Sure, things look rough for Yahoo Inc. and Microsoft Corp. after they couldn't agree on a deal. Yahoo's stock has cratered, and its would-be suitor has to figure out another way to catch up in the online ad market, a flaw so big Microsoft was willing to pay $47.5 billion to fix it.
But in the long run, Yahoo's rejection of Microsoft's acquisition offer could turn out to be brilliant for both companies. Sometimes the best deals are the ones you don't make, especially in technology, where big mergers and acquisitions are notoriously difficult.
At the very least, if Yahoo and Microsoft aren't better off apart, then they may be no worse off. Emery Trahan, a professor of finance at Northeastern University, pointed out that General Electric Co. and Honeywell International Inc. generally have done fine despite dropping their acquisition plans under regulatory pressure in 2001.
"It's not necessarily a failure to walk away," Trahan said. "It might be more of a failure to push for a deal under terms that don't make sense."
It remains to be seen, however, whether Microsoft and Yahoo will fall into this category. If Yahoo management fails to improve the company's fortunes, or no other suitor emerges, Microsoft and Yahoo still could end up mating after all.
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