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Summary:

Jerry Yang, Yahoo’s CEO, this morning posted what can be described as an emotional blog post about the Microsoft-Yahoo buyout saga. He reinforces the points he has made all along: that Yahoo needs to execute, innovate and develop more focus. Good intentions, but apparently not many […]

Jerry Yang, Yahoo’s CEO, this morning posted what can be described as an emotional blog post about the Microsoft-Yahoo buyout saga. He reinforces the points he has made all along: that Yahoo needs to execute, innovate and develop more focus. Good intentions, but apparently not many are buying it. You should read the comments in response to Yang’s post: a lot of angry people, including shareholders who think that the company should have sold out. (Kara is reporting some frustration in the executive ranks over the lost big opportunity.)

Actually, Yahoo seems to be quite friendless right now. Even its so-called friends are ruing the lost opportunity. Bill Miller of Legg Mason tells the New York Times that he might have taken the deal at $34 to $35 a share and not waited around for the $37 a share Yahoo wanted. Microsoft decided to opt out after making a final offer of $33 a share. The Wall Street analysts are using Yahoo for a pinata this morning. Here are some of the juicy comments:

  • Brian Bolan, Jackson Securities: “We believe that shareholders should sell their stock in Yahoo! as the company will not only face numerous lawsuits but intensifying competition from competitors. The lawsuits are likely to decrease EPS throughout the second half of year, eating away at the cash the company has on hand.”
  • Bill Morrison, Think Equity: “In what may likely to go down as one of the more destructive decisions for shareholder value in the history of Internet stocks ….To say we are disappointed is an understatement—dispirited is more like it.”
  • James Mitchell, Goldman Sachs: “We believe that Google may benefit from the disarray of its two largest competitors, as Microsoft has withdrawn its bid for Yahoo! Any search affiliate choosing a partner at this time may bias toward Google as the safe choice in an uncertain world, helping Google retain its network leadership while potentially slowing its Traffic Acquisition Cost (TAC) growth…”
  • Ben Schachter, UBS Securities: Yahoo!’s execution remains the problem, as the company has not been able to execute better targeting and measurement on its own site effectively enough over the past 15 years. We are not willing to give them the benefit of the doubt that they can make meaningful improvement over the next three years, particularly given a heightened competitive dynamic where Yahoo! will now be competing against Google, Microsoft, AOL and possibly others.

The rest of Wall Street analysis reflects my original weekend post. Yahoo is down 16 percent for the day in active trading.

  1. 16% My My!!!

    “Frankly, there’s a lot of nonsense and misinformation in what’s being reported… on terms that fully recognized the value of Yahoo! and was in the best interests of our stockholders.”

    I still can’t get it…

    Note: WP.com link (Tag-Web) to this article is http://gigaom.wordpress.com/1970/01/01//

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  2. It takes vision too see beyond par value – Yang is either a damned visionary, or so rich that he doesn’t care about widows and orphans portfolios. As for me, a non-stockholder, I think this was a good call, for all the turmoil and things that get planned in mergers, but never get executed with alacrity.
    http://bizcast.typepad.com/clients/2008/05/support-the-yah.html

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  3. Om, at the risk of sounding like William Safire I take exception to your characterization of Yang’s blog posting as “emotional”. In my experience the use of the word “emotional” in this context is usually VC Silicon Valley codepeak for “irrational behaviour.” Coupled with the connotation that women are emotional whereas men are rational I have always felt that there is a sexist undertone to the use of the word.

    I think a more appropriate word to use might be “passionate.” Of course “passionate” is often used in the Valley positively especially when a founder is involved.

    So is Yang “passionate”? Undoubtedly. As the co-founder of Yahoo! he probably considers the company his baby. As such he is probably incapable of clearly assessing what is good for third party shareholders as selling the company would be akin to selling his own fleash and blood.

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  4. I think $23 was too much for Yahoo. Part of the problem is that if you take two companies that don’t understand the ad space you don’t merge them and suddenly get one that is. If Yahoo understood, Online Advertising they wouldn’t have used Google Ads on their site.

    Microsoft needs to buy several small companies that it can merge into its corporate culture, rather than huge companies that there would be a multi-year pissing match to decide who was in charge of what. Pick some key people build the legos to move forward, and get on with beating Google AA.

    http://www.takingthebridge.com/2008/05/microsoft/12-step-program-for-beating-aa-what-microsofts-plan-b-should-be-building-an-adsenseadwords-competitor-in-minimal-time/

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  5. [...] for all of Scoble’s projects.  While they are at it, they need to get Dave Winer, Om Malik, Fake Steve Jobs, and Perez Hilton. And for good measure the Technorati Top 100 by Authority and by [...]

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  6. OK, Yahoo! has a lot to get done – but if Wall Street analysts were judged by their performance, they’d all be out of a job…

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  7. Good comments, except the one from Goldman Sachs. There would have been rather more disarray involved in an attempt to integrate Y with MSFT post-acquisition.

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  8. I’m not certain Yahoo! is friendless (anywhere) – you don’t have the most eyeballs, and not have friends.

    The problem is Yahoo’s Wall Street buddies have personal investments in consolidating the advertising industry. They have more money in Microsoft and Google then they have in Yahoo!, and they’re not making as much as they could be as long as the industry remains fragmented.

    In other words, they could invest in Yahoo!, but they’re already heavily invested in Yahoo’s competition, and they will complain and shape the market until the landscape fits their views of reality.

    They should be wining and dining Yahoo!, not leaving them with the check.

    p.s. yes, my first sentence has three negatives :D

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  9. I can’t tell you the last time I actually even went to Yahoo for anything. When I need to find a site, I go to google, when I want to play fake poker, I go to my online poker place, when I want to chat, I turn on aim, when I want to check the classifieds I goto caigslist, and when did I last go to Yahoo? i am not sure.. its been a long time thats for sure.

    john

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  10. [...] a chance that the Microsoft acquisition could get done, the investors (me included) are ready to feed Yang and Filo to the wolves and the fact that the stock dropped to a level that is still well above the price when the deal was [...]

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  11. But the games not up yet. Jerry Yang has apparently taken a battering from Yahoo investors. I reckon this will all kick off again soon.

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  12. Why some insist on looking for a partner or Yahoo? Yahoo has more email users than Google, Yahoo messenger more than GTalk, Flikr more than Picasa… Ok Google is much better in ads, and is winning brand recognition compared to Yahoo. But is the war over? Does Pepsi give up because Coke has better share? Aren’t Macs now a real alternative to Windows, even in Windows still commands far far higher market share? Why can’t Yahoo come back on their own? Probably they just need a change in leadership.

    A Microsoft-Yahoo wedding only benefits investors and bankers, but not at all the end-user.

    http://tech-talk.biz/2008/05/06/microhoo-why-people-love-weddings/

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  13. Being bought by MSFT isn’t necessarily the greatest thing for Yhoo share holders – MSFT has been stagnant stock for years and their own product execution hasn’t gone very well in the recent past. I don’t understand Om’s irrational rant against Yhoo. I am a share holder of yhoo and i feel they have a good chance to stick it out on their own. I am an active user of both yahoo and google services – frankly, if google disappears tomorrow, i’d still be functional with yhoo. You can do a search with yhoo and google and see for yourself how much difference there is. For all other features, yahoo does better or equally good than Google, mail, messenger, finance, news, maps..

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  14. [...] Yahoo is Friendless On Wall Street [...]

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  15. @Najeeb: Yahoo might still have functional web apps, but I think whether they’re better than Google’s is highly, highly debatable. Gmail and GTalk are gaining leverage by the minute – I have more friends chatting with me on GTalk than I do (or ever did) on Y! Messenger.

    Google Maps is FAR more accurate than Y! Maps. I’ve gotten lost several times using Y! Maps, and I’ve yet to ever been given wrong directions from Google.

    Another thing is, Google’s APIs are far easier to develop on for third-parties. That’s why you see YouTube and Google Maps on the iPhone and not Yahoo’s offerings.

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  16. [...] But it’s definitely hitting mainstream. At Web2Expo in mid-May, Yahoo was giving out placemats of stickers, rather than individual ones.  Have they jumped the shark? Certainly, this is the challenge of Big Internet — how does one maintain the allure of secrecy, of being “in”, while still achieving the economies of scale that investors anticipated. To me, this sticker placemat is a metaphor for many of the challenges Yahoo faces. [...]

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