All Things Digital

Yahoo CEO Jerry Yang said in an interview today that he’s still open to a deal with Microsoft.

Yang told Reuters, referring to Microsoft’s execs after they walked away from their takeover efforts Saturday: “If they have anything new to say, we would be open…I am more than willing to listen.”

After Yahoo’s precipitous stock drop today, this kind of backfilling is not a surprise, of course.

So, what more can BoomTown say, except that a picture is worth a thousand words?

Be careful what you wish for, Jerry Yang.

Because after talking to a dozen Yahoo (YHOO) execs over the weekend after the Microsoft (MSFT) takeover deal cratered, most of whom are vice presidents or above, I have to say that your stock drop isn’t the worst thing you will have to deal with this morning when you pull up at work.

The worst? That’ll be the very hairy eyeballs you will be getting from a lot more of your employees, who are scared silly and a lot peeved by the limb many feel you have dragged them and their stock options out onto.

A major decline in the share price today was of prime concern to those I interviewed, with most hoping it would not dip below $20, based on the possibility of signing a long-rumored ad outsourcing deal with Google (GOOG) soon that could potentially keep the stock higher.

Also of concern: making too many sudden moves to placate Wall Street, like a possible alternative merger with AOL (TWX) (which the Yahoo troops still don’t seem to welcome).

But causing particular dismay was the image of Yahoo’s top execs high-fiving after Microsoft CEO Steve Ballmer walked away from the deal, an act reported in the New York Times this weekend after the deal was scotched.

“That was very telling, if it was true,” said one exec, who–like everyone–did not want to be named. “It shows a complete lack of connection to the balance of the company.”

And that was the nice quote!

Last night, Yang tried to placate employees a bit by posting an aptly named communication, “OK, so now what,” on Yahoo’s blog called (not so aptly) Yodel Anecdotal. He also took a slap at, presumably, Microsoft’s PR effort and the press coverage around the takeover attempt.

“By the way, I’m sure you’ve all read or watched the news about this. Frankly, there’s a lot of nonsense and misinformation in what’s being reported. Just so we are all clear, here’s what happened. The board took its mission very seriously. We clearly indicated to Microsoft that we were open to a transaction but only if it were on terms that fully recognized the value of Yahoo and was in the best interests of our stockholders.

“No one is celebrating about the outcome of these past three months… and no one should.”

So no high-fiving anymore, right? And, just so we are all clear, everyone at Yahoo I talked to sure isn’t celebrating.

So, here’s a sampling of the feelings, none of which were positive, even though BoomTown tried mightily to get someone to render a more sanguine spin on the proceedings:

“I am in shock.”

“I don’t know if we won or we lost. I think we lost.”

“I don’t love that it was Microsoft, but I think everyone thought $33 was a pretty good offer from a pretty good tech company.”

“Having to face my staff tomorrow will not be so much fun and I need some Prozac, since I don’t know what I can say to them about how our leadership is going to get our company going again.”

“Where’s the Jelly memo when you need it?”

“I can’t really talk to Jerry, since it is difficult to tell a founder tough things he probably needs to hear.”

And, “Do you think we need to do an intervention with Jerry and the board?”

I am not sure that would work, but most employees I talked to thought a new leader at the top of Yahoo would be a good idea to give employees a fresh start and a new outlook.

Suggestions ranged from former Yahoo COO Dan Rosensweig to former Viacom (VIA) CEO Tom Freston to former eBay (EBAY) CEO Meg Whitman (pictured here).

“Jerry could become chairman, Sue [Decker] could remain president and then someone who can really charge in and make drastic change could be CEO,” suggested one exec. “Do you think Meg Whitman would do it?”

Um, no. But, ironically, Whitman was almost Yahoo CEO in a potential merger between Yahoo and eBay that never happened in the late 1990s.

As they will also say someday about 2008’s stillborn takeover of Yahoo by Microsoft: Could’ve, would’ve, should’ve.

But didn’t.

A stark visual of the situation–courtesy of The Wall Street Journal–with regard to the competitive Internet advertising and stock situation.

These two charts look at the performance of the major players–Microsoft (MSFT), Yahoo (YHOO) and Google (GOOG) (and AOL [TWX] in the ad chart)–from 2004 to 2008.

What more can we say?

So we won’t.

Also, here’s a link to a video of an appearance I made on ABC News last night about the danger of Google getting too powerful. (Naughty ABC does not allow embedding; here also is the text post.)

Please see this disclosure related to me and Google.

The blogosphere immediately jumped all over the inevitable meme that after the Yahoo (YHOO) deal fell apart, Microsoft (MSFT) CEO Steve Ballmer’s job was at risk.

What with the problems with the new Vista operating system and the general feeling that Microsoft’s Internet strategy is in shambles, the argument that Ballmer would be shown the door by an impatient board and replaced by former CEO and Founder Bill Gates was clear.

Actually, not so such much at all, but that has not stopped all the noise.

Maybe Ballmer should go and maybe not, but I would like some proof that’s not in evidence as yet.

Instead, this TechCrunch story was typical, full of assertions as easy to make with certainty, but just as easy to knock down.

First, it noted that Ballmer being the “big driver behind this deal at Microsoft–some would say to the point of obsession” had made him vulnerable to the board, which he was trying to impress with a “transformative” deal and that he was worried about being fired.

Actually, I would be worried if Ballmer was not obsessed, given that more than $40 billion is an awfully big bet.

And has anyone noticed how typically ineffectual most boards are (see Yahoo, see Time Warner [TWX], see them all)?

I doubt there is a major force on the board of threat to Ballmer, except Bill Gates, who has never shown the slightest inkling of turning on his longtime partner.

Also, Gates himself fumbled with regards to the Web, and he even wrote a book about not doing that in 1995, called “The Road Ahead.”

Microsoft has bungled the Internet? It’s out of touch when it comes to the Web? Its troops have too many lifers who cannot innovate? Google (GOOG) has cleaned their clock? What!?

Of course, this has been news to exactly no one for about a decade now.

In any case, the Yahoo purchase was not the worst of ideas, if a bit obvious–although I have written several times that Microsoft should have bought up other Web 2.0 companies instead of Yahoo.

Both sides acted cloddishly, to be sure, and I am sure Microsoft’s board and execs are smarting a bit from misjudging this foray–I myself wonder how they did they not anticipate just how recalcitrant Yahoo would be.

But Microsoft’s withdrawal was clearly a better path than a hostile proxy fight.

So it did not work out (as yet)? So what? And if Microsoft stock rises tomorrow on the news, of course, all will be forgiven.

In addition, TechCrunch uses a source that is not exactly reliable, quoting “one secondhand account that leaked to us yesterday before the deal was called off,” who tells tales of Ballmer’s ranting and raving about how he wouldn’t let the board “crucify” him.

Ballmer can sometimes be a loudmouthed popinjay!? What ho?!?

Also news to exactly three people in the tech sector and they have been in an isolation tank since 1976.

More to the point, I got that exact anonymous email too, and it was credible and from someone with some good information.

But I felt I could not use the Ballmer info without more proof (also, I would need to know who this person is or find other non-anonymous-to-me people to bear its assertions out).

While compelling and sent in very good faith by an obviously smart person, as many of these types of emails are, I figured the lively emailer was probably from someone close to or even one of the many disgruntled employees of Microsoft who did not like the Yahoo deal.

There were lots of them, as BoomTown reported here, but I determined the emails were just wishful thinking.

But you be the judge!

Here’s two sections from the emails I got in their entirety related to Ballmer (with some minor edits to protect the sender) that TechCrunch clearly used verbatim, so you can see the whole thing rather than the pulled quotes:

Ballmer really does think his job is on the line if he doesn’t close the Yahoo deal, and soon. He’s worried after the fiasco that was the Windows Vista launch, then this, the Board will ask Gates to stay on while they find someone to replace him. Apparently this has caused Ballmer to be more of a tyrant than ususal, yelling and screaming at employees for almost no reason. Some Microsofties are secretly wishing the deal falls through so that Ballmer will get the axe and Microsoft will get new leadership.”

and

The particular incident… was that an exec made a comment about not having to worry about Ballmer anymore if this Yahoo deal falls through. He didn’t realize Ballmer was within earshot. Ballmer started yelling and screaming that this deal would go through and that the board wouldn’t be able to ‘crucify’ him over this. The scuttlebutt suggests that the board was ready to walk because they fear this deal is proving to be to big of a distraction, but Ballmer is obsessed with making it happen in order to protect his job. The board gave him one more week to get it done….many in Microsoft belive Gates will stay on if asked because even Gates realizes that Ballmer needs to go.”

Like I said: Wishful thinking.

This, of course, does not absolve Ballmer from having to come up with some very smart moves and fast to at least keep competitive with archrival Google and also figure out a way to protect its Windows software franchise in the wake of Google’s cloud computing effort.

But that is a longer and more vicious ground war that will go one for a long time.

Yahoo might be Ballmer’s Vietnam or Iraq, as still other bloggers are writing, but let’s keep in mind that the first went on for decades and the second, unfortunately, is still slogging on.

Valleywag got a hold of a sticker (see below) that Bebo employees are passing around in anticipation of the close of the purchase of the third-ranked social-networking site by AOL for $850 million in cash.

The motto: “I, for one, welcome our new AOL overlords.”

Why shouldn’t they? As BoomTown reported, every Bebo employee has had their previously granted stock options accelerated and fully vested under terms of the deal.

This is typical in acquisitions by the Time Warner (TWX) online subsidiary, since it cannot offer enough of its moribund old media stock.

Unfortunately, those kind of deal terms don’t make for the kind of environment that encourages already jumpy entrepreneurs to stay. In fact, it kind of gives them a free pass to leave.

Still, it is nice to see Bebo minions celebrating their new bosses, including AOL CEO Randy Falco and President Ron Grant, who helmed the Bebo deal.

But to clarify for Bebo staff: Falco and Grant’s nickname at AOL is Smithers and Burns, that lovable pair from “The Simpsons,” and not overlords.

It goes without saying that further errors like this will not be tolerated.

Gone, Tim Tuttle of Truveo. Gone, the Birches of Bebo. Gone, Dave Morgan of Tacoda. Gone, many Quigos.

One of the more interesting little problems that AOL has had over the last few years, in regards to its acquisition of hot Internet companies, has been that it is situated deep in the bowels of the Time Warner (TWX) behemoth.

So, one wonders, will a possible hook-up with Yahoo (YHOO) change that, giving the also-ran Internet outfit potentially valuable stock in Yahoo to better entice valued employees to stay?

Read more »

To: Rumormongers

Re: Wacky–even by Google standards–stock market schemes

Google (GOOG) –let me get this straight–is apparently considering buying just under 20% of Yahoo (YHOO) shares at some elevated price, according to a post on TechCrunch yesterday, “although the goal isn’t so much to close the deal, which would almost certainly be opposed by U.S. regulatory agencies. But rather to throw another curve ball at the Yahoo Board…”

Excuse me for a second, as my brain just exploded. While I don’t doubt TechCrunch had a good source on this report, it just goes to show the level of kooky desperation and out-of-control emotion that Microsoft’s (MSFT) unsolicited bid for Yahoo has had on all the parties involved.

Were Google to actually take wacky advice like this, I would worry about more than its recent stock drop. Such a move is neither savvy nor effective (after all, Google cannot shimmy its way out of the fact that it just really just cannot have Yahoo, in whole or part, because of its huge market share in search and search advertising).

Why? It just makes me a little nervous if Google, a major U.S. corporation with lots and lots of government rules and regulations to follow, is contemplating “pretend” buying of shares of Yahoo to trip up rival Microsoft, as if it were a kid playing a stock market equivalent of Ding Dong Ditch (see helpful video below on how to do a successful DDD).

Quoting an anonymous adviser to the deal, the TechCrunch post noted: “It’s a relatively cheap way for Google to confuse the situation further, and, potentially delay or disrupt a Microsoft acquisition.”

Well, if $10 billion or more, along with inevitable shareholder lawsuits, is cheap, I guess so!

OK, not so much. But the scheme concocted by anonymous wheelers and dealers sure wins points for being interesting. And creative. I might even say: crazy like a fox.

But let’s just stick with crazy, shall we?

For a little better take on the situation, try the excellent (and, more importantly, accurate) analysis of the stock situation around the deal by The Wall Street Journal’s Matthew Karnitschnig of the Deal Journal blog posted yesterday too, which I post in its entirety below (also, a picture of what Microsoft might look like if it manages to swallow Yahoo whole):

Yahoo’s Deteriorating Defenses Against the Microsoft Bid

Like a coiled python eyeing its quarry, Microsoft appears content to wait for Yahoo to exhaust its defenses before moving in for the kill.

To understand Microsoft’s sanguine approach, look no further than Google’s share price. Until Microsoft made its offer for Yahoo on Jan. 31–-then valued at $44.6 billion–-Google and Yahoo were both down about 18% on the year. Yahoo has jumped about 50% since the offer; Google has fallen a further 16%.

Part of Google’s slide is connected to concern that a combined Microsoft/Yahoo would cost it business. Still, investors appear most worried about a decline in Google’s advertising revenue. Those concerns sent its shares to a nine-month low Tuesday.

One needn’t be a certified financial analyst to surmise that were it not for the Microsoft bid, Yahoo, which faces the same challenges in the marketplace as Google, also would be getting thrashed in the stock market.

If Yahoo shares suffered the same percentage decline as Google’s have since the Microsoft offer–not an unfair assumption considering Google stock rose 12% in the 12 months before the offer and Yahoo’s fell about 35%–then Yahoo would now be trading at about $16. That is about half of Microsoft’s original $31-a-share offer, which Yahoo dismissed as “undervalued.”

If Google’s stock keeps dropping, the Yahoo board might want to solicit a new valuation. Because if Microsoft does strike, the attack is likely to be unrelenting. Microsoft won’t crush any bones, but its objective is the same as the African python’s: to swallow its prey whole.

Please see this disclosure related to me and Google.

The recession’s impact might not miss the typically high-flying Internet stocks. Or maybe it will. Or not.

Good thing Facebook and Slide got all that cash!

With a lot of companies reporting soon, here’s a video from WSJ.com to help you sort it all out:

Let’s be clear on one thing: We won’t be getting any financial information out of the company about Facebook’s performance or the slate of its shareholders until it’s good and ready to hand it over.

That’s because, although it has been widely reported, the hot social network will not fall under the Securities and Exchange Commission’s old “500 shareholder rule,” which would have forced it to report such information when the number of shareholders, including those holding just stock options, reached 500.

While companies like Google got caught in that net several years ago, the SEC actually recently changed that rule to exempt those just holding options, which the vast majority of Facebook’s growing legion of employees (about 400) have been given.

In fact, said many sources, Facebook only has several dozen individual shareholders who actually own stock and that number is unlikely to rise in the future.

Read more »

Well, news out of China for Yahoo has never been very good, what with all the human-rights issues–that would be jailing of people related to information the company has released to Chinese authorities there.

But, there seems to be some silver lining with the IPO of Alibaba.com. Shares of Yahoo did decline yesterday due to intense focus and perhaps some profit-taking on the business-to-business e-commerce portal, in which Yahoo holds a stake.

In its offering yesterday, Alibaba.com raised $1.5 billion, although investors expected substantially more shares to be sold. Yahoo agreed to buy $100 million of the Alibaba.com shares, and it also owns a 39% share in its parent, the Alibaba Group.

The IPO has had a dulcet impact on Yahoo shares in recent weeks, lifting its stock price in anticipation of a killing when Alibaba.com debuts on the Hong Kong stock exchange Nov. 6.

Here’s a good Wall Street Journal piece about Alibaba.com and a chart to peruse, if you feel like helping Jerry Yang keep Yahoo stock smoking (well, a little wildfire, at least!).

Could Yahoo ever become a takeover target?

This kind of patently annoying answer from a CEO could certainly help fuel such a scenario–this time in an interview Microsoft head Steve Ballmer had yesterday with Charlie Rose:

Rose: Are you in talks to acquire Yahoo?
Ballmer: If I were, I wouldn’t say anything, and if I weren’t, I wouldn’t say anything.

Translation for those who don’t speak corporate hoo-ha: There were talks. They did not work out as yet. But we thought we could still keep Yahoo in play all by ourselves by being vague.

Read more »

We slap around Yahoo sometimes in this column, but we are also capable of hugging it out when the occasion presents itself.

Thus, kudos to Yahoo President Sue Decker for buying 47,000 shares of the company’s stock for $1.1 million, a nice show of confidence by the executive and one few others tend to do in times of turnaround, including any other bigwigs at Yahoo.

In fact, Decker is picking up the shares in an open-market purchase–as opposed to exercising options she might have been awarded as a top exec there–just after they hit a three-year low of almost $22.50. She now holds about 425,000 shares of Yahoo.

It’s the largest purchase by a Yahoo insider in four years, according to InsiderScore.com. Most executives at Web companies, I have found, don’t do a lot of buying of company shares beyond what they are awarded, stock they usually sell the minute they exercise their options.

Nothing wrong with that, but it is a nice symbolic move by Decker to buck the trend and also show support for the company she is charged with getting back on track.