All Things Digital

Oh, this is just too good to pass up, so it is once again time for BoomTown to let you know exactly what Yahoo CEO Jerry Yang actually meant in his internal memo to employees about the hiring of Bain & Co. to evaluate its troubled business systems.

Jerry wrote: yahoos,

it’s time for another update.

Translation: Yep! Still no adult punctuation! We might continue to face serious big-boy issues at the company, but we refuse to give in on our insistence on kindergarten spelling patterns.

In that vein, would you like a nice cold glass of chocolate milk before I get to the bad news?

Jerry wrote: as a company, we’ve made some great progress this year. while it hasn’t been easy, especially in light of the challenges we’ve faced (not to mention the current downturn in the macro economic environment), we’ve accomplished a tremendous amount and we’re all working hard to continue executing on the company’s strategic plan.

Translation: As a company, we have managed to avoid disaster more times that Serena and Dan have broken up and reunited on one episode of “Gossip Girl.”

We’re foiled Steve Ballmer of Microsoft (MSFT)! We’ve co-opted shareholder activist Carl Icahn! We’ve pissed off investors like Gordon Crawford!

Much like Serena and Dan, who are arguably a lot sexier to watch in their state of complete plot paralysis, that all this has moved Yahoo (YHOO) precisely zero feet forward in terms of true changes at the company does not matter.

Jerry wrote: as we look ahead and to position us for success in 2009, we’re continuing the work already underway to get fit as an organization: actively looking for ways to make process and structural changes to our business that will allow us to work more efficiently, with more scale. we’ve enlisted the help of Bain & Co. to work with the leadership team on identifying ways to leverage our strengths, and to improve and accelerate our performance. we all know and experience parts of yahoo! where we can do better and be more agile in a competitive marketplace. this is consistent with what you told us in the YEES survey conducted in may–we need to find easier ways to work within yahoo!, and more importantly, create an even better experience for our customers and users.

Translation: Here come the weasel management consultants!

By saying “actively looking for ways to make process and structural changes to our business that will allow us to work more efficiently,” we actually mean layoffs.

By “identifying ways to leverage our strengths, and to improve and accelerate our performance,” we actually mean learning how to make layoffs.

By “we need to find easier ways to work within yahoo!,” we actually mean having the weasels, oops, Bain, tell us the best way to get rid of people via … layoffs!

Jerry wrote: each one of us will play an important role in this process. in the coming weeks, we’ll be soliciting your input and feedback. i want to know how we can improve the way we work with each other, and the way others work with yahoo!.

Translation: While the famous “Peanut Butter Manifesto” by Brad Garlinghouse (who laid himself off!) outlined all this and more years and years ago, we’d like you to tell us the best way to fix what’s broken, even though that has been, well, the presumable job of management.

Also, if you have any thoughts on who we should lay off, please do not hesitate to put your suggestions in the purple boxes we have placed strategically throughout the campus (and stuffing ballots with my name on them will not count!).

Jerry wrote: i know that yahoo! can benefit greatly from more discipline among all departments and functions, across the company. longer term, getting fit now will enable us to be more successful moving forward.

Translation: Discipline = layoffs. Getting fit = layoffs. But just think how lean and trim we’ll look when it is all over!

Jerry wrote: thanks,

jerry

Translation: Thanks and please don’t forget to take your complimentary purple Yahoo cozy on the way out! (The Bain people said it would be a nice touch.)

And, as an added plus, here is a decoding of the fully-punctuated statement Yahoo PR guy Brad Williams made about rumors of possible layoffs at the company:

Brad wrote: Yahoo! has been exploring ways to streamline our processes and bring new agility and efficiency to how we work as an organization. As part of this effort, we have engaged Bain & Co. to help us identify opportunities for improvement. This work is well underway, with the ultimate goal of positioning Yahoo! to achieve long-term, sustainable growth.

Translation: After I am laid off, I think we can all agree that this kind of stunning verbal acrobatics is sure to impress the folks over at Dunder Mifflin, where I hope to work next.

When Yahoo holds its first board meeting tomorrow–with three new board members, including shareholder activist Carl Icahn–there will be little time for getting-to-know-you chitty-chat.

In fact, it should be all business for the group, which needs to push the reset button hard for Yahoo.

Definite topics: the progress of talks to buy AOL from Time Warner (TWX)–probably Yahoo’s most attractive option, if it can get a good price–and which are more serious than has been reported; whether the company has any strategic interest in making up with Microsoft (MSFT) after a year of acrimony; how the company can attract new top-level talent to reinvigorate itself; how to make nice with disgruntled major investors; and, of course, how to react to the troubled economy, which is sure to impact the advertising business.

In fact, Yahoo (YHOO) CEO Jerry Yang is acutely aware that he and his management team have only a few months to really show investors and employees that they can get things moving at the beleaguered company.

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It is absolutely worrisome that Yahoo’s share price continued its downward swirl today, closing at a five-year low today at $17.75.

The downward drift far from the it-can’t-drop-below-$20 barrier makes it clear that Wall Street is valuing the company at close to what it could sell its assets off for and not much more.

This obviously puts additional pressure on the already squashed-down Yahoo (YHOO) management to perform.

In fact, with all this pressure, you’d think Yahoo CEO Jerry Yang would have turned into a twin of the cursed Hope Diamond by now.

But Yahoo is not the only Web company getting bashed by the weak economy and continuing mortgage crisis. In a bruising market, shares of eBay (EBAY), Microsoft (MSFT), Amazon (AMZN) and Google (GOOG) have also been down about four to five percent this week in an already lackluster period this year.

In fact, on a year-to-date basis, it is Google that is off the most on a percentage basis (see chart below; click on the image to make it larger), with Amazon being the most hardy performer.

Nonetheless, it is not a particularly good situation for the whole sector or the smaller Web 2.0 players that have banked their futures on having an IPO or being slurped up by the bigger players.

Of course, Yahoo is the most vulnerable to attack because of the last year of turmoil, especially Yang, but also longtime board members, who are perhaps even more at risk.

As BoomTown wrote earlier this week, Yahoo execs must find a way to turn around its business and fast, clarifying its focus and streamlining its units, before someone does it for them.

That does not mean anything will happen though, because newly minted board member Carl Icahn can no longer be an activist as an insider and he only has two other possible allies on the board, who also recently joined as part of his cabal.

Thus, it is highly unlikely Icahn could force Yang to resign at this point, unless it was on Yang’s own steam.

While a lot of names for possible replacements have been bandied about and laughably unsubstantiated reports of a secret deal with Icahn for Yang to resign are floated, this is just wishful thinking for some unhappy investors.

Nonetheless, a change could be forced via yet another agitated outside investor, one smart observer noted to me, who could start another noisy circus and demand a split of the company (search to Microsoft, the content and communications assets to one of many companies like News Corp., Disney, Comcast).

Such a move would require a lot of energy, which is lacking in the market overall right now. In addition, tangling with Yahoo has already ground up Microsoft and Icahn, as well as disgruntled major investors like Gordon Crawford.

So, even in its decidedly prone state, taking on Yahoo once again is probably not for the faint of heart.

Unless there is an 11th-hour change of heart from Time Warner, former AOL head Jon Miller will still not be Carl Icahn’s choice for the two other seats he will select–which also requires Yahoo’s consent–to the board of the Internet company, set to be announced by Friday.

Instead, several sources with knowledge of the situation think Icahn is more likely to choose Edward Meyer and Frank Biondi (pictured here, left to right), both of whom were on the alternative board slate when the activist investor was waging his now-defunct proxy fight against Yahoo (YHOO).

Another possibility is someone BoomTown had previously picked–former Nextel exec John Chapple (pictured here)–as a personal favorite, noting in late July:

Thus, overall, from good-fit perspective, I like another former exec, John Chapple of Nextel best of all because mobile will be increasingly important to Yahoo in Web 3.0 (frankly, it better be, as Web 2.0 has not been too kind to Yahoo).

Via Sprint (S), Chapple knows from big mergers and he knows how to makes deals. He has been the operator of a digital company, unlike many of the others. And he is also an entrepreneur, which is a plus.

Longtime media exec Frank Biondi is a longtime Icahn crony, and Meyer definitely has the advertising chops Yahoo needs, as former Grey Global Group head.

Icahn has already been seated as a board member of Yahoo.

Presumably, Icahn will now begin to try to figure out ways to goose Yahoo’s lackluster stock from the inside, in order to recover the hundreds of millions of dollars in paper losses he has endured since he started his still fruitless quest to change Yahoo’s management and/or get it to sell to Microsoft (MSFT).

One possible scheme was to eventually install Miller as Yahoo CEO.

In any case, both Icahn and Yahoo CEO Jerry Yang strongly supported Miller for the board.

But Miller was unexpectedly nixed because of a noncompete agreement still in place that he had signed with Time Warner after he was tossed from AOL in late 2006.

After tacitly agreeing to waive the noncompete, Time Warner’s CEO Jeff Bewkes told Miller he could not be considered for the slot.

Thus, Yahoo is limited to the list of possible members of Icahn’s director slate.

Once burnt, twice shy?

I suppose that’s the reason Microsoft is not loaded for bear and headed back down to Sunnyvale to make another play for Yahoo right now.

Not even after Jerry Yang orchestrated activist investor Carl Icahn’s defenestration, by inviting him on the board at Yahoo (YHOO), where he will be 100 percent silenced.

Not even after the stranger-than-fiction shareholder vote miscount (oops–we thought no meant yes!).

Not even after Yahoo stock’s consistent flirting-with-the-teens price.

Not even after its second-quarter results made it clear that it’ll be an uphill battle for Yahoo management to achieve the aggressive financial plans outlined when the Internet company was fending off Microsoft’s takeover bid.

So while opportunity is surely knocking for Microsoft (MSFT), especially if it wants to reach its stated goal of competing with Google (GOOG) in the online space, the software giant prefers not to answer the door right now.

Sources close to Microsoft’s thinking say the company is waiting for the right time, when Yahoo’s stock price is even lower and when Wall Street completely gives up on management, to figure out the next move.

Instead of acting, according to sources, and taking more flak for those actions, the whole brain trust up there is taking a breather and biding its time.

(In fact, many top Microsoft execs are on vacation, which is why August is a good time for Yang–who is himself headed to China for the Olympics–not to worry about a hostile attack.)

The strategy? Sitting in the grass–waiting, watching and making plans.

But, in truth, Microsoft cannot really make plans–except for the vague we’ll-keep-coming-and-coming in the online search and display business motto–until it decides the best way to reach its intended goals.

The first order of business, of course, remains the selection of a digital czar, which was promised by Microsoft CEO Steve Ballmer after top exec Kevin Johnson quit unexpectedly several weeks ago.

As BoomTown previously reported, the top inside contender is SVP Brian McAndrews, who came to Microsoft via its pricey $6 billion acquisition of aQuantive.

And Microsoft’s future-of-software guru Ray Ozzie remains a favorite choice of the troops.

But, sources said, Ballmer is still interested in a possible high-profile outsider coming in to shake things up.

The problem is, most such execs see the job for what it is–a potential tar baby that will only muck their careers up and produce no easy victories.

“Who wants the headache?,” said one outside exec who has been contacted by Microsoft. “While there might be upside there, the downside is much more significant.”

Thus, sitting very still for now might, indeed, be Microsoft’s best choice. It certainly is a lot less messy.

“Is that all there is, is that all there is.
If that’s all there is my friends, then let’s keep dancing.
Let’s break out the booze and have a ball,
If that’s all there is.”

Peggy Lee sang it best about troubled times in the classic song “Is That All There Is?”

But, dancing and making a video about dancing is obviously something that elevates Yahoo (YHOO), which is no small thing in this tough period for the iconic Internet company.

In the video below, Yahoo’s Yodel Anecdotal Blog Editor Nicki Dugan (whom BoomTown is immediately offering a job as AllThingsD.com video chief) takes the well-known dancing-fool Internet celeb Matt Harding of the Where the Hell Is Matt? Web site and places him all over Yahoo for 33 dancing sessions.

The video was recently shown at the company’s all-hands meeting, and it is simply delightful to see Yahoos looking happy simply by tripping the light fantastic.

I think activist shareholder Carl Icahn should make Harding one of his picks for the Yahoo board. (Icahn was officially appointed to the board yesterday, and his two board picks will be revealed Aug. 15.)

Highlights of the video of Harding dancing at Yahoo include Co-Founder David Filo’s infamous mess of a cube, a video conference jig with the team in Burbank, doing a sitting-down boogie with President Sue Decker, having a tango with Yahoo’s Purple Cow and a hip-shaking visit to “Frenemy Territory” at Google.

Best of all, of course, is a do-si-do with Yahoo Co-Founder and CEO Jerry Yang, who seems to be channeling an odd combination of Tony Manero in “Saturday Night Fever” and Barney the purple–how perfect!–dinosaur in his dance stylings. (Enter a caption contest here related to the picture above.)

Happily, this is the kind of dancing it is enjoyable to see Yang doing, because the two-stepping, shuffling and tap-dancing he is going to have to do to stay in power–after the much less sanguine shareholder vote this past week–is going to be much less fun to watch.

Here’s the video from Yahoo (all credit to Dugan and Yahoo) and the wonderful “Dancing 2008″ video that Harding did all over the world (I dare you not to smile):

All Yahoo needs now is for former Florida Secretary of State Katherine Harris to show up and start recounting votes.

It could happen, given all the crazy characters who have been drawn to the much-beleaguered Internet company like a magnet, in 2008.

It’s almost as if there is a voodoo curse on Yahoo (YHOO).

So, you didn’t think the digital gods would let it have more than one weekend of good news, did you?

No, they will not, it seems.

After the annual meeting last Friday, which went off without a hitch and, more importantly, without an expected major shareholder vote against the company’s management and board, you could feel a palpable easing of tension among Yahoo leadership and its exhausted PR team.

By Monday, the Yahoo shareholder kerfuffle–in essence, one major shareholder of Yahoo has asked for its outside tabulator of investor votes at the annual meeting for a recount–had landed with a thud.

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There is a mini-tempest brewing over how shares were tallied in the Yahoo annual meeting last Friday, specifically around whether a group of votes withheld by one of Yahoo’s major shareholders was not counted, counted incorrectly or even voted incorrectly by the investor.

According to sources close to the thinking at Capital Research & Management, the proxy committees for its two large funds that hold a significant stake in Yahoo (YHOO) recommended last week that they withhold votes specifically from CEO Jerry Yang and from various board members, such as Chairman Roy Bostock, to register disappointment with their performance.

Thus, the investment fund confirmed it had approached outside vote tabulator Broadridge Financial Solutions, a Lake Success, N.Y.-based financial services company that does securities clearing and processing, to investigate whether those votes were correctly counted on behalf of its Capital Research Global Investors fund.

Capital Research Global Investors–one of two funds separately managed at Capital Research & Management–owns 6.5 percent of Yahoo, according to recent filings, and Capital World Investors owns 9.8 percent.

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Yesterday, in what feels to BoomTown to be a deeply petty move, Time Warner said that it had blocked former AOL head Jon Miller from being considered as a possible Yahoo board member.

The reason is a noncompete Miller (pictured here) signed, part of a severance agreement he reached with the media giant after it unceremoniously tossed him out in late 2006.

A Time Warner spokesman said Miller was barred from working “for a variety of competitors, including Yahoo, until March of 2009.”

Like it matters.

According to sources at Time Warner (TWX), the decision came from on high at corporate and not from the AOL unit. And it is not due to jealousy over attention Miller has received of late–Microsoft was also interested in hiring him to take over for departing exec Kevin Johnson.

Miller, sources said, was called by Time Warner CEO Jeff Bewkes (pictured here) last night and told by him, “We’ve changed our mind.”

Why?

Well, to be sure, Miller is no Time Warner favorite, even after being gone for almost two years.

But Miller, whom Time Warner and AOL execs never miss an opportunity to bash, off the record, is also no threat to AOL, which he actually helped revive from the ruins of the disastrous AOL-Time Warner merger.

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After its annual meeting today, as its board members had lunch together, Yahoo released the results of its shareholder vote and it seems we will still have CEO Jerry Yang to kick around some more.

Yang garnered 85.4 percent of the shares to stay on as a director of the Internet company, with 14.6 percent withheld.

While having almost 15 percent of your investors think you are not worthy is not good, it is also not nearly as bad as it could have been.

In fact, overall results are actually better than last year. Thus, being attacked by Microsoft (MSFT) and activist investor Carl Icahn has had a dulcet effect on Yang’s image.

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Talking to Yahoo shareholders as if they were particularly thick and surly teenagers, Yahoo Chairman Roy Bostock articulated his umpteenth defense of the board’s handling of its dealmaking with Microsoft.

“I’d like to take you back–with all the hoopla, all the publicity that has surrounded the company, I think there has been a great deal of misinformation,” said Bostock about Yahoo’s (YHOO) dealings with Microsoft (MSFT) over the last year, speaking at its annual meeting this morning.

Thanks, Roy–glad you finally cleared things up!

Actually, not so much, as his speech was more of the same of what Yahoo has been saying in defense of its rejection of Microsoft’s $31 takeover bid in February.

(Meanwhile, a Microsoftie texted me: “Stand up and scream: Liar.”)

A Microsoft spokesman said as much in an official statement, released while the meeting was still taking place: “Yahoo is attempting to rewrite history yet again with statements that are not supported by the facts.”

Maybe not, but also from Bostock on the Microsoft situation:

On Yahoo’s behavior: “Proactively engaged.”

On the board’s efforts: “Encouraged Microsoft to engage.”

On the Microsoft offer to buy Yahoo’s search: “Not compelling.”

Overall: “As we have said repeatedly, we were open to a deal with Microsoft for the whole company and search, if it made sense.”

And, best of all, about activist investor Carl Icahn, who recently dropped his proxy fight against Yahoo and is set to join the Yahoo board in mid-August: “Carl’s a smart guy, he’s a good guy, despite some of the things that have been written about him.”

Well, by Bostock mostly, in a series of nasty letters he traded with Icahn before peace was declared.

Now onto Yahoo CEO Jerry Yang and President Sue Decker!

Eight minutes to go and BoomTown has a copious choice of seating here at the San Jose Fairmont Imperial Ballroom, as you can see from this picture.

But there was no electricity for the computers of the press!

The purple T-shirt squad from Yahoo (YHOO) had lovingly set up power strips for the reporters gathered in the cheap seats in the back. But the power was off. Then it came back on, went out and came back again. For now.

Is Yahoo CEO Jerry Yang power-playing with the press as he did shareholder activist Carl Icahn?

As in taking it away?

Well played, Jerry, well played!

Ah, lovely breakfast pastries of all kinds tumbling down from the tables outside the Imperial Ballroom at the San Jose Fairmont this morning at Yahoo’s annual meeting.

But, of course, no Carl Icahn and the noisy proxy fight circus that would have followed the shareholder activist here.

Which is kind of a relief, really, after a very fraught year for the troubled Internet company.

As to news that is likely to come out of the meeting, which starts at 10 a.m.?

“It’s going to be boring,” said one Yahoo PR honcho.

“We’re going for dull,” said another, sporting a purple Yahoo T-shirt, which most of the various Yahoo (YHOO) minions were wearing.

“Nothing will happen,” said another.

Actually, it sounds like a great corporate strategy for the year ahead for Yahoo: Aggressive monotony!

No news is good news!

Bore reporters into a stupor!

Well, I am sure I can come up with something.

Until then, here is my video from last year’s meeting at the much less tony Santa Clara Convention Center:

Is it just me or does the dire situation of Grizabella the Glamour Cat in the musical “Cats” remind you a little bit too much of what has been going on with Yahoo (YHOO) and its CEO Jerry Yang over the last year?

Thus, BoomTown has decided to make that scraggly cat’s anthem Yahoo’s for its annual meeting tomorrow, because the similarities are simply startling.

(Grizabella’s signature song, “Memory,” is even wildly purplish, just like the Internet company!)

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Oh dear, oilman T. Boone Pickens has apparently been Yanged.

That sounds like something that would happen out on the back 40 of a Texas ranch that no one in the clan ever discusses in polite company.

Actually, losing about $50 million is also something moneymen like Pickens don’t like to talk about either, even if he is as rich as can be.

Of course, in dumping his 10 million shares so precipitously, Pickens’s parting shot showed exactly what Yahoo’s big weakness is as the company heads into its annual meeting this Friday: an increasingly depressed stock.

Indeed, because of Pickens’s departure as an investor, Yahoo (YHOO) shares dropped just below the dangerous $20 a share level yesterday to $19.71, not far off the $19.18 price that prompted Microsoft (MSFT) to attack in February.

Yahoo shares are now just holding onto the edge at $20.05 this morning.

This is perhaps Yahoo’s biggest external problem. While the stock has shown resilience of really dipping to the mid-teens, if the shares drop that far, Pickens will look attractive compared with the kind of vulture investors who will show up to pick at Yahoo.

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