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Yahoo CEO Jerry Yang
Yahoo searches for answers as it runs out of options, makes deal with Google

Yahoo announced grimly on Friday that talks with Microsoft were over.  According to Yahoo at a secret Sunday meeting Microsoft "unequivocally" rejected the idea of buying the whole company and tried instead to push for Yahoo to sell it just its search portal.  Interestingly, Microsoft appears to believe the search portal is worth more than the company as a whole, at least to its interests.  Yahoo, however, clung to the belief that its search portal, second on the internet to rival Google, was too valuable to sell piecemeal. 

The news of talks ending sent shares sinking like a stone in the sea, down over two and a half dollars to finish at $23.52.  To put this in context, Microsoft publicly offered Yahoo $33 a share.  Yahoo demanded $37 a share, saying Microsoft proposal "significantly undervalued" it. 

It has since come out that the faceoff occurred at a Seattle airport on May 3, between Yahoo CEO Jerry Yang and Microsoft CEO Steve Ballmer.  Yang allegedly demanded more money and Ballmer balked at the demand.  This exchange reiterated Yahoo's penchant for a rather vainglorious vision of self-worth, which it has held throughout much of the talks while showing little ability to justify it.

Standard and Poor's equity analyst Scott Kessler puts it aptly, saying, "If you are a Yahoo! shareholder, you just have to be scratching your head right now."

Perhaps more shocking, according to a recent lawsuit filed by shareholders Ballmer later would go on to make an offer of $40 a share -- nearly a hundred percent premium at the current share price.  According to the lawsuit, Yang and Yahoo Board Chairman Roy Bostock intentionally sabotaged the deal, and were not interested in selling the company at any price.  These claims have yet to be proved or disproved in a court of law.

The end of talks and Yahoo's failing stock is especially bad news for Yang and Bostock, as it puts investor Carl Icahn in prime position to sway already malcontent shareholders to his side when he attempts a takeover in the company's annual shareholder meeting, which Yahoo's management has pushed back to August.  If successful, Icahn is going to do a little late summer cleaning, ousting not only all the board, but also Yang, who he feels has been especially damaging to the company and its ability to deal.

A small hope still lies for Yahoo's top leadership in that Microsoft's complete rejection may bring into question whether Icahn's attempt to sell would have any more success.  Many analysts think that a great deal of whether the takeover bid succeeds depends on what kind of plan Icahn can bring to the table.  An optimal scenario for him would be if he came having already advanced in preliminary informal negotiations with Microsoft, while a not as promising scenario would be if he merely said talks would commence after the switch.

Icahn remained silent on the latest developments for the time being.

In yet another sign of slippage, Yahoo is trying to regain composure after the failure by announcing a deal with Google.  After a test run with Google showed that using Google advertising next to Yahoo search results would significantly up revenue, Yahoo is eager to make a deal with Google.  The deal, if it passes antitrust scrutiny is estimated to bring in about $800M USD extra revenue for Yahoo in the next 12 months.

Google's top executives were quick to praise the deal.  Cofounder Sergey Brin said, "I am happy to be helping them to stay independent."

And his fellow cofounder Larry Page added, "Having more money is a good thing."

However, beneath the rhetoric, the fact remains that coming to Google is a major concession, and will likely forever put Yahoo at second place, at best, in a critical element of the search engine business -- advertising.  While a Microsoft-Yahoo conglomeration, might have dreamed of taking on Google, the Yahoo of today, selling parts of its business to Google, has little chance of holding such hopes.  The latest developments only bring more uncertainty and drama to the unfolding story of the struggling company that was once the internet's top search engine.



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RE: Love it.
By masher2 (blog) on 6/13/2008 11:23:43 AM , Rating: 4
> "This guy has made one of the biggest business blunders of the modern age."

Not from his perspective. Yang was simply looking out for his own personal interests, rather than the best interests of Yahoo shareholders. His position, perks, and salary as CEO are now safe, regardless of the share price.


RE: Love it.
By TomZ on 6/13/2008 11:31:43 AM , Rating: 2
...safe until August that is...

In the long term, I think Yang has adequately demonstrated his capabilities (or lack thereof), and I think that Yahoo shareholders will replace him at the next opportunity.


RE: Love it.
By MrBlastman on 6/13/2008 11:40:54 AM , Rating: 5
He has obviously demonstrated his abilities to create a billion-dollar a year company out of nothing.

Be fair.

The man did something many of us could never dream of achieving in life. If you think otherwise, go ahead and start a billion-dollar plus company yourself.

It is harder than you think.

While shareholders are upset (and they should be), he is human and is simply trying to fight the fight a little longer. The shareholders did make him very wealthy through the company going public, but deep down inside all of us I would hope have that inner fire, that sense of self-consciousness about something we have all worked so hard to create - and fear that all of this that we have made could be wiped out, abused, or butchered in a minute.

It is called pride. The man is human and we're seeing his desire to keep his baby from being thrown to the wolves. I don't blame him at all for this.

Paycheck? come on, do you really think he cares about his day-to-day paycheck? The man is worth billions. He could care less. This is a personal matter for him.

Does it make it right in a business perspective? No. But, you can't be so quick to call the guy a schmuck, a waste of air, a reject, nor a failure. He's anything but that.


RE: Love it.
By masher2 (blog) on 6/13/2008 12:15:43 PM , Rating: 3
> "do you really think he cares about his day-to-day paycheck? The man is worth billions."

Yang isn't worth "billions". At current share prices, he's worth about $1.3B. I don't know his salary at present, but they were paying the past CEO something like $75M/year, plus a benefits package that brings the total close to $100M. That's a billion dollars a decade, by the way...not exactly chicken feed.

In any case, you're saying essentially the same thing I am. It's not just the salary that Yang covets, its the position itself, with the perks, prestige, and status that goes along with it.


RE: Love it.
By tmouse on 6/13/2008 12:33:11 PM , Rating: 2
He may not be worth that if they lose the shareholder lawsuit.


RE: Love it.
By MrBlastman on 6/13/08, Rating: 0
RE: Love it.
By TomZ on 6/13/2008 1:00:48 PM , Rating: 2
You talk a lot about human psyche and pride, but part of being a "management professional" is doing what is right, despite your personal feelings/whim/etc. Nobody wants someone with the maturity of a child running a billion-dollar company.


RE: Love it.
By MrBlastman on 6/13/2008 1:34:01 PM , Rating: 2
What he is doing is definately without any doubt not in the best interests of shareholders.

That doesn't make him a child though.

Why does it bother you so much, do you have stock in Yahoo _or_ Microsoft? I'm sitting back enjoying the soap opera.


RE: Love it.
By TomZ on 6/13/2008 1:44:03 PM , Rating: 2
I don't have a stake in either company. I am a fan of personal responsibility, and I can't understand why you are willing to give Yang a pass because of his ego problems. He's there to do a job, that's all. If he does it, great; if not, he needs to be shown the door.


RE: Love it.
By MrBlastman on 6/13/2008 1:53:13 PM , Rating: 2
I'm not giving him a pass. If I were a Yahoo shareholder I'd be upset.

He will get the door soon enough, or be granted his coffin to rot in. I am just trying to shed more light into the inner workings of his mind and why he is acting how he is.

The human angle, rather than the hard business facts.

Perhaps it is time for another chapter Days of our .COM's. :) (I'm eagerly waiting to see what will happen with Mr. Kahn, Yahoo and Yang. It is beginning to get quite juicy).

So until then, I'm watching all of this news like the soap opera that it really is.


RE: Love it.
By masher2 (blog) on 6/13/2008 1:47:54 PM , Rating: 2
We all have a stake in America. When CEO's abuse the system and destroy shareholder value, it ultimately hurts us all, whether or not we own shares in that particular company.


RE: Love it.
By Parhel on 6/13/2008 3:30:13 PM , Rating: 1
quote:
When CEO's abuse the system and destroy shareholder value, it ultimately hurts us all


That's true, but not relevant. He did nothing unethical. All this psychoanalyzing of Yang is hurting my head. We don't know that he made his decisions based on pride or emotion or foolhardiness. We just know that he's just made some really poor decisions. Not unethical, just shortsighted.


RE: Love it.
By Ringold on 6/13/2008 4:41:30 PM , Rating: 2
quote:
He did nothing unethical


Not honoring his fiduciary responsibility was unethical. If more people acted the way he does it would reduce confidence in the American equity markets.

quote:
A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.


He was too busy looking at his own interests.

I'll concede to Blastman above that he did show the ability to build a billion-dollar company, but he has just as clearly shown his inability to responsibly manage it now that it's public and the size that it is. If he didn't want to not be the uncontested owner, he shouldn't of taken peoples money in an IPO.


RE: Love it.
By TETRONG on 6/13/2008 6:04:56 PM , Rating: 2
The shareholders should have left the company if they don't like it's strategy.


RE: Love it.
By maverick85wd on 6/13/2008 12:20:16 PM , Rating: 2
quote:
It is called pride. The man is human and we're seeing his desire to keep his baby from being thrown to the wolves. I don't blame him at all for this.

Paycheck? come on, do you really think he cares about his day-to-day paycheck? The man is worth billions. He could care less. This is a personal matter for him.


Well said. I would like to see how many of the people that are blasting him right now would have done exactly the same thing in his shoes. I was a bit apprehensive to see Yahoo go to Microsoft, anyways. Not that Microsoft is as totally evil as everyone claims, they do and have done a lot for the tech community... but they have proven they are relentless in their search for a profit. I understand that is how a company operates, but sometimes I think they push it a bit far. Either way, good post!


RE: Love it.
By TomZ on 6/13/2008 12:39:29 PM , Rating: 2
quote:
Does it make it right in a business perspective? No. But, you can't be so quick to call the guy a schmuck, a waste of air, a reject, nor a failure. He's anything but that.

I disagree - he is a failure. He took his company public and became accountable to his shareholders, and now he is failing in that responsibility. He is doing what is best for his own self-interest, but he doensn't own the company - his shareholders do. And what his shareholders need, and what he is failing to deliver, is management in a way that maximizes shareholder value. Selling the company is one good way to deliver that value.

If he wants to be proud of something, maybe he should take up a hobby like playing guitar or drawing. He doesn't own Yahoo, and it is irresponsible of him to completely ignore the needs of those that do. Hence why I predict he will be relieved of his duties.


RE: Love it.
By ksuWildcat on 6/13/2008 1:02:00 PM , Rating: 2
I wouldn't say that Yang is a failure, although I would agree that he did not act in the shareholders' best interest. I'm sure that part of the problem stems from relinquishing control of his "baby", his ego, and on some level a desire to protect his employees. He should have at least pursued a strategic partnership with Microsoft, even if they had no intentions of selling the entire company. Yang and the board definitely could have handled the situation much better.

That being said, the problem with so many publicly traded companies is that executives are so focused on immediate results for the next fiscal quarter, they are willing to sacrifice a company's long-term health for quick gains. I'm glad that Yahoo didn't capitulate to the initial offer, but they could have handled entire fiasco in a way that would have made some arrangement with Microsoft possible.

It is often very difficult to balance shareholders' demands for return on investment with long-term goals for a company.


RE: Love it.
By MrBlastman on 6/13/2008 1:20:16 PM , Rating: 3
Keep living in the clouds man. Not all of the world revolves around the $green$ utopia you envision.

How do you measure a man's impact and worth in life? By his money? By his accomplishments? Or by his principles?

Think hard before you answer.

... and get to work on starting that billion dollar company you think is so easy to create. ;)


RE: Love it.
By masher2 (blog) on 6/13/08, Rating: 0
RE: Love it.
By MrBlastman on 6/13/2008 1:36:50 PM , Rating: 1
You're darned right. I'm a capitalist and work 100% commission, earning my keep every single day.

I only get paid for whatever sweat I create. If I do nothing I get nothing. I love every minute of it and wouldn't trade it in at all.

I'm just trying to get the point across to Tom that money is not the end-all for everyone. Some could care less. It doesn't make it right what they are doing, but it is certainly worth elaboration to expain to those who don't see it.


RE: Love it.
By TomZ on 6/13/2008 1:41:11 PM , Rating: 2
You're making this into some kind of social/political argument. I'm just saying that Yang is not doing his job and should be removed. Whether he needs/wants/worships/hates money is irrelevant, as are his ego problems. He's supposed to do a job and he isn't, that's all.


RE: Love it.
By ksuWildcat on 6/13/2008 1:43:00 PM , Rating: 3
quote:
In a capitalist society, people get rich not by confiscating wealth from others, but by creating it.


Well, ideally anyway. But then there are people like Kenneth Lay from Enron whom did "confiscate" their wealth from others. It's a shame that he didn't live long enough to serve his prison sentence.

Capitalism works pretty well under many conditions, but like all other systems, it is relatively easy to manipulate, lie, cheat, and steal your way through, regardless of what part of the income scale one is on.

I still hope that someday we'll have a utopia where we work for the betterment of all.

"Don't tell me you don't use money in the 23rd century."


RE: Love it.
By ksuWildcat on 6/13/2008 1:44:26 PM , Rating: 2
I should have read what I typed more carefully, as I meant to say:

"Don't tell me that you don't use money in the 23rd century."


RE: Love it.
By masher2 (blog) on 6/13/2008 1:49:46 PM , Rating: 3
Err, Ken Lay is a testament to the stupidity of socialistic government structures, not capitalism. Had the California legislature not created such an artificial, arbitrary system of price controls and structures, no one could have abused the system to profit from it.


RE: Love it.
By ksuWildcat on 6/13/2008 2:01:57 PM , Rating: 2
Backdating stock options and directing subordinates to use shady accounting practices is the fault of the government? He knew perfectly well that what he was doing was wrong, both from a legal and moral point of view.


RE: Love it.
By masher2 (blog) on 6/13/2008 2:15:09 PM , Rating: 2
Come on, Enron isn't famous for backdating stock options, a practice thousands of companies have engaged in. Enron existed for one reason only -- changes in government regulations that created a market for wholesale trading (and manipulation) of electricty and natural gas markets.


RE: Love it.
By ksuWildcat on 6/13/2008 2:29:13 PM , Rating: 2
Nevertheless, government policies did not drive Ken Lay to lie and steal as his company tanked and ruined many peoples' lives. There would be no need for government regulation if people like him didn't exist. You cannot fault the government for his (or other executives') behaviors.


RE: Love it.
By masher2 (blog) on 6/13/2008 2:45:58 PM , Rating: 2
> "government policies did not drive Ken Lay to lie and steal "

No, but they enabled him to do so. Without the artificial energy markets created by government fiat, Enron would have never existed.


RE: Love it.
By rsmech on 6/13/2008 2:06:07 PM , Rating: 2
There will always be abusers to any system. Someone like Kenneth Lay would also abuse your utopia. So to give an example of a crook doesn't invalidate the entire system.

It's the flaws in people that find was to abuse any system.


RE: Love it.
By ksuWildcat on 6/13/2008 2:25:06 PM , Rating: 1
Indeed, which is why it would take a radical cultural shift to even begin thinking about such an idea, but I can still hope that someday, money will not be the driving force behind our advancement.


RE: Love it.
By TomZ on 6/13/2008 2:48:32 PM , Rating: 2
I suggest you move to a country and live under a communist or socialist regime, if you want a "radical cultural shift" and to live a life where money is not the "driving force behind our advancement."


RE: Love it.
By ksuWildcat on 6/13/2008 3:19:22 PM , Rating: 2
I'm picturing a world where there are no countries, religions, or other social controls invented by man, where our leaders are not self-serving bureaucrats, and where people act in the interest of helping all. Unfortunately, such a notion may never exist, but you can call me an optimist.


RE: Love it.
By MrBlastman on 6/13/2008 3:34:16 PM , Rating: 2
Sounds pretty bleak to me. A very :-| utopia.

At least we have diversity in the world we are in right now.

Like it or not, good and evil create color in an otherwise stark world. It'd be a boring movie if everyone was smiling all the time totally clueless as to their inner existence.

That or a good zombie flick.

... "Look at all the smiling people."

"HOLY CROW BARNS! DID YOU SEE THAT ZOMBIE BITE HIS HEAD OF?!" a fan proclaims, turning to his neighbor and notices a blank, white look on his face with soul-less eyes. "Uh oh"

A munching noise is heard.

Nope, come to think of it, it wouldn't be so bad. :)


RE: Love it.
By TETRONG on 6/13/2008 6:22:00 PM , Rating: 2
That's precisely why you're so dangerous-because you live in movies.

Go pop some pills and erect your shrine to trump and hilton.


RE: Love it.
By masher2 (blog) on 6/13/2008 12:44:38 PM , Rating: 4
> "He has obviously demonstrated his abilities to create a billion-dollar a year company out of nothing."

I'd also like to point out that Yang wasn't CEO of Yahoo during most of the company's existence. Furthermore, Yahoo has made some of the most collossal blunders of all corporate history, such as their refusal to buy Google when they had the chance (for $3B in stock -- Google is now worth about 60 times that), their dropping the ball on what made the company strong in the first place -- searching and navigation, and many, many other crucial missteps.

Yahoo was certainly in the right place at the right time. But more so than almost any other tech company in recent memory, it has failed to capitalize on its positions and advantages, and is now being threatened with being overwhelmed entirely.


RE: Love it.
By MrBlastman on 6/13/2008 1:40:50 PM , Rating: 2
I think this success and lack of full realization of potential will prove to be a great case study in B-School for years to come.

They are the Microsoft that could have been of the .com era. You could put them side by side and simply teach the lesson of:

Those who saw opportunity and acted versus those who saw it and didn't really "see" it.

In the end it pains me to see the company blunder away into oblivion but so is it headed towards thus far.


RE: Love it.
By StupidMonkey on 6/13/2008 3:03:03 PM , Rating: 2
+1. Exactly.


RE: Love it.
By theapparition on 6/16/2008 10:02:01 AM , Rating: 2
quote:
The man did something many of us could never dream of achieving in life. If you think otherwise, go ahead and start a billion-dollar plus company yourself.

Yes he did create a billion dollar company, but so did other millionaires and billionaires. Some got there through hard work and dedication. Others, were just in the right place at the right time. Don't know which catagory he falls into, but clearly he made a bad move here.


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