Yahoo is Friendless On Wall Street

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Goldman Sachs: “We believe that Google may benefit from the disarray of its two largest competitors, as Microsoft has withdrawn its bid for Yahoo!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.


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