A year ago Sunday, on February 1, 2008, Microsoft Chief Executive Steve Ballmer told the world his company wanted to buy Yahoo.
Despite months of discussions, the deal never materialized, distressing many Yahoo shareholders and hastening Yahoo's replacement of CEO Jerry Yang with Carol Bartz. But what if Yang had gotten up on the other side of the bed one day a year ago and led his company to accept the offer?
It's impossible to know what would have happened, of course. But an exercise in speculation can be illuminating, as Philip K. Dick showed with The Man In The High Castle, a novel in which Nazi Germany and imperial Japan won World War II.
So let's suppose that Yahoo agreed to Microsoft's acquisition offer after bargaining Microsoft up a notch on the price tag to, say, $31 per share from the original $29.
First would have come the challenge of antitrust approval. But the Justice Department has shown itself to be more concerned with checking Google's power, taking Microsoft's side when it came to the ill-fated Yahoo search-advertising deal with Google.
The European Union has shown more antipathy toward Microsoft, but it, too, likely would have been spooked enough by Google's might that it would sign off. And given that the EU is only now getting around to the issue of Microsoft bundling a Web browser with its operating system, any big compunctions about Microhoo probably wouldn't have set in until 2015.
So Microsoft and Yahoo probably could have cleared that hurdle, but not quickly, and there are other details to reckon with, so let's suppose that the deal closed in August. Yahoo shareholders would have received a chunk of Microsoft shares and a wad of money that looks princely in comparison with the present $11.74 value of their Yahoo shares.
Sure, there would be some bellyaching, but all those institutional investors who were publicly griping about Yahoo's management would have been mollified--especially because revisionist history or not, the economy in August 2008 already was well on its way downhill, and Yahoo's stock likely wouldn't look so great.
So next up would have been the big challenge: integration, which, as former Sun Chief Executive Scott McNealy famously described it regarding the merger of Hewlett-Packard and Compaq Computer, is like watching two garbage trucks collide in slow motion.
Executives fond of competing pet projects would be pitted against each other, tooting their horns and trying to fend off others' with candid assessments--and Yahoo already had enough internally competing projects on its own, as documented in Brad Garlinghouse's Peanut Butter Manifesto.
But Microsoft actually saw the HP-Compaq merger as an example of how to make Microhoo happen: pick a product and go with it, rather than mess with grueling efforts to combine separate and often incompatible properties. So in all likelihood, Microsoft would have treated the acquisition with the alacrity it deserved.
Integration hell
Some parts of the Microhoo integration would have been relatively straightforward. First, top management.
Given that we've already rewritten history with Yang signing off on the deal, which implies that he would have gotten past any over-my-dead-body, burn-the-furniture attitude, he probably would have stuck around a year for appearances' sake--and he's a helpful sort of fellow who probably would have worked at least for a time to try to hand off his baby to its new parents. It wouldn't be easy, but Yang at least already has years of experience reporting to another CEO.
So which company has the better brand online? Yahoo.
Microsoft has been hobbled by its MSN vs Live branding muddiness, and the Yahoo brand has long history of great recognition. In April 2008, Yahoo's front page had 61 percent portal market share to MSN's 20 percent, according to Hitwise. But brands live a long time, and with the merger only closed for a few months by now, Microsoft probably wouldn't have had much of a chance to make big changes.
Technologically, Yahoo and Microsoft are worlds apart. Yahoo's widespread use of open-source software and fondness for the Firefox browser would raise hackles all over Microsoft. But for the sake of expediency, and to avoid spooking the Yahoo administrators and coders who actually know how the Internet property is wired, Microsoft almost certainly would have left things stand as is for at least a year. It had already had undergone the long and painful experience switching Hotmail from Unix to Windows.
Philosophically, though, Microsoft and Yahoo are converging, partly because the Internet is only becoming more important and partly because they're being driven in the same direction by Google's competitive threat. Both want sophisticated online services, both want a better search site with more traffic, both want to be a hub for people's lives on the Internet, both want to be an unavoidable part of online advertising.
Service winners and losers
The nitty-gritty of integration would have involved figuring out what to keep when the two companies had directly competing offerings. Yahoo's got the traffic, it's got the brand, and its services in general probably would have come out ahead.
Search would have been an obvious decision: keep Yahoo's search engine, redirect Microsoft search traffic to it, and get the combined engineering team cracking as soon as possible. It has more volume and more advertisers. The tricky part would be migrating advertisers to Yahoo's technology, but Microsoft would have a huge incentive to build as much critical mass as possible to try to check Google's dominance as soon as possible.
Yahoo has another big asset: Yahoo Open Strategy. Even in the real history, YOS is only just arriving now, but even a year ago, its potential was clear: it offers Yahoo users more to do online, energizing Yahoo properties by linking them together with social activity and building them into the broader fabric of the Internet.
Yahoo took ages to retrofit its site with the Yahoo Open Strategy technology, including interfaces that can broadcast user activity such as rating a movie; delaying YOS even more by mashing it up with Microsoft's online sites would have increased its risk of irrelevance.
With some big properties, a type of merger would be needed. With Yahoo Messenger vs. Windows Live Messenger, the companies already have done interoperability work, easing the pain of merging two largely incompatible networks into one.
The ugliest part would have been e-mail. Each company already has two options--Microsoft's Exchange-Outlook combination for businesses and Hotmail for consumers, and Yahoo's Zimbra for businesses and Yahoo Mail for consumers. Two e-mail offerings already are too many, and four are way too many, but e-mail is a core part of customers' lives, and it would have been hard to move gracefully.
So by this time in the companies' merger, users probably would see nothing different. But if Microsoft were smart, it would have determined that Yahoo Mail had the better technological underpinnings, in part because of Yahoo Open Strategy, and begun steering new sign-ups to it. Perhaps a migration tool would be released, or at least under way, for those who want to change manually.
With Yahoo part of Microsoft, one big project would look very different: the cloud-computing version of Microsoft Office, accessed via a browser. The combination of Microsoft's existing Office customer base and Yahoo's online customer base would have provided a much better rival to Google Docs, especially when it comes to attracting business customers who are more likely to actually pay for a reliable, supported service.
Not everything would have gone well for Yahoo projects, though. The same scrutiny that Yahoo properties are undergoing now, under the Bartz administration, would have begun months earlier and likely with less sympathetic eyes. With new bean counters in charge, Yahoo sites that didn't pass muster would have been axed with less hesitation.
Merging in an ugly economy
And that cold calculation likely would have gotten colder because of the economy.
By the time the acquisition closed, signs of the economic troubles would be apparent. Microsoft shareholders, seeing their stake diluted and their cash reserves depleted by the acquisition, could have become a significant issue. Microsoft's flexibility to acquire other companies, lavishly fund research with cash, or pursue other big-picture changes would have been significantly decreased.
Yahoo's deteriorating ad revenue would have become apparent, likely spawning a collection of Monday morning quarterbacks. After all, a better time for companies to consolidate is by snapping up weaker companies more vulnerable to economic swings. Microsoft wouldn't have been buying Yahoo at its peak, but the accountants in Redmond likely would be worrying about goodwill impairment charges.
Yahoo employees, spooked by the bad economy and Google's continued dominance despite it, might have been happy about having a more stable employer and a better shot at taking on Google, cultural clashes notwithstanding. But the reality of layoffs would likely have swept away many feelings of security.
Yahoo and Microsoft each announced significant cuts in the real world--1,520 for Yahoo and up to 5,000 for Microsoft--because of the economy. Combined with the inevitable redundancies from the merger, the job cuts probably would have come earlier for Microhoo and might well have been followed by more, increasing the total.
Worse, that unpleasantness would have taken place before any of the fruits of the integration were visible, deepening morale issues.
So by this time in our alternate history, there would be plenty of unpleasant news. Google wouldn't be put in its place, the benefits of the Microhoo merger wouldn't be apparent, and the world would look very similar to today's, minus a YHOO ticker symbol on Nasdaq. But the seeds of the merger's fruit would be planted, and if Microsoft played its cards right, Google would be reckoning with a more formidable competitor.
Yahoo CEO Carol Bartz
(Credit: Autodesk)Carol Bartz, Autodesk's former executive chairman, has replaced Jerry Yang as Yahoo's chief executive.
"She is the exact combination of seasoned technology executive and savvy leader that the board was looking for, and we are thrilled to have attracted such a world-class talent to Yahoo," Yahoo Chairman Roy Bostock said in a statement Tuesday. "The board is united in its view that her energetic and decisive leadership style, coupled with a proven track record of driving growth, operational excellence and shareholder value, is exactly what Yahoo needs to get back on a path toward achieving its full potential."
Bartz, 60, spent 14 years as Autodesk's CEO before becoming executive chairman in 2006. At Yahoo, Bartz's challenges will include adapting from a successful but relatively unknown software company to a struggling media company whose Internet properties used by hundreds of millions of people.
In addition, Yahoo announced the departure of President Susan Decker.
"The Board thanks Sue for her service as President, the important contributions she has made to Yahoo!'s development in a variety of roles over the past 8-1/2 years, and her willingness to work with Carol Bartz to ensure a smooth transition. We respect her decision to move on to other challenges and wish her only the best," Bostock said in a statement.
Stay tuned to this post for more details as they come from a news conference at 2:30 p.m. PST. We'll be live-blogging the event. ... Read more
Updated 2:09 p.m. PDT to note that Bartz has officially replaced Jerry Yang as CEO.
Carol Bartz, Autodesk's executive chairman and Yahoo's new chief executive, is by most accounts a strong, smart manager familiar with running a large company.
The big question for the successor to outgoing Chief Executive Jerry Yang, though, is how well her experience nurturing growth at a computer-aided design software company will transfer to the job of turning around an embattled media company.
Carol A. Bartz
(Credit: Autodesk)Analysts scrutinizing the situation, though, are more bullish on Bartz than worried about her media chops.
"Bartz (is not) someone who brings a lot of Web experience to Yahoo, but there's plenty of that to go around at the once-iconic Web portal. What the company lacks is a firm business leader that can instill confidence in Wall Street, major partners, advertisers as well as Yahoo employees," said Gartner Group's Allen Weiner in a blog posting.
And Bartz could consummate the Microsoft deal that Yang and his allies rebuffed, added Collins Stewart analyst Sandeep Aggarwal. "Yahoo has a very strong bench strength of top executives, including two co-founders. Perhaps the only near-term catalyst (for the stock price) is a deal with Microsoft. So Yahoo needed a CEO who buys a likely search deal with Microsoft at a philosophical level," Aggarwal said in an interview. "We think Carol likely fits that requirement."
Earlier Tuesday, we reported that Yahoo had extended Bartz an offer to replace Yang as CEO, and The Wall Street Journal had reported that she would accept it. Representatives from Yahoo and Autodesk didn't comment at that time.
At Yahoo, she'll have her work cut out for her. The Internet pioneer has suffered in recent years, with revenue growth eclipsed by Google's search-ad business and two major layoffs in 2008. Yang's year-and-a-half-long attempt to turn the company around, including a major rewiring called the Yahoo Open Strategy intended to increase activity on the site, began arriving just as the economy plunged into the abyss.
What's not clear is whether Bartz is the type of person who would be more inclined to sell Yahoo or its assets or rebuild from its current business. At Autodesk, she chose the latter route.
"Her vision was more about expanding into growth opportunities," said former Autodesk director Larry Wangberg, who worked with Bartz for years when she was CEO and chairman. "One example is Autodesk's international initiatives. She not only went after the obvious markets overseas but also ones which weren't as well known. Now the international markets make up a large portion of Autodesk's business."
Top-ranking exec
Bartz draws lavish praise for her years at Autodesk, earlier as CEO, and now executive chairman.
"She has this enormous capability to make things happen," Wangberg said. "She is very powerful, in a quiet way, and a results-oriented CEO who is equally comfortable talking to technologists (or to) businesspeople such as (those) in marketing or on Wall Street."
"The genius she had for the Autodesk years was a really good blend of a hard edge with a sensible personality the employees rallied around. She was able to make the tough decisions," said Renny Ponvert, a senior analyst with Management CV, whose firm ranks nearly 3,000 executives based on those executives' performance over 10 years.
Bartz, 60, gets the top score on the firm's scale of 1 to 5: "In terms of shareholder returns, net revenue growth, and generation of consistent operating income, she's definitely one of the best in the world," Ponvert said. In comparison, Yang is in the bottom fifth, he added
Right now, Yahoo's problem isn't a shortage of people with media experience. It's a need for fresh eyes to rationally assess what the company should and shouldn't be doing--someone who's not wedded to any particular project.
"It's good to have an outsider come in, because I think they're going to have to make some difficult decisions," said Technology Business Research analyst Allan Krans.
Lou Gerstner famously turned IBM around after coming from a dramatically different industry, RJR Nabisco. Outsiders aren't a miracle cure, though. Indeed, Yang's predecessor at Yahoo, Terry Semel, came out of Hollywood, and his attempt to transform Yahoo couldn't respond to Google's clout. John Sculley came from Pepsi to lead Apple, but it was perhaps the ultimate insider, Steve Jobs, who bore responsibility for that company's current strength.
Though Yahoo needs top leadership more than it needs another ad sales executive, media companies are different from those that sell technology, and Bartz would have to quickly come to terms with a new and complicated world.
"She's smart and she's tough, but Yahoo's a media company," said Forrester analyst David Card. "I think Yahoo's future depends on it cultivating some of the things it has. One of the things it has is relationships with other publishers, ad agencies, and marketers. It's building out the Yahoo network, but it's not a software problem."
The transition from software to media is one challenge. Another is the transition to a company focused on hundreds of millions of ordinary people. "The risk is not in her ability as an executive, the risk is whether she will get it with (Yahoo's) consumer domain," said Jon Holman of executive recruiting firm The Holman Group.
Who is Carol Bartz?
Bartz spent 14 years as Autodesk's CEO before becoming executive chairman in April 2006. Before Autodesk, she worked at Sun Microsystems, 3M, and Digital Equipment Corp., so she's seen the tech industry from several perspectives. And for some more breadth, she's on the boards of Intel, Cisco Systems, and Network Appliance.
Bartz has ventured outside the straight business realm, too. She's a board member at the Foundation for the National Medals of Science and Technology, was inducted into the Women in Technology International Hall of Fame in 1997, and served on President Bush's Council of Advisors on Science and Technology. And she's been outspoken about being a breast cancer survivor.
More telling about her style, though, is an anecdote from her history at Autodesk with its current CEO, Carl Bass, who came to the company through an acquisition.
"They were having tough times. She fired him," Ponvert said. "She had the courage to realize two months later that she desperately needed him. She hired him back, and he became her hand-chosen successor."
People at Bartz's level, with famously big egos, are even more reluctant than usual to admit their mistakes, but to her credit, Bartz was willing, Ponvert said. She also coped well with hard times at Autodesk during 2000 and 2001 when the tech bubble burst.
Another asset Bartz would bring to Yahoo: international experience. Autodesk's computer-aided design software is bought where growth is occurring, and that means Bartz has skills in emerging markets, not just established ones, said Technology Business Research analyst Ezra Gottheil. "She would know more about Asia, about China, about emerging markets, than the average software CEO," he said.
Yahoo is by no means out of the woods, but Yang has done some of the thankless, grinding work of repositioning the company. At Yahoo, Bartz would get to take advantage of that.
"She would be the perfect executive to rewrap the box and make it an attractive operating entity as well as takeover target," Ponvert said. "Right now perception is that Yahoo is damaged goods. Carol could polish that up and make it a sought-after property."
CNET News staff writer Dawn Kawamoto contributed to this report.
Yahoo began laying off 1,520 employees around the world on Wednesday as the company tries to deal with its financial difficulties.
Here's what outgoing Chief Executive Jerry Yang had to say to employees about it in a memo that uses his trademark lowercase style.
yahoos,
today, most of our layoffs in the US are happening, and they've been underway in other regions around the world.
this is a tough time for all of us and i wanted to take a moment to reach out to you.
Outgoing CEO Jerry Yang
(Credit: Yahoo)saying goodbye to colleagues and friends is never easy. they all are dedicated members of our yahoo! family, who worked beside us and shared our passion.
but as you all know, we must take actions to better perform in today's turbulent global economy. while we've found efficiencies in many parts of our business, laying off employees is unfortunately unavoidable. our difficult decision to let colleagues go reflects the changes we're having to make to better align costs with revenues - something businesses in virtually every sector are also having to do.
for those who are affected by these layoffs, i am extremely grateful for your contributions to yahoo!. we realize the impact this will have on you. that's why, consistent with our past practices, we're making every effort to support you with severance packages and other services.
the reductions we're making are very hard, but they are also very necessary--as we focus on the long-term health of our business. to those who are leaving us, i extend my heartfelt thanks on behalf of yahoos everywhere--you will be missed.
thanks,
jerry
Billionaire investor-activist Carl Icahn opposes selling just a portion of Yahoo, telling CNBC on Wednesday that he believes the company's stock in undervalued.
Carl Icahn opposes a partial sale of Yahoo, saying the company is undervalued.
(Credit: CNET News)"I don't think there is very much to having a partial bid for the company, at least as a large shareholder," Icahn said.
Icahn, who is on Yahoo's board of directors, made the statement while addressing rumors that former AOL Chief Executive Jonathan Miller is trying to raise money to acquire all or a part of the Internet pioneer. Miller reportedly believes he can do a deal worth about $20 to $22 per share.
Icahn, who purchased an additional 7 million shares of Yahoo last week, told CNBC that he spoke recently with Miller about the possibility of buying Yahoo.
"Right now I would be against that and I pretty much told Jonathan that," Icahn said. "I think the stock is very undervalued."
He also said that while he had not spoken with others on the board about a partial sale, he thought they would agree with him.
In recent months, Yahoo shares have fallen, along with the rest of the stock market, and have been hovering around the $10 mark--a far cry from the $33 a share Microsoft offered in its takeover bid for the company earlier this year.
Icahn was also queried about who he thought would make a good chief executive for the search pioneer after the recent resignation of CEO Jerry Yang. Icahn said the company needed a CEO who is "a hard-nosed, cost-cutting kind of guy," but did not mention any candidates by name.
He also emphasized that he would still like to see a search deal worked out with Microsoft.
Yahoo has been under great financial pressure lately. In addition to Yang's resignation, there has been a parade of executives abandoning the troubled search company.
After reporting a 64 percent drop in net income and warning that the advertising market is softening, Yahoo announced in October a layoff of at least 1,430 by the end of 2008. The cut follows another in which about 1,000 Yahoo employees lost their jobs in February.
Update 10:00 a.m. PST: Added Yahoo's closing price Friday.
Although it seems everyone from Microsoft to analysts to shareholders have lost some interest in Yahoo, at least one person hasn't: Carl Icahn.
Over the course of three days this week, the activist investor bought up nearly 7 million shares of Yahoo, the Associated Press reported Friday. That brings Icahn's stake in the Internet search pioneer to about 75.6 million shares, or 5.5 percent, according to a regulatory filing. Icahn paid an average of $9.92 for each share.
Carl Icahn has bought up 7 million shares of Yahoo this week.
(Credit: CNET News)The move comes on the heels of the announcement that Chief Executive Jerry Yang will step down once a replacement for him is found.
Earlier this year, Icahn launched a proxy fight in a bid to take over Yahoo's board. Among his wishes was that Yang step down. The company and Icahn eventually reached an agreement wherein he got a seat on the board, and the number of seats was expanded, with Yahoo appointing two new members from Icahn's slate of candidates. Following the agreement, Yang said that he welcomed Icahn's "fresh perspective."
In recent months, Yahoo shares have fallen, along with the rest of the stock market, and have been hovering lately around $10. That's in contrast to earlier this year, when Microsoft offered $33 a share in a sweetened takeover bid for the company.
Shares of Yahoo closed Friday at $11.51, up 93 cents, or about 9 percent. The stock market was open for a shortened session, following the Thanksgiving holiday.
Last week, Microsoft CEO Steve Ballmer said at the company's annual shareholder meeting: "We are done with all acquisition discussions with Yahoo." He did not discount the idea of a search partnership however.
Yahoo's board and outgoing Chief Executive Jerry Yang agree that his skills aren't the right ones to turn the company around. What strengths, then, should his successor have?
Given Yahoo's sluggish responsiveness and years of trouble, a turnaround expert with a high pain threshold certainly is a good place to start. But there are other options beyond that.
News.com Poll
Among the options are a mergers-and-acquisitions specialist who might broker a deal with Microsoft or another partner, a buttoned-down operations expert who could speed up Yahoo's existing strategy, and a bold visionary who could take Yahoo in a new direction altogether. (Vote your opinion here, and weigh in with comments below.)
Opinions varied among experts surveyed about the matter, but one thing seems clear: a fresh set of eyes soon will look at Yahoo's business.
"An outsider seems like the best possible option," said Jennifer Chatman, an organizational behavior expert at the University of California at Berkeley's Haas School of Business. "They need someone who's less invested. Jerry Yang was there from the beginning...I think he's really suffered from not having an objective view of what the company is worth."
One source familiar with Yahoo's thinking shared the company's wish list of desirable attributes for Yang's replacement: someone with prior CEO experience who's got both operational and strategic skills, someone experienced in technology, and somebody energetic and young--which apparently means in his or her 40s or 50s. The company expects to come up with a pool of about a dozen candidates and settle on one within six months, though there's no hard deadline, the source said.
Companies searching for a new CEO typically select a handful of top requirements and attributes then work with an executive search firm to refine the qualifications list, said David Nosal, chief executive of Nosal Partners, one such firm. Yahoo could come up with a short list of candidates within 45 days or so.
Analysts also believe it's better to hire a new CEO whose experience tilts more toward the advertising and media realm than the technology realm. Yahoo still has a powerfully large audience, and it's not going to outdo Google when it comes to letting the robots rule the roost.
"You're in the business of aggregating audiences and selling them to advertisers," said Forrester analyst David Card. "How you create that has more technology than in TV or movies or newspapers, but it's not like you're in the business of having armies of developers who run massive server farms and bring efficiencies out of algorithms."
Outsell analyst Ned May agreed. "I think the technology is less important than the advertising and media focus," he said. Just coming up with new technology doesn't guarantee it'll be a hit, he said, citing Google Docs as an example. "You can build it and they won't come."
Opinions varied, though, on whether Yahoo wants a CEO who will bring a new strategy to the company or one that will bring the existing one to fruition.
May expects somebody who can execute the plan Yang set in place, which seeks to improve search and display advertising on the one hand and to offer users more active, useful Web sites on the other.
"I think it's an execution person--someone who works well with current company," May said.
But Terry Hendershott, a professor at Haas, expects bigger changes.
"They have a strategy problem," Hendershott said. "They've been existing on the idea that they have a lot of traffic and they'll someday monetize this. And they're not doing this very well."
Forrester's Shar VanBoskirk believes the current strategy is workable but needs some pizazz.
"They need somebody with a little bit of guts and some operational expertise," VanBoskirk said. "They don't lack for legacy, they don't lack for data, they don't lack for experience. They lack for the flash in making that all sexy again."
CNET News staff writer Dawn Kawamoto contributed to this report.
After nearly a year and a half at Yahoo's helm, Chief Executive Jerry Yang will step down once the company finds a replacement. Monday's announcement starts closing a chapter in the Internet pioneer's history that began in June 2007 when Yang replaced Terry Semel as CEO.
It's been a rough time. Yahoo's stock has dropped from $28.12 when Yang took over as CEO to Monday's close at $10.63.
News.com Poll
But though Yang didn't build Yahoo into a Google-slayer, he hasn't been idle, either. The company looks very different from when he took over, with the new Amp platform launched and the Yahoo Open Strategy under way to fire up activity on Yahoo properties. Here's a recounting of Yahoo's recent history.
• June 12, 2007: Shareholders blast Semel and Yahoo's board at the company's 2007 shareholder meeting. Semel is defensive: "This is clearly a year of transition for our company. We believe we are well positioned now to take advantage of strong growth up ahead."
• June 18, 2007: Semel steps down. Yang, previously bearing the title of chief Yahoo, takes over as CEO.
• Jan. 7, 2008: Yang demonstrates Yahoo's vision for a revamped, more socially active Yahoo Mail, a key part of the company's effort to back off its media strategy and move toward a site that's more useful for Yahoo members and used by them more often.
• Jan. 29, 2008: Yahoo announces a layoff of about 1,000 employees while reporting fourth-quarter earnings. "We're making good progress executing on this strategy, and I'm confident we're heading in the right direction," Yang says. "This sort of transformation takes time, but we have the talent and the strong cash flow to succeed."
• Feb. 1, 2008: Microsoft publicly announces its $44.6 billion cash-and-stock offer to acquire Yahoo. "Microsoft's consistent belief has been that the combination of Microsoft and Yahoo! clearly represents the best way to deliver maximum value to our respective shareholders, as well as create a more efficient and competitive company that would provide greater value and service to our customers," Microsoft CEO Steve Ballmer says in a letter to Yang and Yahoo Chairman Roy Bostock. Yahoo's stock surges from a close of $19.18 the day before the offer was made public to close at $28.38.
• Feb. 11, 2008: Yahoo rejects Microsoft's offer, saying "Microsoft's proposal substantially undervalues Yahoo." The company would repeat this rationale several times in coming negotiations.
• Feb. 12, 2008. Yahoo's layoffs begin.
• April 5, 2008: Microsoft sets an ultimatum for a Yahoo response, threatening to take the matter directly to Yahoo shareholders.
• May 3, 2008: Discussions break down. Microsoft says it's really not interested in Yahoo. "By failing to reach an agreement with us, you and your stockholders have left significant value on the table," Ballmer says in a letter to Yang. "But clearly a deal is not to be."
• May 4, 2008: Microsoft and Yahoo had come close in their price discussions. Microsoft had offered $33 per share, while Yahoo had been willing to go as low as $37. Yang tries to rally the troops as news of the breakdown goes public by telling Yahoo employees that "there's a reason why we're the only Fortune 500 company with an exclamation point at the end of our name, and now is the time to demonstrate what that exclamation point stands for."
• May 18, 2008: Microsoft talks with Yahoo restart--for a narrower slice of the company.
• June 12, 2008: Yahoo and Google announce a search-ad partnership under which Google will supply some advertisements for Yahoo search results. The two will share the revenue, and Yahoo expects $800 million in revenue and $250 million to $450 million in new operating cash flow during the first year of the deal. Meanwhile, Yahoo said talks to sell its search business to Microsoft broke down.
• June 26: After numerous executive departures, Yahoo announces a reorganization that centralizes some power.
• July 12, 2008: Yahoo rejects a proposal to sell its search assets to Microsoft.
• July 14, 2008: Carl Icahn, who owns about 5 percent of Yahoo stock and who had strongly urged a Microsoft deal, begins an effort to oust Yahoo's board of directors and replace them with his own slate.
• July 21, 2008: Yahoo settles with Icahn, agreeing to give him and two allies a seat on the board.
• July 29, 2008: Investor T. Boone Pickens dumps 10 million Yahoo shares.
• Aug. 1, 2008: Yahoo shareholders gripe about the company's performance at the company's annual meeting. "We might not see $33 again for two years," says Patrick Sheridan, who came from New York for the meeting. "I might have to cut my losses. I voted against the entire board."
• Aug. 5, 2008: After uncovering a vote-counting slip-up, Yahoo finds support for Yang and Chairman Roy Bostock much lower than initially expected. A total of 33.7 percent of shares withheld votes for Yang, 39.6 percent withheld votes for Bostock.
• Aug. 6, 2008: Carl Icahn joins Yahoo's board.
• Oct. 21, 2008: Yahoo reports a 64 percent decline in net income, lowers its financial performance forecast, warns of a softer ad market, and says the layoff will result in at least 1,430 losing their jobs. Despite the bad news, Yang maintains an optimistic tone that focuses on an indefinite future when the economy looks better. "While the advertising market goes through a down cycle, we believe the Internet ad market will recover, with Yahoo positioned to take share," Yang said.
• Nov. 5, 2008: The Justice Department's threat of an antitrust lawsuit kills the Yahoo-Google ad deal. Yahoo expresses its dismay, but Google--growing ever more dominant and facing more scrutiny as a result--doesn't think a big legal fight is worth it. The companies had proposed a narrower deal to the Justice Department, but to no avail, so Yahoo must bid adieu to $800 million in new revenue.
• Nov. 17, 2008: Yahoo announces Jerry Yang will step down as CEO once a successor is found. "All of you know that I have always, and will always bleed purple. I will always do what I think is right for this great company. While this step will be an adjustment for all of us, I know it's the right one," Yang says in a memo to Yahoo employees.
See also:
• Yahoo CEO Yang to step down
• Yahoo's ultimate search: A new CEO
• A pity for Yahoo that John McCain didn't win
• Jerry Yang memo to staff about stepping down
• Microhoo revisited: Would it be a search-only deal?
Updated 8:29 p.m. PST with analyst comment.
Jerry Yang's resignation as chief executive of Yahoo opens the door wide for another Microsoft offer, several sources said Monday.
News.com Poll
"I would expect Microsoft to come back within the next three or four months," said Eric Jackson, an activist Yahoo shareholder who was among the investors angry with Yahoo's management for not accepting Microsoft's previous bid. "I think Microsoft will come back because Microsoft needs Yahoo, despite what they've been saying publicly, and I think they know that," Jackson added.
Financial analysts also were licking their chops about the possibility. "We still believe Microsoft will eventually own Yahoo. Jerry moving out of the CEO role may accelerate this," said UBS analyst Benjamin Schacter. "Yahoo is a key strategic asset in the online space, and given the scarcity of key players of size, we see value here not reflected in the stock's current valuation."
Bank of America's analyst team expects a deal with Microsoft, too, but a narrower one. "We continue to believe a search deal with Microsoft is possible, but do not rule out an all-out deal for the company," the analysts said.
And a former Yahoo executive who asked not to be named also predicted that Microsoft would come calling now that Yang is not at the helm.
"There was a lot of bad blood during the last discussions between Yang and Microsoft executives," he said. "I would assume that Microsoft's search business cannot do well on its own. Yahoo's (search business) cannot do well on its own and it makes a lot of sense to combine."
The executive said Microsoft likely wouldn't want to buy all of Yahoo; just the search business.
Earlier this month Microsoft CEO Steve Ballmer threw cold water on a Yahoo deal. Despite Yahoo's deflated stock price, he's not interested in "going back and re-looking at an acquisition."
"We tried at one point to do a partnership around search, not advertising. That didn't work either, so we moved on, and they moved on," he said at a Committee for Economic Development of Australia lunch in Sydney on November 7.
However, neither Microsoft's nor Yahoo's search businesses have made much progress in competing against Google and both could use a boost in a downturned economy.
"Even with the bad economy and decline of Microsoft's stock price, this is a deal that makes strategic sense," Jackson said. "It's a natural time given this move for Yahoo to reassess. The board is feeling incredible pressure and guilt and anger from shareholders for passing on the deal before."
And Microsoft would get a deal this time, he predicted. "Yahoo shareholders now would be over the moon if they could get $20 a share, which is where stock was at a few weeks ago," he said.
CNET News' Stephen Shankland contributed to this report.
See also:
• Yahoo CEO Yang to step down
• Yahoo's ultimate search: A new CEO
• Yang's travails: A Yahoo timeline
• A pity for Yahoo that John McCain didn't win
• Jerry Yang memo to staff about stepping down
• Microhoo revisited: Would it be a search-only deal?
Here is the full text from Yahoo Chief Executive Jerry Yang about his decision to step down to his earlier role as Chief Yahoo.
From: Jerry Yang
Sent: Monday, November 17, 2008 5:03 PM
Subject: update
yahoos -
i wanted to address all of you on the news we've just announced. the board of directors and I have agreed to initiate a succession process for the ceo role of yahoo!. roy bostock, our chairman of the board, is leading the effort to identify and assess potential candidates for consideration by the full board. the board will be evaluating and considering both internal and external candidates and has retained heidrick and struggles to help in this effort.
i will be participating in the search for my successor, and i will continue as ceo until the board selects a new ceo. once a successor is named, i will return to my previous role as chief yahoo and continue to serve as a director on the board.
last june, i accepted the board's request that i assume the ceo role to restructure and reposition the company as a whole in order to more effectively meet the fast-changing needs of both users and partners. since taking on the ceo role, i have had an ongoing dialogue with the board about succession timing. thanks in large measure to your tireless efforts, we have created a more open, competitive yahoo! and we believe the time is now right to transition to a new ceo who can take the company to the next level.
despite the external environment we face, the fact remains that yahoo! is now a significantly different company that is stronger in many ways than it was just 18 months ago. this only makes it all the more essential that we manage this opportunity to leverage the progress up to this point as effectively as possible. i strongly believe that having transformed our platform and better aligned costs and revenues, we have a unique window for the right ceo to take ownership over the next wave of mission-critical decisions facing the company.
all of you know that I have always, and will always bleed purple. i will always do what I think is right for this great company. while this step will be an adjustment for all of us, i know it's the right one. i look forward to updating you on this process as soon as the board has developments to share, and will continue to do everything i can to make yahoo! fulfill its full potential.
thank you,
jerry
See also:
• Yahoo CEO Yang to step down
• Yahoo's ultimate search: A new CEO
• Yang's travails: A Yahoo timeline
• A pity for Yahoo that John McCain didn't win
• Microhoo revisited: Would it be a search-only deal?
