Yang to Step Down as Yahoo CEO - Enter Microsoft, Icahn, and Google
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Immediately after this, Microsoft publicly announced that it had made an offer to acquire Yahoo. This was nothing to sneeze at: it was a $44.6 billion cash-and-stock offer that would have represented the single biggest purchase in the software giant's history. Yahoo's stock rose more than $9 per share on the news, closing at $28.38. Many observers speculated that Microsoft wanted Yahoo mainly for its search technology; king of the desktop, it had been unable to make any headway against the growing Internet monolith that was Google. It must have thought that by joining forces, Yahoo and Microsoft would have a chance to survive in a future where the net's increasing importance meant that more people spent more time online...and where Google's online services nibbled at Microsoft's desktop dominance.
But Yahoo rejected the offer, and many observers today think this was Yang's biggest mistake. By May 2008, it was revealed that Microsoft had offered $33 per share, a substantial premium, but Yang had not been willing to go any lower than $37 per share, insisting that the company was worth at least that much. Some observers cited Yang's well-known hatred of Microsoft as one reason for his intransigence.
Indeed, that hatred was so strong that it sent Yahoo into the arms of its biggest rival. In mid-June, Google and Yahoo unveiled a partnership in which Google would supply some ads for Yahoo search results. Yahoo would benefit from the revenue-sharing aspects of the deal, to the tune of an estimated $800 million and then some in the first year. At the same time, Yahoo's talks with Microsoft to sell a smaller part of the company broke down. This came as no surprise; indeed, many said that part of the point of the Google deal was to poison any hope of a deal with Microsoft.
Meanwhile, the reorganization proceeded apace. By the end of June, Yahoo had lost at least three executive vice presidents and two senior vice presidents – and one of the latter was Brad Garlinghouse, author of the notorious memo I mentioned earlier. The move put Sue Decker into the spotlight as Yahoo president, and made the company leaner and (one assumes) more focused. It also put Yahoo under a great deal of pressure to perform – a pressure already brought nearly to the breaking point thanks to the grassroots stockholders' revolt encouraged by Carl Icahn as a result of the company's rejection of the Microsoft deal.
Yahoo couldn't ignore Icahn. He held five percent of Yahoo's stock, and his reach was apparently out of proportion to that percentage. By late July Yahoo settled with him by agreeing to give him and two of his allies a seat on the board. That probably pleased Icahn, but it seemed to make another investor very unhappy; T. Boone Pickens dumped 10 million Yahoo shares around this time.
Next: Is Nobody Happy? >>
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