YHOO and MSFT: Jerry Yang should be fired

So Microsoft has taken its ball and gone home: the company announced late today that it is withdrawing its bid for Yahoo after the company refused its bumped-up $33 a share offer and stuck firm to its demand for $37 a share. The letter from Steve Ballmer, which my friend Paul Kedrosky also has posted, describes how Yahoo not only refused the offer, but made it obvious that it was prepared to effectively commit corporate hari-kiri in order to make itself as unappealing as possible. Among other things, it planned to sign a keyword-ad deal with Google.

I’m all for fiduciary duty, and in particular the duty of senior executives to scour the globe for a competing offer in order to get the best value for their shares. But Yahoo has had three months and has turned up nothing but an unbelievably lame deal with AOL (or so rumour has it). What possible reason could it have for pushing Microsoft to $37? The existing offer was already 70 per cent higher than the stock was trading at prior to the bid. And the Google deal is just a poison pill by another name.

In my view, Yahoo CEO Jerry Yang has gone way beyond fiduciary duty and has been effectively blocking this deal in any way possible. I expect to see the stock tank, and deservedly so. If I were a shareholder, I would be calling for Yang’s head. This deal was by far the best opportunity the company had to achieve some value.

Update:

This post appears at Seeking Alpha as well, and there are some good comments from Yahoo shareholders and supporters there.

Facebook plus Plaxo: Crazy delicious?

I don’t know why I’m even bothering with a post that isn’t about Apple, when the entire globe — perhaps even the universe — is holding its breath waiting for news, but I have to say that the Facebook-buying-Plaxo rumour makes sense to me. I know that both Eric Eldon at VentureBeat and Mike Arrington at TechCrunch make a good case for why it might not happen, but I think it could.

Eric notes — as does Valleywag — that there is reportedly some bad blood between Facebook-backer Peter Thiel and Plaxo-backer Michael Moritz over some previous Silicon Valley deall, and Mike says that the numbers behind Plaxo aren’t that attractive for Facebook, especially at the $200-million valuation the site is looking for.

That may all be true, but I tend to agree with Henry Blodget on this one: adding the features of Plaxo, which allows users to import contact data from all kinds of different services, would make a lot of sense for Facebook, and even at $200-million it would be cheap given the (theoretical) $15-billion valuation Facebook has. Why not do it? I can’t see a tiff between Thiel and Moritz holding back an idea if it makes sense.

Don’t try to fool Mother Google

Google executive says the company gets a little peeved when takeover targets, er… lie about their business. That actually happens?
clipped from blog.redherring.com

Don’t try to pull the tiniest fast one on Google’s acquisitions group—they’ll find out!

Google acquisition chief Salman Ullah said as much at a Monterey, California, conference of venture capitalists and startups last week.

“If you tell us something is black and it turns out it’s white—we get very irritated,” he said at Red Herring Spring on Thursday. “Because we will find out that it’s white during diligence.”

Mr. Ullah said such red flags were deal breakers.

“And we’ve walked from deals when—even though the issue was very tiny, very small, very insignificant—the target has lied to us.”

Would that include the YouTube deal?� Google didn’t exactly set aside—as part of due diligence—$1 billion for Viacom’s lawsuit.

  blog it

Vonage: please buy some or all of us

Anyone who has been following the Vonage IPO story – as my friend and conference-organizing colleague Mark Evans has, and as Om Malik has – won’t be surprised that the voice-over-Internet pioneer is rumoured to be shopping itself around. The prospectus for its initial public offering, which was on and then off, then back on again, has been out there for months with little or no interest, or at least not enough to make it happen. That’s not a great sign.

As I’ve mentioned before – and others have too, including Mark and Om – Vonage’s IPO smacked of more than a little desperation to raise some cash while the iron was even slightly warm, and the story at CNN/Money fits with that. Whether an IPO or a takeover, Vonage needs money big-time. Its marketing costs have exploded, thanks in part to those Woo hoo! commercials (which I actually kind of like, if only because I like the song), and it needs a river of cash flow to pay for the expansion it needs to remain relevant.

As Om and others have pointed out, research shows that cable VOIP services are taking share away from standalones such as Vonage – and doing so at an increasing rate. That means the window is rapidly closing, and the risk for Vonage (which was started by VOIP pioneer Jeff Pulver, whose VON Canada I am appearing at next week) is that it could become the next TiVo, a pioneer that winds up winning the early battle but losing the war.

As someone told me once, the pioneers get the arrows and the settlers get the land. Alec Saunders says buying either Vonage itself or the stock would be the “ultimate triumph of greed and stupidity over common sense.” Of course, as we all know, that doesn’t mean it won’t happen 🙂

Steve Jobs gets a new job at Disney

When it comes to Steve Jobs, most investors and even non-market watchers probably think of a single word: Apple. After all, Apple is the company that Mr. Jobs co-founded in the 1970s, when he was just a cocky twenty-something (as opposed to a cocky fifty-something). It’s also the one he has been chief executive of twice — once during its early years of success, and then more recently as the architect of Apple’s stunning metamorphosis from computer industry also-ran into personal-electronics titan. And of course, whenever Apple introduces new products to its worshipful fans, the guy at centre stage in jeans and black turtleneck is Steven Paul Jobs.

Apple’s turnaround has been an incredible success story — right up there with the rise of Google — and it has had a similar effect on the company’s share price, which has gone from a little more than $10 (U.S.) a share two years ago to a recent close of almost $80 a share. That gives the company a market value of more than $65-billion, which — as Mr. Jobs noted recently in an internal e-mail to employees — puts the company ahead of Dell, whose CEO once said Apple should close its doors and give all the money to shareholders.

Obviously, having the company you run increase in value by 700 per cent in two years has to make you feel pretty good — and Mr. Jobs has also seen his bet on Apple’s future pay off financially. Although he has taken a salary of $1 and no bonus for the past three years, he exchanged some worthless stock options for shares in the company in 2003, and those shares are now worth upwards of $800-million. Not a bad return.

Even compared with his success at Apple, however, the story of Mr. Jobs and Pixar, the digital animation company that created such movies as Toy Story and A Bug’s Life, is an eye-opener — as Paul Kedrosky points out in his own succinct way. The company Jobs bought from film-maker George Lucas for just $10-million two decades ago — the one that media conglomerate Disney has just announced it is acquiring — is worth roughly $7.5-billion, and Mr. Jobs owns 51 per cent.

He may not be as closely associated with it as he is with Apple, and Pixar may not have splashy events like Macworld where Steve shows up in jeans and a turtleneck, but he is clearly in the driver’s seat at the animation company (ironically, he is also far better compensated at Pixar, even if you exclude the value of his stock: his salary at Pixar in 2004 was $52). And he will soon be pulling a considerable amount of weight at Disney too. How will that work out, and how will it affect Apple? Interesting times are definitely ahead.

Note:

Please read the rest of this column at the Globe & Mail website.