This One Made Me Laugh

Check out the following title from a WSJ article:

"Yahoo Seeks Decisive Leader"

How will the board know if they see one? A decisive leader, that is. Until recently, maybe last month, they thought Jerry Yang was the guy for the job.

The company has been rudderless for a while. Could get worse before it gets better. The stock popped yesterday on the idea that the major roadblock to selling the company is now out of the way. Was Yang that powerful?

I guess Microsoft might step in here but I'd be willing to bet that the stock will be single digits if they wait til January.

Well-Played, Microsoft

I had some mice in my garage this week so I put out traps. I caught a couple yesterday, including one that sadly wasn't dead yet. Yahoo probably feels a lot like that mouse.

Microsoft most likely was lucky to walk away from the Yahoo deal at $33. Yahoo was just greedy and stupid. This time around Microsoft seems to be playing it perfectly.

"We made an offer, we made another offer, and it was clear that Yahoo didn't want to sell the business to us and we moved on," Ballmer said. "We are not interested in going back and re-looking at an acquisition. I don't know why they would be either, frankly. They turned us down at $33 a share."

Yahoo will be a part of Microsoft at some point. They're just going to have to beg and squirm some more.

I Might Be Wrong on This Microsoft/Yahoo Thing

Kevin Johnson, the Microsoft exec who didn't get the Yahoo deal done, left today to run Juniper.

"Johnson joined Microsoft in 1992 and worked his way up to being the head of worldwide sales. He was put in charge of Windows and tasked with incorporating Microsoft's online services business with its traditional software groups."

I was thinking that now that Yahoo has caved in to Icahn, Microsoft's acquiring the assets they have wanted all along would be part of the only solution that would result in Icahn getting his payday. Would Johnson bolt if positive news was around the corner?

I'm not sure of anything on this one. Added to the mix is Ballmer's statements yesterday in a memo to employees that indicated a new focus on Apple as a competitor.

Stay tuned.

Yahoo

The results for the quarter speak volumes.

It was either the low end of the range or a miss depending on how charitable you want to be. It's hard to run a struggling business and fight a raider and a takeover at the same time.

Looks like they'll sell the non-core assets to buy some time. Eventually Microsoft will get the core assets and Icahn might get out whole.

Nothing to see here folks.

Yahoo Rolls Over

Plays dead. Sort of.

Yahoo agreed to give Carl Icahn three Board seats to end the proxy fight, but that's all they ended.

In his statement, Icahn said he "believe(s) that the sale of the whole company or the sale of its search business in the right transaction must be given full consideration." I'm guessing he also believes that he should make a pile of money on his Yahoo investment, which he hasn't yet, so don't expect him to sit quietly while Yang and his boys "fix" the company.

Yahoo has proven that they can't compete with Google. Teaming with Microsoft was probably their best option from the get-go.

I wonder what Microsoft is thinking.

Yahoo - Running Amok

"SAN FRANCISCO (MarketWatch) YHOO 22.45, +0.01, +0.0%) Chief Executive Jerry Yang on Friday said the company was launching an online advertising campaign on the Web portal's homepage to win over shareholders in the proxy battle with billionaire Carl Icahn."

This is a bad joke with no end in sight.

YHOO is at $22. They could have sold for $33 or more. A huge premium. Even at $22 the stock is expensive.

Icahn isn't the problem. The problem is that they could have taken a huge premium for their shareholders and they didn't.

What exactly are they trying to convince their shareholders of?

The NY Post

The NY Post today gives Microsoft CEO Steve Ballmer a lot of credit.

"Sources close to the Microsoft-Yahoo! deal talks, as well as some Yahoo! shareholders, believe Ballmer is intentionally making offers that he knows Yahoo! will reject - and using Carl Icahn to do it - as part of his longer-term plan to either buy Yahoo! on the cheap or permanently hobble it as a competitor. "

I'm not buying the part about hobbling Yahoo as a competitor. In terms of search and advertising, the only competitor that Microsoft cares about is Google. Plus, Yahoo has been limping pretty badly for a while.

Is it in Ballmer's best interest to paint Yahoo management and Board as intransigent on not shareholder-friendly? Of course.

I actually don't think Ballmer has done a bad job to date on the Yahoo deal, other than not pushing ahead more quickly when it looked like he had a window to get the deal done. Now, whether the current back-and-forth is designed to sweeten the terms, it looks like the result for Microsoft will be the same. Game over.

The Latest Yahoo Twist

Of course Yahoo doesn't agree to the newest proposal.

I have written before that I thought the original Microsoft deal was a good one for Yahoo shareholders and that they should accept.

They didn't, Icahn started getting involved, Microsoft went away and Yahoo was widely criticized for having blown it.

Fast forward to the last couple of weeks. Icahn is under water (SAI estimated his YHOO cost basis at $25/share with the stock around $23.50), and Microsoft is sniffing around again.

The offer this weekend consists of Microsoft taking the search business and Icahn taking the rest, selling assets, claiming he will increase returns to shareholders, dump his stock,etc. There's no way that Yahoo would agree to this, and they didn't, because they don't want to be broken up in the first place. They are now willing to sell the whole company to Microsoft for $33, though.

Then Microsoft can keep the search business and let Icahn have the rest.

Yahoo Not So Much

If you like Yahoo in its current form you should take some pictures for posterity - it's not going to last long.

Microsoft is back in the catbird seat. They have no reason to pay anywhere near their original offer and may be able to get only the parts of Yahoo that they want at a better price.

Icahn is in a tougher spot but he has a lot of skin in the game and is going to force the issue. If the Yahoo Board isn't already paying attention then they are in for a rude awakening, and I don't think a shotgun wedding with AOL is going to do the trick.

Yang and company had lots of ways that they could have orchestrated a better outcome than the one they're headed for. It's too bad.

Mid-Year Thoughts

The first 6 months of 2008 were a tough time for equity investors, financial firms, IPOs, SUVs, housing-related companies and Eliot Spitzer.

The S&P 500 is down 12.9% for the year.

I'm sure the folks at EBay are steaming as a French court yesterday ordered EBay to pay $61 million to LVMH for failing to block the sales of fake Louis Vuitton goods. EBay claims that they are already spending $20 million per year to combat counterfeit auctions. This is going in a very bad direction for EBay as there is really no solution. With millions of auctions going on they can't vet everything. If they are potentially on the hook for tens of million of dollars per brand/per country that they do business in they could really be behind the 8 ball.

Last night while I was asleep, Henry Blodget at SAI summed up the more recent goings on in the Yahoo fiasco. It's time for Yahoo to do something right.