Yang walks a tightrope as Microsoft pulls out

Microsoft has finally lost patience with Yahoo’s refusal to play ball and abandoned its hostile takeover bid launched three months ago.

Microsoft’s Steve Bullmer insisted a deal no longer “makes sense” for the interests of the company’s shareholders, having upped its original $44.6bn bid to $47.5bn (£24.1bn) - $33 per share - only for Yahoo to demand at least $53bn or $37 per share.

Yahoo!’s shares plunged 20% in New York on Friday and 12% in Frankfurt putting pressure on CEO Jerry Yang to reveal what he plans to do next.

Despite insisting Microsoft’s bid has been nothing but “a distraction”, the fact Yahoo has pursued strategic alliances with Google, AOL and MySpace suggests ‘business as usual’ isn’t really a long term option.

Should Yang pull off a deal which sees Yahoo shareholders appeased and the company’s future re-strengthened, the decision to stand firm in the face of Microsoft’s hostile approach could be heralded as one of the boldest business decisions of all time.

After all, Yahoo might not be the power it once was but for search alone it’s still No.2 and regardless of its need for cash that gives it a firm position to negotiate from.

However, should a deal not be struck elsewhere and shares continue to tumble you can’t help but think, no matter what Steve Bullmer says now, Microsoft will be back to pick up the pieces at a far lower price.

Yang’s decision might not look so wise then. Be interesting to see this one pans out, but at the moment it seems to be Yang taking the all the risks and Bullmer who's able to bide his time with shareholder support intact.

Image: flickr.com