Now it's all on Jerry Yang's shoulders

Now it's make-or-break time for Jerry Yang.

Yahoo CEO Jerry Yang

(Credit: CNET Networks)

If his gambit succeeds, Yang will be feted as the second coming of Steve Jobs, reviving the glory of a one-time technology bellwether. If not, he'll join Terry Semel and Tim Koogle on the roster of failed Yahoo CEOs.

Earlier Thursday, Yahoo announced that Microsoft was no longer interested in pursuing a deal. Into the breach steps Google CEO Eric Schmidt with a search advertising arrangement that could be worth as much as $800 million to Yahoo.

•  During the first year after implementation, Yahoo expects the deal to generate an estimated $250 million to $450 million in incremental operating cash flow.

•  The agreement is nonexclusive. Yahoo can display paid search results from Google, other third parties, as well as its own Panama marketplace. (Here are more details on Yahoo's search ad-pact with Google.)

After all the "sturm und drang" revolving around a possible Microsoft deal, this much-rumored Google tie-up comes as a bit of an anticlimax. But at least Yahoo has chosen a direction, moving beyond the endless muddling of the last five months.

Steve Jobs: Been there, done that

(Credit: Dan Farber/CNET News.com)

Yang's immediate task is to find a way to sell the Google deal to regulators. The agreement won't officially kick in for another three and a half months because of antitrust sign-offs. Yahoo can probably persuade Washington to give the green light.

Some will dismiss the deal as an acknowledgment that Yahoo wasted millions of dollars developing its Panama search advertising platform (not to mention the $1.6 billion it paid in 2003 to buy Overture Services). There's some truth there but it may be too harsh a judgment. Besides, the Google arrangement may turn out to be a clever move if it fosters the two companies' respective strength in search and display advertising.

Whether Carl Icahn and the investor class agree--we'll know Friday morning when Wall Street opens up for business. Icahn could do nothing Thursday but count his losses as shares of Yahoo plummeted after the company announced the collapse of the Microsoft talks. If the Google deal fails to do much to revive the stock price, they'll naturally call for Yang's scalp.

Of course, that goes with the territory. Yang never wanted to see Yahoo get swallowed by Microsoft. He wanted the opportunity to direct the turnaround, and now he's got his wish. Is Yang equal to the challenge? Beats me. He's super-smart and knows the company backwards and forwards. But he is not a charismatic leader and he turned in an uneven performance on the conference call announcing the Google deal. He tripped over words and sounded unsure as he spoke, leaving No. 2 Sue Decker to handle the hard questions. I wouldn't read too much into appearances, but strong CEOs know how to put on a good show.

[Sumatra-Bosch]

It's really not about the math.

Yang's an old Lotus Development guy and he knows corporate culture is the real make or break aspect of any takeover. He also has experienced first hand the gangland tactics of MSFT while at Lotus and no doubt would not wish its horrific culture of humiliation on his own.

In the event of a MSFT takeover, Yahoo! most likely would collapse from catastrophic wholesale abandonment by 90-99% of the staff who may or may not plant logic bombs in the companies networks to leave MSFT a pile of smoldering iron.

Icahn is a tortured guy but he should be able to understand that asking Yahoo's people to work for MSFT is like asking the surviving members of the Tate Labianca families to go to a dinner party hosted by Charles Manson.

[WJeansonne]

Hey Sumo-Botch:

You think Microsoft is a gangster? Wait til you see how effective Icahn is at handling inept and rogue CEOs, lol. You ain't seen nothing yet. That lawsuit Monday was the shot across the bow. The next will be a direct hit against Yang and his cohorts.

[robvme]

Yang is an idiot. Does anyone really believe Microsoft really wanted Yahoo? The distraction created by all of this was a stroke of genius and a well crafted maneuver playing off of Jerry's dislike of Microsoft, his weak performance as CEO, and the vunerable position that Yahoo is in. As for what Yahoo employees think, well, they are all probably feeling pretty uncertain about their futures, the direction of the company, and what their next job may look like in an economy that is not very robust in an area where realestate is expensive yet values have dropped out. If I worked for Yahoo, I would probably be submitting my resume to Microsoft. Culture of a company is only as good as the pay check. Yahoo employees aren't there for some higher cause or for charity. I think Sumatra's comments above are dead wrong and emotional, sort of how Jerry runs Yahoo.

[UStraveler]

First of all, Yang (Yahoo) was VERY smart for acquiring Overture... Without it, they would not own their own SEARCH ENGINE -- remember, Overture owned AltaVista and Yahoo was just a Portal (or DIRECTORY) on the internet. Next, Yang was SMART to push Microsoft away... If memory serves me well, Microsoft used to use Google (and before that AltaVista) to run its search results before they decided to trip over their own engineers to try to build a search engine -- and both times, Microsoft FAILED...

As for Yang taking back control, I know several things he could do to take Search Traffic away from Google and Microsoft... The only question is: Will he?

This is more of a: "If up to Yahoo to loose", than a: "How can they turn the market around".

As for Microsoft, they have another option in the Search market they haven't even considered... But, I think I'll wait a little while before I open my mouth on this subject...

Rock on Jerry..

[bobr]

The true measure of success for any CEO is tied to the task for which they were hired. Tim Koogle was hired by Yahoo specifically to bring enough maturity, wisdom and decorum to the company to enable it to go public. Tim succeeded! The current fiasco with Microsoft should provide enough evidence of a fundamental problem at Yahoo that would drive any good CEO out. I don't know Terry Semel but please don't put Tim down as anything but a winner.

Side comment, there comes a time when 99% of all successful companies outgrow the capabilities and temperament of their founders. Some know when to leave gracefully.