36 Comments

Summary:

Yahoo’s board is reportedly going to make some sort of a decision about the future of the company and the Microsoft bid later today. What took them so long?

There is word on the street that Yahoo’s board is going to make some sort of a decision about the future of the company and the Microsoft bid later today. (Kara Swisher says its going to happen next week.)

What has taken them so long? Nearly a week has passed since Yahoo received an unsolicited offer of $44.5 billion from Microsoft.

Since then everyone — including Google — has had his or her say on the deal. The only group that has been silent on the topic – Yahoo’s board of directors -– is the one that really matters. Reuters is running a long piece on Yahoo’s board and its role in this merger. It is a bit of PR puffery; it tries to position the board as key players in the deal, and notes how they need to deliberate everything in order to get it right.

That would surely be a change from their track record thus far. Their silence — a week is long enough for them to say yeah, neah, or give us more money — is typical of their lackluster performance as a board.

A 62 percent premium to Yahoo’s stock price is as good an offer as Yahoo can hope for. The company’s turnaround efforts, the Peanut Butter Manifesto, and Jerry Yang’s 100-Day Plan are all delusions of (lost) grandeur. After all, the stock’s value had been sliced in half long before Steve Ballmer showed up on the door, dragging bags of money behind him.

Yahoo should have teamed up with eBay when it had a chance, but a $44.5 billion offer is pretty darn good. Yahoo is simply delusional if it thinks it can find someone more desperate than Steve Ballmer & Co.

While it is easy to blame the management, Yahoo’s board of directors can’t duck the blame. It was on their watch that a culture of mediocrity enveloped this once-iconic company. The board, instead of being proactive, sat idly by as the company lost its direction, focus and eventually, its market leadership.

If Wall Street and the media were aware of Terry Semel’s rumored lack of interest in the job, why wasn’t the board aware of it? Instead they decided to reward him with $71 million, much to the chagrin of the investors, before showing him the door. As one talented executive (and engineer) after another left the company, looking to go chase opportunities at either Google or with other Silicon Valley startups, what, exactly, was Yahoo’s board doing?

Where was the board when the company was making one strategic blunder after another -– losing its technology focus and instead chasing the ephemeral opportunities in la-la land? Where were they when politics and bureaucracy started to eat at Yahoo’s insides?

Whatever spin you might read in the news media about Yahoo’s board, simply put, they have failed in their duties.

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  1. Your pretty tough on them Om. We all know how fast technology can change. This all comes with the territory. You can’t blame the board for losing a technology battle on the frontlines. I haven’t heard anyone suggest a winning strategy for Yahoo! We can blame the board, but really it was lost in the LEARNING and KNOWLEDGE of engineers. Google just kicked their butt. Take Microsoft’s $$$ and move on.

  2. Alan Wilensky Friday, February 8, 2008

    People say, people say, but it was said best by a Yahoo I interviewed, which I will paraphrase: “…Big Purple used to be a place where a smart tech visionary could at least get an internal hearing. That all changed when Semel got his hands around the company’s throat, ditto Decker.”

  3. Having been on a board of a major company in the past this is NOT taking very long. They need to talk amongst themselves, with investors, partners, customers, employees, etc. They don’t want to go into a board meeting with lots of open questions that don’t have solid answers. I appreciate your enthusiasm to write a tough story but any reader that’s been on a board will know that this is pretty normal.

  4. Micrsosoft buying yahoo is not a bad thing after all. It happens all the time in all the mature industries. Despite beig a die-hard google fan, I don’t think there is any harm in Yahoo going to Microsoft. After all, it will remove lethargy in both yahoo and microsoft for betterment of internet.

    And BTW, ‘Yahoo Live’ and ‘Microsoft buying Upstream.tv(still a rumor)’ , don’t it look ironical??

  5. So sad that despite a magnificent footprint of users, a decent average number of services used by users, and a strong arsenal of content, media and agency relationships, Yahoo has never seemed to be able to connect the dots in a more than the sum of the parts fashion.

    In this age, that is a cardinal sin IMHO, but organizationally, they are too silo’d to make it work.

    The irony is that Microsoft used to be the bastion of the embrace, integrate, extend (MS proprietary-ness) mindset but now are too big, bureaucrat and slow to employ their time-tested ‘serial killer’ (of the competition) tactics.

    Some further analysis of the deal is here: http://thenetworkgarden.com/weblog/2008/02/the-market-make.html

    Hope that you are feeling better, Om. :-)

    Mark

  6. Krishna Chodavarapu Friday, February 8, 2008

    @ Rick, I don’t think Om is too tough on them. It is fine for a company to lose some battles. But I don’t think there has been a company more unsuccessful as Yahoo (well, I’m sure we can think of a few.)

    No, what I think is really unforgivable about Yahoo BoD is that the company was going down the shitter for eons and they were so slow at not only trying to fix their problem, but recognizing they had a problem at all.

    Om is right, the media and Wall St. was much more aware of the problems than was Yahoo BoD.

    While $31/share is a significant premium over the recent Yahoo share price, it wasn’t so long ago that Yahoo was at that price. I think MSFT got a bargain. I remember rumors of a $50 billion offer not too long ago.

  7. If Yahoo’s TV grid (no fix for more than 10 months) is any indicator of the rest of its technology, you hit the nail on the head!

  8. I think Om is off on the board timing – it does take more than a week of due diligence to decide on a $40 billion deal – but right on everything else. The Yahoo board, in its various incarnations, has been a disaster since the hire of Semel. By IMHO the best measuring stick for a CEO, relative change in value to your closest competitor, Semel is the worst CEO in the history of the world. It was under his watch that Google went from being a small, private company more than a little dependent on Yahoo, its biggest partner, to eating Yahoo’s lunch. And along with that came a $170 billion or so increase in market cap while Yahoo’s barely moved upwards. Giving up more than $150 billion in 6 years is pretty amazing. It started with the board thinking Yahoo was a media company and not a tech company, and thus hiring a Hollywood big media guy to run it (in absentia from Hollywood no less!), then never realizing their disastrous mistake as the rising tide of search advertising lifted Yahoo a little while Google rose to the moon. It was that terrible decision back in 2001 and the subsequent satisfaction with it that has brought Yahoo to this point.

  9. In hindsight it’s easy to criticize the board but in truth, at the time Yahoo was gambling on the future of the Internet closely tied to media. Semel was a logical choice because he was a Hollywood guy and the hope was that he could bridge the worlds. The Broadcast.com deal is the shinig example that Yahoo bit into that strategy hook, line, and sinker. We can see now that Yahoo bet wrong and that users are more interested in creating their own content and interacting with each other rather than with media companies. Even after this became apparent, the board continued to hope that Semel could be a technology CEO. By the time they figured out technology wasn’t his thing, it was too late.

    Had Yahoo bet on the Internet itself and brought on a technology CEO like Eric Schmidt, Yahoo would be a very different company right now, certainly one that would be much more competitive with Google. Granted some of the blame does fall on the directors and C-level execs for not properly watching and reacting to Yahoo’s progress in relation to the direction of the industry. But I think a fair amount also sits on the fact that Yahoo bet on the losing horse.

    Question now is if Yahoo can reposition itself as a competitive, dynamic technology company and whether it can do it alone or with Microsoft’s help.

  10. Good points by all. I agree that the real blame here belongs to Terry Semel and Sue Decker. Terry had very poor vision which affected everything Yahoo did or didn’t do over the past 3-4 years. Sue Decker has been the #2 or #3 person during this same period and she has failed. I’ve yet to see anyone take this on but it is an irrefutable fact.

  11. Om: You are little bit off base on timing. You probably would take more than a week to decide whether to sell you house. Bloggers and the media, have the luxury of spouting insta-analysis and armchair quarterback, with little to no consequences, other than showing a complete lack of knowledge or insight. I love blogs, but sometimes, the made up news with no real analysis is just WEAK.

    When making a $40B sale, the Board of Directors have legal and business obligations called fiduciary duties. The Board’s decision has real impact for thousands of employees and shareholders. Accordingly, the Board has to carefully weigh options and get advice from Bankers, lawyers and other advisors. This kind of work is not done on the back of a napkin and certainly takes time.

    It takes hard work and real thought. Somethings the “news” misses when they do insta-analysis.

  12. An Update on Microsoft and Yahoo | Athow.com: Internet, Media and Technology at its fullest Friday, February 8, 2008

    [...] GigaOM, Silicon Alley Insider, Google Watch, Techland, Todd Bishop’s Microsoft Blog, Search Engine [...]

  13. Jesse Kopelman Friday, February 8, 2008

    Do Boards of Directors even have a place in fast growing tech companies? What did Apple’s board ever do that was worthwhile other than bringing back Jobs (who would have never been gone accept for a previous BoD)? Does Microsoft owe any of its success to its BoD, or is it all Gates and Balmer? When people talk about Google, I never here any mention of their board. Again, do these boards do anything useful or are they just a form of hidebound tradition, like the Electoral College.

  14. Jesse, I absolutely agree with you.

  15. Atlanta apartment Friday, February 8, 2008

    “losing its technology focus”

    Yahoo never had a technology focus for search. They were among some of the first through the door for search, but their strength was never a focus on technology. Google did and does. There website was always focused on delivering the best search results on the web and once word of mouth hit there was only a matter of time until Yahoo was in the dead pool. It is called evolution, survival of the fittest.

  16. yahooligans are speaking out against being ballmer’s “developers”
    see story on digg http://digg.com/tech_news/Yahooligans_oppose_being_Ballmer_s_Developers

  17. Memex 1.1 » Blog Archive » Asleep At The Wheel Saturday, February 9, 2008

    [...] Malik is not impressed by the way the Yahoo Board has dealt so far with the Microsoft bid. What has taken them so long? [...]

  18. Where were the rest of us Om?

    The tech industry culture is to say nothing and do nothing, it’s the rare person who says “Wait a minute this isn’t working” and when he or she does it, they become an outcast.

    Don’t blame the Yahoo board for being part of a system that punishes people for calling attention to problems.

    This, btw, is why we have bubbles and why they burst so explosively. Insted of Yahoo taking the necessary steps in time to preserve shareholder value, it was easier to pretend that Semel knew what he was doing, and the company had direction, and could execute simple strategies.

    We need to learn how to give criticism without making it personal, to accept it without taking it personally.

  19. This deal is a no brainer. Microsoft is the best thing that could happen for a Yahoo that has sadly run itself into the ground. Their slow response is indicative of problem they’ve self-created, a slow responder to just about everything. Someone I know, way smarter for me, interviewed for a top spot at Yahoo about 9 months ago, he was shocked at their deer in the headlights approach wrt Google. So bye bye Yahoo, let’s make way for more exciting stuff, their day has come and gone, let’s let them go.

  20. whether its the board, the CEO, or the senior mgmt, the same criticism applies — a severe lack of technical vision & understanding, combined with a bordering-on-criminal lethargy & inability to respond competitively over a period of more than 5 years.

    marc andreesen has a withering and detailed skewering of the Yahoo board that is hilarious except for the fact that it’s so completely on the money.

    Om is absolutely correct about the Yahoo board. They should be ashamed of their performance.

  21. @ Dave Winer,

    Thanks for the long comment. You are right to point out that we don’t comment often enough about things that are going wrong, or the insanity that is starting to grip the valley.

    I agree, that we all, including myself have been guilty of saying nothing, lest we hurt someone’s feelings but that isn’t really a good thing.

  22. @ Jesse K,

    SO perhaps we should do away with the shsm called a board of directors, get rid of the bloat and stop wasting money.

    Why spend millions of ddollars on the rubber stamps and friends of the CEO?

  23. Now, this is where the Board has screwed up…

    Yahoo Board to Reject Microsoft Bid
    By Matthew Karnitschnig
    Word Count: 317 | Companies Featured in This Article: Yahoo, Microsoft, Google

    Yahoo Inc.’s board plans to reject Microsoft Corp.’s unsolicited $44.6 billion offer to acquire the Web giant, a person familiar with the situation says.

    After a series of meetings over the past week, Yahoo’s board determined that the $31 per share offer “massively undervalues” Yahoo, the person said. It also doesn’t account for the risks Yahoo would be taking by entering into an agreement …

    Forgive me OM, you may have been correct, if this is another indication of stupidity at it’s finest. I see no better future for Yahoo! than to take MS’s offer. As Cramer says, “who do these Yahoo! guys think they are?” Really, their business is going to pot and they think they have more value? They are losing value every day they stay in business.

  24. Source: Wall Street Journal

    At least it makes for good stories for the next 12 months!

  25. Yahoo’s entire history made it unsuited to dealing with Google. Yang and Filo started out with a directory – editors picking significant web sites and placing them in categories for people to browse. Totally top down. They were thinking media from the start, not services, and this wound up killing them.

    With the Semel hire they brought in a guy who just knew a lot more about what they were already doing – editorial. And their sports and finance sites show that they did keep improving in this area.

    Had they thought of themselves as a services company, not a media company, they would have bought eBay when they had the chance. They would have integrated social features, telephony and IM into mail earlier, and better. No clue what happened w/Flickr (how do you now integrate with print purchase?).

    By ’05 they knew that Google’s ad engine was much better, so they started Panama. Would seeing themselves as a services company have helped? Maybe. This upgrade seems to have failed, taking out the keystone in their whole structure. (I tried to integrate Yahoo ads into a site, found Yahoo’s ad network interface to be virtually impenetrable, as if they didn’t really want the business anyway. Strange.)

    And now the company will check into a hospital in Redmond for a little grave malpractice. Take a good look at your loved one. He will only return in a box.

  26. It appears they are rejecting the bid, not Microsoft. Looks like the negotiation process may be underway. Next, we can discuss the impact on Microsoft. I’ve got my thoughts, but will let digest for awhile. BTW, it’s not good.

  27. I think one of things that gets overshadowed by Microsoft’s 44 billion dollar bid is that fact that it is not Yahoo! that needs Microsoft. We should not forget who has more market share of the two. Microsoft approached Yahoo! for a reason, and that is because it most certainly has the most to gain. I personally commend Yahoo! for not folding because they are holding the aces, not Microsoft.

  28. Microsoft-Yahoo! – freakin amazing week « A private Blog from Michael Jung. Saturday, February 9, 2008

    [...] read a lot of blogs and comments on this (+trolls, +haters). The importances of this one is – to show you a quality comment of this story; A 62 percent premium to Yahoo’s stock price is as good an offer as Yahoo can hope for. The [...]

  29. SiliconValley-JOBS Sunday, February 10, 2008

    Om Malik, I consider that Yahoo’s board should realize that many talented executives are trying to leave the company since Microsoft disclosed its unsolicited merger proposal last week.

    In fact, our company has been contacted by some of Yahoo’s employees who are trying to get employment at other Silicon Valley startups, before it is too late.

  30. AOL? Of all companies? Even Microsoft is a better choice. Yahoo should be stay independent, all other options are taking us towards a world with less symbols and a plain monochromatic industry. By the way, this is hilarious: http://www.5min.com/Video/How-to-Negotiate—Tips-for-Yahoo-5794173

  31. online shopping store Monday, February 11, 2008

    Yahoo is still the best and most beloved internet company and I don’t support them to sell it. Whatever is the problem can be fixed. It appears that they are suffering from brain drain. Let them get rid of all top level executives. Bring new and fresh ones with fresh ideas and zeal. Then improve their services, especially the search engine service. It takes Microsoft Msn just 2-3 days to index and rank a website but 7-30 days for Yahoo. Let them start there: index and rank websites fast (2-3 days). Then let them start massive advertising so people will start using their engine to search for stuff and massive traffics would begin to flow as well as profits. All of this can be fixed with $1 billion dollars. Why throw away a $100 billion dollars company loved by billions of people when it can be fixed with $1 billion dollars. I say to Jerry Yang and his borad of directors, if you can’t fix it, hire me to do it for you free!!!

  32. News Cast Live, formerly Mike Thinks News » NewsCast LIVE #169 When lawyers rule…or rather now that Lawyers rule the world. Tuesday, February 12, 2008

    [...] Yahoo says, thanks but err, nope. [...]

  33. Microsoft, Yahoo Back On, Or Not – GigaOM Sunday, May 18, 2008

    [...] a board.  Ichan’s move to put a new board in isn’t all that bad: Yahoo needs to clean house, as I had said a long time before holier-than-thou Carl showed [...]

  34. Oow, Eew, Ouch … Yahoo! – GigaOM Thursday, June 12, 2008

    [...] think this is yet another critical blunder by a company that lost its way back three years ago when then CEO Terry Semel lost interest in the company, putting in a path of mediocrity. Of course, as one of my gurus once said, in [...]

  35. Business News Research » What’s Wrong With Yahoo? – GigaOM Sunday, July 6, 2008

    [...] a state of masterful inactivity, masked perhaps as a culture of consensus. This starts at the top – from the company’s board and senior management down to VP level where people are prone to organizing and attending twenty [...]

  36. After Yang, What Should Yahoo Do? – GigaOM Monday, November 17, 2008

    [...] to the head the company that was looking down a deep abyss a while back was an ineffectual one, and a total and absolute failure on the part of Yahoo’s board of directors. In June 2008, I wrote about the systematic rot inside the company. What hasn’t been discussed is [...]

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