Is it over? Maybe not….Maybe this is part of a bigger plan…

Microsoft may be actually pulling the plug on the Yahoo! deal as a form of intimidation. It is a risky play, but perhaps it is a strategy that is sort of a “See what happens to your shares if we pull out” strategy by Balmer and Microsoft. Yahoo! shareholders are going to be angry, that is for sure. But, what if that is exactly what Balmer wants? What if this is the Maxihard-ball that we were expecting from Balmer and Friends?

It has been a weird few months of this already. After coming to Yahoo! (YHOO) with a surprise takeover offer, Microsoft’s Steve Balmer “patiently” waited for Jerry Yang to come to his senses. Who is Yang kidding anyway? While Yahoo! is the #1 trafficked site, the company has done a lousy job at creating shareholder value. Sure, the integration of the two companies was going to be problematic as egos, up and down the ranks, were going to be bruised. Yet, in the end, there would have been interesting, and potentially profitable opportunities for the two as they created synergy across several platforms.

Balmer needs to revive Microsoft as a “cool” company. Yahoo! needs life support. Microsoft wants the cloud, Yahoo! has the eyeballs and they both want to take a bite out of Apple and Google. The opportunity to move online was striking. But only at a reasonable cost…and on Balmer’s terms.

Maybe Balmer thought that it was wise for Yahoo!, the pre-Google giant to come groveling back to Microsoft after snubbing them a year back.

Remember, before this generous offer, Yahoo! shares were trading just north of $19. Yang has been a big part of the downfall of the company’s stock price. Since he took over from Semel, the shares have been on a slide from to $27.

Also, maybe Microsoft is still aggravated that they lost the Doubleclick deal to Google back in April, 2007. Isn’t it interesting that just when that deal disappeared, Microsoft came to Yahoo! with the idea about acquisition. At the time, share were priced at $28, $10 higher than they were when the most recent offer was made.

Microsoft must have believed that the beleaguered Yahoo! would have been salivating to take the deal. WRONG!

While there is a benefit for the two companies to join, the cultural divide is too great. On top of that, Yang is not going to play second fiddle and Balmer is not about to be told what to do. They are like two kids fighting over a new toy. Fight enough and in the end, the toy always breaks.

I believe that there will be plenty of posturing and talk over the next few weeks that will show Yahoo! rethinking their strategy and decision. It is hard to imagine that this is really the end. If nothing else, the lawyers are going to become rich with fees they collect from lawsuits by disgusted Yahoo! Boohoo! shareholders.

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