Yahoo Next Steps: Google Deal, AOL Purchase, & Pleasing Investors
The question of the day seems to be how low will Yahoo go when the US stock
market opens later today. Even I,
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
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
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
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
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
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.
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
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