RIP MicroHoo!: Yang & Board High-Five as Stock Nosedives

By Kyle Austin

While some of us were enjoying a nice little Saturday (A trip to Home Depot to get some wall paper, maybe a stop at Bed Bath & Beyond), Steve Ballmer and Jerry Yang were working OT to get the Microsoft and Yahoo! deal done. However, a funny thing occurred sometime in-between them sitting down early Saturday in Seattle and Yang landing back in Silicon Valley on Saturday afternoon – The deal completely collapsed.

The story (in-short) played out because Ballmer led off the meeting (turns out they had been talking in somewhat secret all week) by offering Yang $33 a share. Yang countered that by saying $37 a share was the lowest offer they would accept and by all accounts the room went silent after that. Yang who was accompanied by co-founder David Filo at the meeting returned to The Valley shortly after and once again got on the phone with Ballmer. At that time Ballmer officially withdrew Microsoft’s offer for Yahoo!. According to the New York Times, this news was met with high-fives between Jerry and the rest of Yahoo!’s board. Goes to show you the disdain the Yahoo! board room still held for Ballmer and company regardless of what the deal would have met for stock holders.

Both sides have officially stated their thoughts on the end of the acquisition talks with releases here and here. Ballmer sent this backhanded thank you to Yang for his consideration and sent this note to his employees.

Yang brought forth his additional thoughts on the last three months with this post on Yahoo!’s weblog Yodel Anecdotal. In which he clearly stated his displeasure with the spin Microsoft put on the acquisition process and its collapse.

“By the way, 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.

No one is celebrating about the outcome of these past three months… and no one should. We live and work in a competitive world and the Web is only going to get more competitive. Executing on our strategic plan is what matters most.”

Yang also states “With Microsoft’s withdrawal, we’ll be better able to focus our energy on growing our industry leadership and maximizing value for stockholders.” Clearly an attempt to reassure investors set to nosedive the stock this morning.

 Which has happened, although the fall has not been as great as some predicted. Yahoo! opened at $23.02 a share this morning as pre market traders dumped the stock after closing at $28.67 a share Friday evening. However, it has rebounded to around $24 a share at 11:30 a.m. ET, which is still far above the $19 a share it was trading at before Microsoft made its offer public three months ago.

Fortunately for Yang it appears his move to test an advertising deal with Google has some investors pricing-in what a full time ad partnership with Google would mean to the business. A deal that Yang must make sooner then later. Still, many investors and Yahoo! employees are voicing their displeasure with Yang and the board after passing up the $33 a share and watching the stock plunge for the 16 percent:

o “There is going to be a lot of pressure on Yahoo’s management to deliver in the next year or two.” ~ Bill Miller, a portfolio manager for Legg Mason (Yahoo!’s second largest shareholder), in the New York Times

Anonymous quotes from Yahoo! executives in conversations with Kara Swisher of BoomTown:

o “I am in shock.”
o “I don’t know if we won or we lost. I think we lost.”
o “I don’t love that it was Microsoft, but I think everyone thought $33 was a pretty good offer from a pretty good tech company.”
o “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.”
o “Where’s the Jelly memo when you need it?”
o “I can’t really talk to Jerry, since it is difficult to tell a founder tough things he probably needs to hear.”

It certainly will be an interesting couple of weeks and months at Yahoo! as they try to doge loosing crucial members of their team and investor lawsuits. Rest assured (or uneasy) Jerry, you’ll still be in the spotlight.

In closing, It has been a wacky three months and I don’t think too many people foresaw it ending this way.

On a side note: The weekend collapse of the deal was a “victory” for bloggers and the digital media who were able to break the news and post follow-ups ahead of much of the mainstream media. Swisher and Michael Arrington were neck-and-neck in breaking the news as they both posted off of information gathered from anonymous Microsoft/Yahoo! sources before official comment came in the form of the press release from Microsoft. Just another illustration of the great contacts Swisher and Arrington have at Yahoo! and Microsoft along with the clout they carry in the industry.

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