We’ve had a bit of discussion in the office recently regarding Steve Balmer’s threatening letter to Yahoo! and MS’s potential acquisition of it.

Balmer makes several strong points in his letter. One, that the current state of the economy today makes the offer even better than it was several months ago. And two, that the board of directors may be potentially ignoring their share holder base and the best monetary outcome for it. After clarifying MS’s position, Balmer said that MS would be forced to go directly to the share holders if Yahoo! didn’t re-consider their offer and start a path of negotiations.

This can be looked at from a couple different points of view. On the one hand, this is a very Microsoft “strong arm” type of move — trying to take what MS thinks is theirs, regardless of the potential obstacles that might lie in the way. On the other hand, MS makes a few good points. A large majority of expert analysis suggested in January that Microsoft’s 62% premium offer over Yahoo!’s stock price was a good deal for share holders. And while many holders may believe in getting the best deal they can, they also don’t want to potentially throw a deal away all together.

Still, what is most interesting about this battle is the publicity of it. Both sides are using the press to their full advantage. Making hostile bids and equally hostile rebuttals. In my opinion it seems that the PR battle occurring on both sides could potentially harm both the perceived outcome of a deal by the public as well as the employees of both companies. Yahoo! and MS have very different cultures and the last thing a sustained group of Yahoo! employees will want is the feeling of being overtaken forcefully by a hostile company.

It seems unlikely that MS won’t get their way at some point. However, the question remains that even if MS is capable of forcing Yahoo! into a buyout, will governments both here in the U.S. and abroad allow it to happen? This process is definitely still in the early stages, but man what firefight it’s been so far.