The three musketeers: Google, Microsoft and Yahoo

Everybody has heard of the saga between the three musketeers: Google, Microsoft and Yahoo: first Microsoft wants to buy Yahoo. Yahoo refuses, and runs into the arms of Google. Google finds an ad-deal with Yahoo will cause too many (legal) problems. Together they would have had more than 80% market share of the search market. Then, Yahoo runs back to Microsoft, but Microsoft is no longer interested. Smart play by Ballmer? Let's look the line of events.

In February Microsoft goes public with an unsolicited bid on Yahoo of $31 per share or $44.6 billion. Ten days later, Mr. Jerry Yang (CEO and founder of Yahoo) refuses the offer with the message that Microsoft undervalues Yahoo. In April, Ballmer tries again, this time with an offer price of $33 per share, and gives Yahoo a three-week deadline for making a deal. Again, they are not able to make a deal, and Microsoft walks away from the table.

In August Carl Icahn shows up, as he acquires $2.5 billion of stock; enough to get him three seats on the board of Yahoo. My hunch at the time was that Microsoft was all behind it, still to get (some) influence on Yahoo in the shape of Icahn.

Last week Google decides to pull-back from the table and Yahoo is forced to go back to Microsoft, to see if there is a deal possible. Ballmer has said in September (on a Gartner technology conference in Florida, according to Marketwatch) that it still makes sense economically to make a deal with Yahoo. Is he punishing Yahoo? Is he playing a sadistic game? Will he wait until the price is right? At the moment, the stock price of Yahoo is trading around $12.

My uneducated guess is that we'll see the acquisition of Yahoo by Microsoft, where the ones to pay will be Jerry Yang and Roy Bostock (chairman Yahoo). And of course, the shareholders. And guess what? Microsoft will be laughing last.