Jerry finally steps aside at Yahoo

Why did it take so long? That’s the only question that remains unanswered when it comes to Jerry Yang and his erstwhile leadership of the company he co-founded, at least as far as I’m concerned. It didn’t really make any sense for him to become CEO in the first place — no matter what his defenders have said about him — and he hasn’t shown any real aptitude for either leadership or vision during his time in the executive suite. About all he has done (aided by a board that gives new meaning to the term lacklustre) is to deep-six the only potential deal Yahoo had on the table that made any sense for the company at all, namely the acquisition offer from Microsoft.

For those keeping track at home, Microsoft was offering $31 a share at the time, which valued Yahoo at over $44-billion. Yahoo’s current market capitalization is less than $15-billion, which means almost $30-billion or about 65 per cent of the company’s value has vanished. Obviously, all of that decline can’t be blamed on Jerry, since the global economic meltdown probably had a little to do with it as well. But even before that happened, Yahoo’s stock value had dropped by tens of billions of dollars. About all Jerry and the board could come up with as a strategy was to float a merger deal of some kind with AOL of all places.

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Yahoo: We are so totally screwed

It’s not exactly a huge surprise, given the anti-trust brouhaha that the proposal caused in Washington, but Google formally announced that its search deal with Yahoo is over, kaput, deceased, pushing up the daisies — it is an ex-agreement. It wasn’t just the anti-trust concerns either; some advertisers were apparently worried about a lack of choice as a result of the tie-up, and not without reason. So how badly is Yahoo screwed right now? On a scale of one to 10, I would say Yahoo is now at 11.

As John Paczkowski notes at All Things D, this deal was supposed to generate as much as half a billion dollars worth of additional cash flow in its first year, money Yahoo could definitely use. But more than that, this deal was a way of trying to stand on its own two feet (albeit while leaning on Google for support), and that is now gone. Microsoft, which had its takeover bid for Yahoo derailed by the Google arrangement — among other things — is no doubt doing the math on another bid.

The only problem for Yahoo is that instead of a $45-billion deal at $31 a share, Microsoft is more likely to bid about half that, and that’s if it even makes another bid for Yahoo at all. Nice job, Jerry. How many failed Hail Mary passes can one CEO throw?


VentureBeat’s Matt Marshall is reporting that an internal Yahoo memo says to expect “a major historical announcement” later today, and the rumour is that Jerry Yang will step down as CEO. Kara Swisher at All Things D says that is dead wrong, and so does the New York Times DealBook blog. VentureBeat has now updated its post and quotes a Yahoo source as saying there is no truth to the rumours.

Yahoo board battle over; war continues


Looks like Carl Icahn has managed to strike a deal with Yahoo to avoid an all-out proxy battle over board members. According to a news release this morning, the two sides have agreed to a settlement that involves expanding the Yahoo board so that two Icahn representatives and Icahn himself can have seats. This effectively negates the need for the settlement proposed by Eric Jackson, which is described below — although as Charles Cooper at CNET notes, this has given the fox a seat on the board of the henhouse. So while the current battle may have ended, the war over Yahoo’s future continues.

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Before activist shareholder and billionaire takeover artist Carl Icahn got involved with Yahoo, and not long after Microsoft started making overtures towards the company behind the scenes, a disgruntled shareholder named Eric Jackson was already trying to marshal support for some big changes at the Internet company, including the departure of CEO Terry Semel, who eventually wound up leaving. Using his blog, YouTube videos and an aggressive lobbying effort aimed at institutional shareholders, Jackson managed to get a substantial amount of support and press for his campaign. Whether his efforts helped to force Semel out or not is open to debate, but it certainly helped crystallize some of the dissatisfaction surrounding the company.

Eric, who formed an activist investment fund called Ironfire Capital as a result of his efforts, is still pushing for change at Yahoo, and this morning he launched a forum on, a small-cap investor-information portal based in Toronto and founded by George Tsiolis. Jackson wants an alternate slate of Yahoo directors, but not the slate suggested by Icahn; instead, he is proposing a middle-of-the-road solution, in which several Yahoo board members get to keep their spots, but others are removed to make way for some of Icahn’s substitutes (but not Mark Cuban; sorry Mark). Shareholders are encouraged to mark their voting cards as described in a statement by Eric and posted on Agoracom.

Jackson says that some investors are uncomfortable with Icahn’s proposed slate because it would remove every Yahoo board member, raising concerns about continuity and the possible triggering of a poison-pill style compensation package. The activist shareholder says that his proposal “will maximize the change so desperately needed” at the Internet company without any of those drawbacks. According to a news release issued this morning, Eric says that his “Plan B” group of Yahoo shareholders includes 150 members, who own 3.2 million shares in Yahoo! worth over $70 million. Yahoo’s annual meeting is August 1.

Yahoo: what to do with all those eyeballs

My friend Om Malik has an interesting post about Yahoo — and not about the interminable Yahoo vs. Microsoft-plus-Carl-Icahn takeover, which has become the beast that refuses to die, but about the kind of thing Yahoo should arguably have been focusing on instead of trying to compete with Google on search. As he describes it, one of the blog posts at Web Worker Daily got a spot on Yahoo’s home page, and then got voted up by users of Yahoo Buzz, a Digg-style feature. As Om says:

In a few hours, the story … was viewed over 200,000 times and attracted over 350 comments. Now that’s a lot of traffic — but more importantly, a gigantic amount of engagement displayed by Yahoo visitors. The traffic sent our way by Yahoo was many times the traffic we get from, say, Digg or StumbleUpon.

As Om notes, it’s not so much the sheer volume of traffic that is impressive, but the engagement of the audience. Even during the biggest Digg storm or Stumbleupon flood I’ve ever experienced, I’ve never gotten more than a handful of comments. As beaten-down as it is, Yahoo still gets a ton of traffic — but Om is right that it needs to find better ways of taking advantage of and leveraging that traffic, instead of just trying to go head-to-head with Google. Should it sell off its search arm to Microsoft? Perhaps. At least then it could concentrate on what makes it different from Google, instead of trying to duplicate it.

Yahoo: Night of the Living Dead

I think even infamous zombie-movie director George Romero would have felt outmatched by the ongoing Yahoo takeover saga, which has gone beyond drama into farce, then back into drama, then taken a right turn into the bizarre, and now threatens to become The Takeover/Merger That Wouldn’t Die. Microsoft wants to buy it, then it doesn’t, then Carl Icahn gets his fingers in the pie, then Microsoft wants to buy just the search operation, then it wants the whole company again, then it wants to team up with someone like News Corp. in order to dismantle the company — and meanwhile, Yahoo is talking with everyone but your Aunt Sally about a merger to thwart Microsoft.

The latest twist is that Microsoft and Carl are apparently still working on a takeover deal for the company. Icahn has sent a letter to Yahoo — and Microsoft has released its own similar statement — saying the two would be happy to discuss a takeover of some kind, but only if Yahoo’s current board gets the axe — the implication being that either the company gets rid of them, or Carl’s alternate slate is voted in at Yahoo’s annual meeting. In both statements, the potential for a full takeover is outlined. Microsoft’s release says that following a replacement of the board, it would

“be interested in discussing with a new board a major transaction with Yahoo!, such as either a transaction to purchase the ‘Search’ function with large financial guarantees or, in the alternative, purchasing the whole company.”

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