Skype’s operating cost, while improving the Microsoft services and value proposition.

  • Anonymous

    Yes lucky, yet smart enough for not getting suckered into buying a company like Yahoo for what.. $37/share? Pah!

    • Guest

      meanwhile, MS just extended the revenue share agreement because they still haven’t been able to get RPS anywhere near where Yahoo expected it to be.

      Ballmer is a jackass. Wait for Thursday and we can see how many more billions he’s lost on search.

    • http://twitter.com/LachlanCMcLeod Lachlan C McLeod

      you know that search in going to be integrated into windows 8?!?! windows 8 will make microsoft BILLIONS.. if bing adds a tiny bit of value to windows 8 then that means that bing it a huge plus for them

    • Guest

      Perhaps you’ve noticed that the Windows division is not the Online division and that each has a separate P&L? And no, even MS can’t afford to keep losing $3-4 billion a year in a so far failed attempt to compete against Google.

    • Monkey D Black

      the online division is the one making all the data centers around the place and you know….it takes money to do all that building you know. it seems as if you would want them to fail for whatever reason    

    • Tom

      Negative cash flow would not be a problem if it was caused by data center buildout.

      The problem with Online is that they have negative *EARNINGS*.  This is not sustainable.  It means that they’re not making enough in revenues to amortize the capex.

      I highly recommend learning how to read a balance sheet (and income statement).  You will understand the world a lot better.

    • Guest

      Incorrect. Other groups fund the data centers as well, including Azure and Office. But yes, build outs at this scale cost a lot of money. That’s not the primary concern. What is, is the lack of success against Google in taking share, and in reducing costs even with Yahoo’s added traffic.

      Remember, MS has a very poor record with these types of endeavors. The majority have started in losses and ended in losses. And even in the few cases where large losses eventually turned into profits, like Xbox, it’s hard to call that a success when after a decade it’s still unprofitable over its existence.

    • Anonymous

      haha, yeah, just as bad as if a company were to buy Motorola alienating current partners…. oh wait…

    • Guest

      Supposition right now.

    • Guest

      No they just did the same by getting in bed with nokia

    • Guest

      The deal was stupid at $31.

  • http://sunnyis.me/ Sunny Singh

    Yahoo!’s main service is not search, jeez.

  • Anonymous

    Yahoo currently sits at 15.47 a share. 19.5 Billion. FYI.

  • Emi Cyberschreiber

    Maybe with Microsoft yahoo would be different and not the fail it is now. but it was alooooooot of money for yahoo.

    at least with Skype everyone uses skype, everyone likes skype. everyone wants skype in their phones, and xbox, and Windows 8. and anywhere.. with skype tech Microsoft can do alot of stuff for the ecosystem. but not with yahoo, for the price of course.

    • Guest

      Give it a year or two under MS’s bureaucratic paralyzing leadership and see whether people still want Skype.

    • http://pulse.yahoo.com/_KTAHVKS2RNDWTQPHQEJALLRNEQ Adam Paris

      Oh please shut up. MS is not the same company as it used to be. Just look at their newest products.

      And btw, Skype stays a seperate division.

    • Guest

      You mean their iPhone v1 response that took three years to come to market, or their iPad v1 response that has already been two years and will be close to three before it shows up in tablets consumers can buy? Yeah, you’re right, they’re not bureaucratic anymore at all. LOL.

  • Anonymous

    jajaja first time i like ballmer

  • Anonymous

    The biggest non-decision Ballmer ever made. Thank god for Ballmer.

    • Guest

      You mean after he made the dumb decision to make an offer for them in the first place and right as the market and economy were collapsing?

  • Shiro

    The Ballm is no Steve Jobs but he’s ours! 

    • Guest

      He’s definitely no Jobs, as has been amply demonstrated over the last decade. And he’s only ours if we want him. I don’t, and voted my proxy that way today.

    • Guest

      Ballmer is the perfect example of “Its better to know the right people, then to be right”

    • Anonymous

      SteveB has done a good job in the last 3-4 years of delegating to experts like Steven Sinofsky, Joe Belfiore and the guy who runs XBox division. SteveB is bright enough to understand he’s more of a bean-counter and not a tech visionary, so he lets those guys do “vision by committee” approach.

    • Guest

      “Its better to know the right people, then to be right”     

      I recommend against you entering any spelling bees, DKofDunCE.

  • Avatar Roku

    In the US Bing and Yahoo have been gaining significant market share. Bing controls 30% of searches in the US, pretty good for something that hasn’t been around that long.

    Whether they can make that growing market share profitable is another question though. I’m not sure why they’re struggling there. Google ad monopoly? Microsoft needs to make bigger moves in advertising. Between Windows, Skype, Hotmail, Live Messenger, and Xbox we know that Microsoft has plenty of eyeballs. Most of Microsofts products are still the most used worldwide.

    • HeatherL

      Wrong last report shows that Yahoo share is down and Bing is stagnate, understand your facts before wasting the grown-ups time.  

    • Guest

      The word you’re looking for is stagnant, sport.

  • Anonymous

    Still think the search engine market is ver much won by Google and its a stupid idea to pay yahoo to become and exclusive partner for your search.. Unless Microsft has something more up their sleeves they should drop the ball on the money eating blackhole called Bing and channel the mone on soemthing else…