The question of the day seems to be how low will Yahoo go when the US stock market opens later today. Even I, optimistic about Yahoo’s chances on its own, don’t expect it to rise. But maybe the latest blog spin from Yahoo, along with formal news of a deal with Google, will help slow the expected drop. More on that below. And by the way, how come no one’s talking about how Microsoft’s stock is likely to drop, too? The failure to do a deal potentially leaves two losers, not one.
Ok, so now what? is from Yahoo CEO Jerry Yang, posted to the official Yahoo blog. He names off a variety of products that Yahoo rolled out in the first quarter of the year as proof of how innovative and creative Yahoo is.
Frankly, I’ve joked a lot on the Daily SearchCast how this fairly unprecedented barrage of product launches felt a lot like SS Yahoo seeing torpedoes coming in the water and throwing everything they have overboard in hopes of blocking them. Some of these product launches have felt rushed and incomplete, pushed forward to try and prove to anyone wondering that yes, Yahoo has cool ideas and activity within it. I don’t know that naming them off again will reassure investors, but we’ll see.
He stresses also what came out in yesterday’s Yahoo press release on the Microsoft walkout, the idea that the "distraction" of Microsoft is now behind Yahoo. That was from the release. From the blog post, he said:
So, what’s next? With Microsoft’s withdrawal, we’ll be better able to focus our energy on growing our industry leadership and maximizing value for stockholders. We’ll continue to execute on our plan — making your Internet experience as personal, relevant, open and social as possible, serving advertisers so well they insist on working with us, and opening up Yahoo! in a way that developers dream of. And, we’ll also continue to pursue strategic opportunities that position us for long-term success.
Of course, this is far from over. There’s going to be a distraction at the very least caused by some shareholders themselves that are expected to be unhappy and who may wish to force a change. But Yang at least does acknowledge that the drama will still go on:
We know the spotlight will probably stay on us for a while. That’s fine — we have a clear path ahead and momentum to build on. And thousands of dedicated Yahoos around the world who have held up well to scrutiny. It’s now up to us to show what we Yahoos can really do.
Probably the most interesting part of the post to me is where Yang comments about all the news and analysis reports out there. Some suggest that Yang is just too emotionally tied to running Yahoo as its own company, rather than selling out now at what to some seems like the best shareholders can ever expect to get. He writes:
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.
Moving along from Yahoo’s own post, here’s an update on other reports and news that have come out:
A Yahoo Shareholder on What Might Have Been: From the New York Times, an interview with Yahoo’s second-largest shareholder Legg Mason saying they’d have liked to have seen a middle ground offer between the $33 per share Microsoft offered and the $37 per share Yahoo was pushing for. Said portfolio manager Bill Miller:
Press reports that major shareholders would have been willing to take $35 are probably not far off the mark.
Heck — since that’s the natural middle ground, I tend to think again why wasn’t it reached?
Personally, I was also pleased to see someone else saying what I wrote about yesterday — that the idea of Microsoft being unable to afford another $5 billion for something that had previously seemed so important seems either cheap or foolish. From the article:
"They didn’t have a prayer of competing with Google without Yahoo,” he said. The difference between Microsoft’s offer of $33 a share and Yahoo’s demand for $37 a share was a few billion dollars, an amount of cash that Microsoft generates in just a few months, he said. For Microsoft, the downside of not buying Yahoo is far greater than the risk of overpaying for Yahoo by a small margin, he said.
Miller also said that he expects Yahoo will have to begin a buy-back of its stock as a means to reassure investors — as well as delivering solid and growing revenue.
Yahoo, News Corp talks have "cooled" from Reuters covers the idea that a deal with Murdoch-owned News Corp isn’t going anywhere. Of course, Murdoch himself said many times publicly he didn’t see much in the deal with Yahoo, so I don’t think much was expected.
Yahoo’s AOL, Google deals still in the works from News.com is far more interesting. An ad deal with Google may be announced later this week. Meanwhile, talks to acquire AOL continue — with the idea that Yahoo’s paid cash to take it, cash that can be used as part of a stock buyback. Be sure to see Not So Crazy: Yahoo May Partner With AOL To Escape Microsoft on why AOL could make good sense for Yahoo. Report: Yahoo & AOL Approaching A Deal from us in April covers a Wall Street Journal article going into more depth about how such a deal might work.
Why Yahoo (YHOO) Should Go Ahead With Google Outsourcing Deal (GOOG) is from Henry Blodget over at Silicon Alley Insider. I mention it because it’s a high profile piece that makes no sense. Blodget argues that there’s "no going back" if Yahoo outsources paid search to Google, and that focusing on Yahoo’s paid search solution (Panama) won’t increase query share, so it should be dumped.
Um, Microsoft has less query share than Yahoo. So by Blodget’s argument, Microsoft had better tie-up with Google as well. And what happens with the paid search technology has little impact on query volume. That’s driven largely by brand perception and quality of editorial results. As for no going back, again, reports are that Yahoo will use Google ads in addition to its own. I really doubt Yahoo (which has played a fairly nimble game of fighting back Microsoft when many thought it would lose) is completely locking out its own paid search future.
My post from yesterday, Leaving Las Yahoo: Microsoft’s $5 Billion Mistake?, gets into these issues more. It also covers why comparing Yahoo’s outsourcing to AOL’s outsourcing to Google is a wrong thing to do. Would people making these comparisons just stop it? AOL outsourced everything to Google and had no real search brand; Yahoo is potentially outsourcing only some of its paid search and has a strong search brand that has largely maintained share. Those are just two reasons why AOL does NOT equal Yahoo.
Dissident Yahoo shareholder plans vote campaign from Reuters covers a shareholder revolt at Yahoo already in the works. From the article: "Shareholders didn’t even get a chance to vote on the deal, but the board negotiated on our behalf and not in good faith," Jackson said. That’s Eric Jackson, who led a revolt against former CEO Terry Semel last year.
I dunno. First, that’s what boards do — negotiate on behalf of shareholders. So I kind of file Jackson under not getting it. Plus, with the shares at $29 and the Microsoft offer at $33 (half of that, actually, which was a stock swap where value could have fallen), I kind of wonder why griping shareholders just didn’t sell. Guess we’ll see how things go.
After Deal Dies, Yahoo Weighs Its Next Move from the New York Times is a nice piece. Yang’s blog post said there’s no celebrations going on over at Yahoo, but from this article:
People close to Yahoo said that the chief executive, Jerry Yang, and his team, who told Microsoft they would not sell for less than $37 a share, greeted Microsoft’s decision as a victory. High-fives were exchanged Saturday afternoon when they learned Microsoft was backing down
The article also gets into the issue I addressed before, on whether Yang was just being too emotional about the company:
“I don’t believe that Jerry Yang as a founder, as someone who is emotionally attached to the company, was really looking out for my interest as a shareholder,” said Darren Chervitz, co-manager of the Jacob Internet Fund, which owns about 150,000 shares of Yahoo. “I don’t think anything Yahoo puts out there is going to be comparable with what Microsoft was offering.”
Maybe. But as the article goes on, Yang apparently had the entire board backing him. It also stresses that the search ads deal with Google is not a complete sell-out:
Yahoo and Google, however, are not talking about outsourcing all of Yahoo’s search ads to Google. Instead, they are considering a more limited partnership, under which Google would deliver ads only on particular searches for which the revenue difference is significant, according to people familiar with the discussions.
Analysts say such an arrangement could have multiple benefits. It would allow Yahoo to retain Panama and even use the extra revenue it receives from Google to invest in its own ad system. A limited partnership could help get around the antitrust scrutiny that a broader deal would most certainly face from regulators. The Justice Department has already begun asking questions about the companies’ relationships.
Jerry Yang’s memo to Yahoo staff from News.com has the email that Yahoos received from Yang. It reiterates things said elsewhere, such as the "distraction" of Microsoft being gone, but still puts a spotlight on Yahoo itself to perform.
in the end, it all comes back to who we are as a company. we have a spirit and a culture that is uniquely yahoo! – and we can’t forget that. staying true to who we are has helped us pull through the recent uncertainty we’ve faced, and will continue to be an asset as we move ahead. there’s a reason why we’re the only fortune 500 company with an exclamation point at the end of our name, and now is the time to demonstrate what that exclamation point stands for.
Personally, I’ve always hated that exclamation point, which is why I never use it when writing about Yahoo :)
Yahoo Execs’ Reaction: “I Need Some Prozac” has some reaction from unnamed Yahoo execs that Kara Swisher at All Things D has gathered. After talking to a dozen vice presidents or higher, she finds they’re not that happy. Quotes range from people not sure if they’ve won or lost to the money quote:
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.”
For more, see related discussion on Techmeme.