All Things Digital

After today’s events, I guess you could say Yahoo (YHOO) and Microsoft (MSFT) tried, holding a series of meetings about a possible takeover that ended up proving exactly how incompatible the companies were.

Kind of like Oscar Madison and Felix Unger, but not funny in any way at all.

Consider a series of meetings, according to sources close to both companies, that took place over the last several weeks, which finally came after Microsoft CEO Steve Ballmer lobbed the Saturday stink-bomb letter to Yahoo in early April, saying he planned to go hostile.

That apparently prompted some movement out of Yahoo, which had been trying to avoid any kind of substantive discussions with Microsoft until then and had been spending its time looking for all sorts of semi-wacky alternatives.

Thus, according to sources close to Microsoft, a meeting on April 15 in Portland, Ore. (a state in which BoomTown said meetings were likely to take place last week).

At that meeting, Yahoo execs laid out the same case they had been doing for investors, a road-show presentation of the company’s growth plans to underscore its case for a higher valuation.

At the same time, Yahoo would not give a specific valuation for the company at that meeting, said sources.

But on a call with bankers and advisers from both sides on April 18, a big number was put forward by Yahoo of at least $40 a share. This was, of course, a nonstarter for Microsoft, which began plans for its hostile proxy fight.

As the deadline loomed on April 29, Yahoo sources said execs there wanted to avoid such a battle.

So Yang and Yahoo Chairman Roy Bostock held phone calls with Ballmer two times that day to suggest ways to avoid a hostile bid and also a walk-away move by Microsoft.

They also suggested, said Microsoft sources, other kinds of deals short of a merger, including a search partnership. Ballmer suggested a face-to-face meeting the next day, on April 30.

At that meeting, which took place in Silicon Valley at Yahoo’s law firm, Yang suggested $38. He also continued to press on major issues like possibly problematic regulatory issues around the pair’s email domination and also suggested the idea of a search deal, like the one Yahoo had been discussing with Google (GOOG).

Finally, as a last-ditch effort, Yang and David Filo–who founded Yahoo with Yang while the pair were at Stanford University as grad students–flew to Microsoft’s home in the Seattle area today to meet at the airport with Ballmer and also Kevin Johnson, the main Microsoft exec who had been spearheading the deal.

It was, of course, the kind of meeting–just the key execs alone–that should have taken place months ago.

Ballmer suggested $33 and a plan to assuage Yahoo’s regulatory worries, while Yang countered with $37, a price the board had approved, even though both Filo and Yang wanted the higher prices.

Worst of all, Yang told Ballmer that, if Microsoft chose to conduct a proxy fight, he would not abandon pursuing the deal with Google to outsource Yahoo’s online ad business, which Yahoo could sign even if Microsoft made a hostile bid.

Such a deal with its archrival, Microsoft execs thought, was impossible to accept and could also be hard to unwind.

“There was not a lot more to say after that,” said a source close to Microsoft.

Yang and Filo left the meeting, but the die was cast. While they expected a counter, Ballmer instead lowered the boom in a phone call and sent a letter saying so in detail soon after.

Another Yahoo source who was told the details of the meeting agreed that even today’s meeting was probably a lost cause.

“There has never been a moment when there was agreement on anything,” said the source. “Can you just imagine how a merger would have been with this as a prelude?”

Indeed. Cats and dogs. AOL and Time Warner (TWX). Oil and Water. Obama and Hillary. You get the picture.

While BoomTown has been wishing that it would not come to this–hoping Microsoft and Yahoo would wise up and actually talk, as many at both companies had been planning would occur in a neutral place like Oregon–it is more likely than not that Microsoft is poised to make a significant announcement tomorrow morning about its next move in its takeover battle with Yahoo.

What exactly that move will be is still unclear, but sources said it could come sometime after the stock market opens tomorrow.

While some are speculating the initiation of a proxy fight by Microsoft–as it has publicly threatened to do–to gain control of Yahoo, one person close to the situation said this: “I would not have said this yesterday, but I would not be surprised if they walked away rather than waged war.”

That’s another thing Microsoft (MSFT) has threatened to do too, along with lowering the price it was willing to pay for Yahoo (YHOO).

(The only thing its execs have not threatened to do is attack Yahoo’s Sunnyvale, Calif., campus at dawn on mounted steed– probably because they fear Yahoo will call in nearby Google as backup and Microsoft will then face its solar-powered, lava-lamp-throwing bicycle brigade.)

The only other options possible seem increasingly remote: That Microsoft raises the price by a dollar or two or that it announces it is in substantive talks with Yahoo.

BoomTown prediction: If Microsoft is not careful, someone is going to lose an eye.

The state motto of Oregon is “Alis volat propriis,” translated as “She flies with her own wings.”

One wonders if the state can help a Microsoft and Yahoo union fly.

According to sources at both companies, execs at Microsoft (MSFT) and Yahoo (YHOO) had been considering a plan to meet on neutral ground in the state that borders both California, where Yahoo has its HQ, and Washington, where Microsoft lives.

But today, there were also reports that Microsoft’s generals are about to launch its proxy warheads, as soon as tomorrow, with a new slate of directors and a plan of lightning attack to take Yahoo by force.

They shouldn’t.

Why? As BoomTown wrote earlier today, it would be better to avoid a bruising proxy fight or a public walkaway by Microsoft, and at least get some kind of substantive talks on track first.

I wrote:

Both options are unattractive for a number of reasons to pretty much everyone and, in BoomTown’s opinion, an excellent example of how juvenile this takeover battle has become (or ‘amateur hour,’ as one source close to both companies described it to me).”

BoomTown suggested the lovely stylings of the Napa Valley for such a meeting, which should include only Yahoo CEO Jerry Yang and Microsoft CEO Steve Ballmer. At the very least, it would be a good idea to leave the bankers behind.

If they do pick Oregon, here are some important factoids to know, all from Wikipedia:

State flower: Oregon-grape (since 1899)
State song: “Oregon, My Oregon” (written in 1920 and adopted in 1927)
State bird: Western meadowlark (chosen by the state’s children in 1927)
State tree: Douglas fir (since 1939)
State fish: Chinook salmon (since 1961)
State rock: Thunderegg (like a geode but formed in a rhyolitic lava flow; since 1965)
State animal: American beaver (since 1969)
State dance: Square dance (adopted in 1977)
State insect: Oregon swallowtail (Papilio oregonius; since 1979)
State fossil: Metasequoia (since 2005)
State gemstone: Oregon sunstone, a type of feldspar (since 1987)
State nut: Hazelnut (sometimes called the filbert) (since 1989)
State seashell: Oregon hairy triton (Fusitriton oregonensis, a gastropod in the ranellidae family; since 1991)
State mushroom: Pacific golden chanterelle (since 1999)
State beverage: Milk (since 1997)
State fruit: Pear (since 2005)
State motto: Alis Volat Propriis, Latin for “She Flies With Her Own Wings” (since 1987; This was the original motto of Oregon, but had been changed to “The Union” in 1957.)
State hostess: Miss Oregon (since 1969)
State team: Portland Trail Blazers of 1990–1991 (since 1991)
State father: Dr. John McLoughlin (since 1957)
State mother: Tabitha Brown (since 1987)
Statehood pageant: Champoeg Historical Pageant (since 1987)
State nickname: Beaver State