Who Should Lead Yahoo? Answer: Nobody
Posted by: Spencer Ante on November 18, 2008
Well, no one can say they didn’t see it coming. Jerry Yang is finally out at Yahoo, reports Kara Swisher with the big scoop.
And no one can say he didn’t deserve it. Yang, having spurned Microsoft’s rich takeover offer, bet the farm on a search engine deal with Google. And when Google pulled the plug on the partnership, after government regulators wanted to attach too many conditions to it, the search giant effectively ended the reign of Yang.
Under Yang, Yahoo lost $28 billion in value, as of today’s closing stock price, and hundreds if not thousands of of highly talented people left the Web pioneer. (Sorry, Jerry, I have enormous respect for your accomplishments but the company is not “stronger in many ways than it was just 18 months ago,” as you claimed in your goodbye memo.)
But I think a strong argument could be made that NO ONE SHOULD LEAD YAHOO! In other words, shareholder return would be maximized if the board entered into serious negotiations to sell the company to Microsoft, if Microsoft still wants to buy Yahoo. And why wouldn’t it?
I’ve always said that the biggest impediment to Yahoo’s sale to Microsoft was Jerry Yang. I still believe to this day, as do many folks in Silicon Valley, that Yang never wanted to sell the company to Microsoft. I also believe that as long as Yang was at the helm, Microsoft CEO Steve Ballmer would never re-enter negotiations with Yahoo!
Now, with the incalcitrant founder out of the way, Ballmer has an opening to take another run at the company.
I realize this is an unusual suggestion. Some folks will argue that Yahoo could increase its value by hiring an outside CEO who could set a fresh course for the embattled giant. But I think the chances of a turnaround are very low, given the strength of Google, the hobbled state of the company, and the weakening economy.
A year from now, Yahoo shares could very well be worth half as much as they are today.
I imagine the Yahoo board could engineer a deal for $17 a share—a 60% premium to today’s close. Meanwhile, MSFT shareholders get YHOO at a 50% discount to the rumored $34 bid this summer.
If Microsoft does not want to buy Yahoo, then I say good luck to the CEO bold enough or crazy enough to take on this job. Whoever it is, the board is probably going to have to throw a lot of money at the person to convince them to take on these headaches.
One way to make the job more appealing would be to take Yahoo private. If the debt markets reopened, Yahoo would make an intriguing buyout candidate in many ways. Sure, it would be a risky deal, but if you took the company out of of the harsh glare of the public market, it could possibly buy Yahoo more time and freedom to dig itself out of this deep hole.