Wednesday, May 07, 2008

Jerry Yang's Foolish "Victory" at Yahoo

Yahoo's rejection of the bid by Microsoft to buy it for $45 billion is the dumbest business deal of this year. Jerry Yang was said to have won by rejecting Microsoft. He lost. He cannot make his company have the value that Microsoft was offering - 62% premium on its market value. He was ahead 62%; he had won already. But he chose defeat instead. Holman Jenkins describes the mess: Business World -
Congratulations to Steve Ballmer. Not many CEOs would have the nerve – humility, cold-bloodedness, whatever – to float a gotta-have takeover offer, then back away over the difference between $33 and $37 a share. Not many CEOs would have been willing nakedly to advertise strategic vulnerability and faulty execution vis-a-vis a rival like Google, then fail to consummate the deal marketed to investors as the remedy for that vulnerability and faulty execution. Even more so because of Mr. Ballmer's Murdochian approach: He came at Yahoo with a rich 62% premium designed to foreclose a rival suitor and confront the Yahoo board with a choice of accepting Microsoft's terms or serving up a big ugly stock price drop to Yahoo's suffering shareholders. By laying such a dramatic premium on the table, he also sent a message to his own Microsoft shareholders that said: "This is the only way I see forward." But Mr. Ballmer didn't count on Jerry Yang, whose idea of what his company was worth became inflated by the perception that Microsoft needed it so much. When Mr. Yang said Microsoft's offer "undervalued" Yahoo, he meant it underestimated Yahoo's value to Microsoft, not to anybody else.
Read on at the original. And Fake Steve Jobs does it with drama.
Says here that Jerry Yang is facing a shareholder rebellion and possible lawsuits for failing to make a deal with the Borg. Money quote: "Disillusioned shareholders are bound to question whether the rejection of Microsoft's sweetened offer was driven more by emotion and ego than sound business sense." Um, yes they are. And for good reason. FWIW, Jerry called me last night. Crying. He'd been on the phone getting screamed at by Wall Street people. And by Yahoo employees who apparently are being really abusive. In men's rooms all over the Yahoo campus a nasty new drawing is popping up, depicting Jerry Yang with his tongue hanging out, his legs pulled up and both thumbs firmly positioned in his ass. Jerry's like, Steve, dude, I know I can turn this company around. I just need a little more time. I've got it all mapped out. First we'll do another 100-day review period to review our operations and re-review the review we did a few months ago; then we'll have a 100-day listening period; then a 100-day period to digest what we've heard when we're listening and incorporate that data into the data we gathered during our review; then a 100-day period to develop a new strategy; then a 100-day period to explain the new strategy to employees; then a 100-day period to reorg the company and start rolling out the foundations of the new strategy to maximize shareholder value and pursue ways to better leverage our opportunities in the still very young online advertising market where we continue to believe we are well-positioned with a unique strategy; then a 100-day period to finish the reorg and roll out the second half of the new strategy. I mean it's pretty simple stuff." I'm like, Jerry, dude, I'm not very good at math and to be honest I kind of lost track of what you were saying because I put down the phone at one point so I could check myself out in the mirror, but I think that plan is going to take something like fifteen years, isn't it?

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