Last week I discussed what Microsoft CEO Steve Ballmer did effectively in his negotiations to take control of Yahoo! Today I discuss a strategy that Ballmer used ineffectively.
On April 5 Ballmer sent a letter to Yahoo! stating “”If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board.”
Three weeks later Microsoft had neither an agreement nor did it initiate a hostile takeover. Here’s the problem – if you’re going to make a threat, be prepared to follow through and do so. Or don’t make it in the first place. You lose too much in credibility – a huge issue in many negotiations – with empty threats.
Of course, circumstances change and it would be foolish to ignore them. But Ballmer didn’t give himself any flexibility in his letter to take potential changed circumstances into account. Instead of saying that Microsoft would be “compelled to take our case directly to your shareholders,” Ballmer could have accomplished much the same by saying that it would “seriously consider taking our case directly to your shareholders.”
By not building in this element, he lost credibility. I’m sure Ballmer’s future counterparts will take note of this.