Following on from the Qwest-Verizon Wireless news, and the negative impact on Sprint, there are lots of rumors this week suggesting that Deutsche Telekom is considering buying Sprint:

Deutsche Telekom AG is weighing a bid to acquire Sprint Nextel Corp. that could catapult the German telecommunications giant’s wireless arm, T-Mobile USA, to the No. 1 position in the U.S., according to people familiar with the matter.

Well, yes, technically, it would put the combined entity in the number one position in terms of subscribers, but Deutsche Telekom would have to be absolutely bonkers to consider such a move. Sprint is already suffering from its inability to merge two incompatible networks (iDEN and CDMA) - DT would have to be a total glutton for punishment to add a third, also incompatible, GSM network to the mix. Of course, you could add in WiMAX and make it four…

The theory is that Sprint’s depressed share price makes this an attractive purchase, but even so it would be a huge nightmare to merge these companies together, and would require some really dramatic changes to even begin to make it work. I say this even though I’m still somewhat confident things can be turned around at Sprint in the long term. I think that there is potential for growth again in the next year or two, and the WiMAX rollout, though risky, might just pay off too.

I know Deutsche Telekom is hugely dependent on T-Mobile’s growth to offset the mess at home, but of course this move would also take that trend in the wrong direction, dragging down the company’s overall growth path without providing any obvious benefits. Any synergies would be outweighed by the amount of investment needed to reconcile the three different network operations. The timing is also odd, since T-Mobile has supposedly now completed its 3G buildout and is getting ready to launch 3G services in June. I just have to hope that this is one of those rumors cooked up by a journalist on a slow news day and that it passes just as quickly as it has come.

Blanket coverage everywhere this week of the Yahoo! Microsoft saga, and specifically on Yahoo!’s rejection of the offer this morning. Lots of coverage too of Yahoo!’s perceived alternatives, which include outsourcing search to Google, merging with AOL or News Corp, or being bought out by private equity funds.

At this point it’s beginning to look like Yahoo! is adopting an “anyone but Microsoft” strategy, in much the way some voters were described to be keen to vote for “anyone but Bush” in the 2004 elections. But the problem with that strategy, in politics as well as business, is that there’s no guarantee the alternatives are any better. The kind of blindness that comes from making negative decisions - not to do something rather than to do something - can lead to worse decisions than the very thing they’re trying to avoid.

No-one in their right mind believes merging with AOL is the answer (AOL Time Warner is of course itself the ultimate example of why such mega-mergers are a terrible idea), and no-one really believes News Corp is interested. Outsourcing search to Google would only provide a temporary benefit in terms of revenues but wouldn’t solve any of the long-term structural issues at Yahoo!. Perhaps the perception of giving Microsoft one in the eye is the biggest attraction to that strategy, but of course that goes back to my original premise.

The fact is, we all know Microsoft taking over Yahoo! will be a disaster in many ways - especially for employees of the acquired company. But it’s not at all clear that any of the alternatives are any better, and certainly many shareholders reasonably believe that this is their best hope of getting out of the current mess at Yahoo! with a reasonable price for their shares.

Yang & Co. have demonstrated that they’re not able to turn the business around, treading too gingerly at a time when the company needs some major changes. There is - I think - a close parallel here with Gary Forsee’s last few months at Sprint: the man who had been behind much of its success in previous years was unable to remove himself far enough from the strategy of yesterday to make the right moves for today and tomorrow. Yang is arguably too similar to Semel in this way, and of course has an even longer history with the company than Semel did. Yahoo! needs a Dan Hesse type who’s far enough removed from Yahoo!’s recent history to be able to make the tough choices and really make a difference. But all this is likely too late at this point. Microsoft’s latest salvo suggests it’s not going to back down and offer the higher price Yahoo! is suggesting it should, but leaves the door open with the following sentence, which may of course merely be threatening a more hostile approach over the heads of the board and directly to shareholders:

Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal. 

Ultimately, though, Yahoo! is fighting a losing battle in seeking alternatives where none really exist. The last hope is for Yang to make a convincing plea to shareholders, detailing his plan for turning the business around and providing clear milestones and metrics he wants to be measured by, as a way of buying more time. But he arguably already bungled that chance in the call which took place immediately before the offer was received. Much as Yang and the rest of the Yahoos might want anyone but Microsoft, it’s hard to imagine their future resting with anyone but Microsoft at this point.

Well, after months of speculation it’s finally happened - Microsoft has made an offer for Yahoo!. From the official press release and the letter to the Yahoo! board enclosed in it, it’s clear that discussions have been going on since late 2006, but that in early 2007 the Yahoo! board shut Microsoft down since it believed it was better off going it alone with its new strategy.

In the end, of course, the company’s fortunes have worsened rather than improved, and so Microsoft is back with what can only be described as a seriously aggressive offer - both in terms of the 62% premium on Yahoo!’s share price and the tone of the letter. It lectures Yahoo!’s board on the woeful state the company is in, its dire prospects, and without naming Google explicitly, makes clear that the only way the two companies can make headway against it is by becoming a single company. The big question is whether Yang feels any differently from Semel (whose departure from the board yesterday now seems likely to have been in part a response to - or the removal of the final barrier to) this acquisition.

Perhaps this also explains Yang’s less aggressive than forecast moves on the job front this week - in anticipation of this deal (which no doubt was signalled in advance through informal channels by Microsoft), he may have decided he was better off keeping Yahoo! together until it was clear where its future lay. At a 62% premium it would be hard to argue that anything other than accepting the offer would be in the best interests of shareholders, who are unlikely to see that kind of growth in the share price anytime soon. Whether it’s in the best interests of customers, employees or the other assets the company has is another question entirely.