Yahoo (YHOO): Yes, We Blew Microsoft Deal, But Please Don't Fire Us
The pitch? This detailed slide show, filed with the SEC.
Key points:
- Microsoft misrepresented its offer to buy us AND the search deal we rejected in favor of the Google deal. In fact, we suspect Microsoft may never have actually wanted to buy the company.
- Carl Icahn has no plan for the company other than what we've already done: try to sell to Microsoft and sign a search deal with Google.
- Carl Icahn has failed to create value at the vast majority of companies he's targeted in recent years. He may have had the magic touch once, but he's lost it. And did we mention that he doesn't have a plan?
Yahoo's management already has our vote, so they can stop filing these things (most of which sound defensive--especially the Microsoft stuff). What's more, we continue to believe Yahoo management blew the original Microsoft deal: If they hadn't reacted with horror at the mere thought of becoming a Microsoft division and done everything possible to block the deal, we believe they could have struck a deal at $34-$35 a share in mid-February. We believe Yahoo's attitude and delay gave Microsoft time to realize that buying the company at $31+ would be a disaster and that it intelligently decided to drop the bid.
That said, we think Yahoo was right to reject Microsoft's search proposal for the reasons we've already detailed, as well as for the new ones included in today's filing:
- The $1 billion purchase price for Yahoo's search assets would have been taxable (i.e., it would have netted Yahoo only $700 million or so.
- Microsoft only agreed to a 70% TAC rate (payout to Yahoo on each search query). This is very low for such a big deal.
- Microsoft only agreed to guarantee better pricing that Yahoo's current search pricing for three years of a ten-year deal.
- Yahoo reiterates that the deal would have added nothing to Yahoo's cash flow, despite Microsoft's claims that it would add $1 billion a year.
- Yahoo disputes Microsoft's claim that the total deal was worth more than $33 per share to Yahoo shareholders.
Yahoo doesn't mention that Microsoft also offered to buy 1/6th of its stock for $35 a share--which would have been appealing to many shareholders. This is one part of the deal that Microsoft is reportedly considering sweetening (Kara Swisher reports that Microsoft may bid for about a third of Yahoo and thus gain effective control over its search assets that way).
Lastly, Yahoo argues that Carl Icahn doesn't have a plan other than firing Jerry Yang. We agree. And as frustrated as we are with Jerry for blowing the Microsoft deal, we're not voting to fire him until someone--Carl or anyone else--shows us a better plan.
See Also:
Microsoft Developing Secret Plan to Seize Control of Yahoo Without Buying It
For all of the reasons you stated for voting in favor of Yahoo's current board, there's just no way to reward a group of people who looked out for their own interests instead of the shareholder's interest by blowing one of the biggest internet deals in history.
THEY DESTROYED SHAREHOLDER VALUE!!!
They simultaneously destroyed shareholder value and damaged their brand probably to the point of no return.
I agree with the premise that Icahn has no real plan to revitalize Yahoo as it is.
I don't agree with the Microsoft deal being bad for Yahoo. Microsoft wants nothing more than to gain in search and they were willing to spend through the nose to acquire Yahoo. At least that would have been better than watching Yahoo, prior to the Microsoft announcement, doing a 3 card monte with their brand.
They cannot be rewarded for their actions.
What makes you think that you need a specific plan in order to fire Jerry Yang? All you need is faith that someone else can do a better job in the same capacity. In my opinion, Jerry has not done anything to create shareholder value in his one year as CEO. I think it's time for some new blood, and someone who does not have the emotional attachment to the company. I plan to vote my shares for Carl Icahn's appointees. If driving the stock price back into the teens is Jerry's way of creating value, then he has earned his pink slip.
To blame Yahoo for the failed MSFT merger attempt (or feint, if it was a feint and I can’t know) would be similar to blaming the bride at a wedding for the groom getting cold feet at the last minute and going to Walksterville.
It just didn’t work, for whatever the reason… and Yahoo’s management performed about the way I would have had I been in the exact same situation. The only thing I'd have done differently is not to allow MSFT to hold the public discourse so long without responses. That was Yang's biggest error.
Yahoo is in the position it's in largely because of decisions made on Terry Semel's watch. Jerry may have had a hand in them, but they were ultimately Terry's responsibility. I still can't point to a lot of non-Internet folks who have jumped into a CEO slow at a major Internet company and done an excellent job, so you can't just bring in a cost-cutter (or a media guy, as Terry demonstrated).
I'd like to see Jerry transition to Chair and have Yahoo's board search for a more hard-nosed CEO. I don't think decapitating the company in a shareholder vote is the best way to make this happen. (The company could fall apart in the months it took to bring someone aboard, and there's no guarantee you'd get anyone good.)
Sue and Jerry may be great, I don't doubt it, but when your ship starts taking in water and you decide to put patches on the holes till you have so many holes that the ship barely moves you get desperate and you loose site of what needs to be done. They decided to rearrange the deck chairs, that will not save a sinking ship. The ship needs to be sent to dry dock for a major overhaul, no more on the fly repairs! Then you can set sail with 1.) A new captian or 2.) Sell it.
I disagree with you on Yang's responsibility for what happened under Semel's watch. He should surely have been involved in any major decisions. If he wasn't, he's a complete incompetent who should have been removed long ago, and certainly should be removed now after this complete debacle.
Where do you see this going from now to earnings report and/or annual meeting? It just continues to decline and I'm wondering if it is wise or a mistake to sell at this level. Swisher's expectations on MSFT are honest, as she is, but I don't know that we can bank on this. I've lost so much as a long-term holder, this has been one of the worst experiences of my life.
Just look at the share price today, Jerry and Sue need to be fired. Jerry form what my council is telling me he could be held personally responsible for the Microsoft debacle. Has the guy ever done anything right?
YHOO will keep falling, and -frankly- why shouldn't it? It was in the high teens when the MSFT offer came, and now it will go there again. Have we seen a boldly changed management? Have we seen a boldly changed outlook? I don't think so.
Any change is better than a management that has failed miserably over the past few years - and
they have been consistent at failing. You think Carl Ichan is a fool - you be the fool henry
As far as takers, Yahoo is a dormant giant and with their shares so low you can offer some juicy stock options.
They have my vote.
Per AT&T's hostile takeover of NCR which the target left as a scorched earth, the received wisdom was that hostile takeovers don't work for high human capital organizations.
Should Microsoft or Carl Icahn succeed in a hostile takeover of Yahoo, what do you think will happen? The Oracle/PeopleSoft or AT&T/NCR experience?
Those of you who bet that you could sell your Yahoo shares for more than $27.50 are now arguing in favor of surrendering the $20.70 value that you have left in your stock to a man who still washes his hands with soap leftover from his TWA takeover. Dumb and dumber!
Icahn is down to plan C. He hopes to get a couple of board seats and become a thorn in Yahoo's side. When Jerry has had enough, he'll buy out Carl's shares at a premium.
All of you Icahn worshippers will lose value, again...
Please allow me to vehemently disagree with you. I know it sounds trite but Jerry really doesn't have a plan. He changes his main bullet points every 3-4 months. Yahoo is bleeding talent in a way that I've never seen before.
Yahoo lacks vision, plain and simple. They tried to follow Google but just ended up going off a cliff. The people (Sue, Jerry, Dan R. etc.) that took them off the cliff are still in charge.
They need radical change. They are not a great company anymore.
That's the problem with most Yahoo executives: they aren't afraid of being fired. It's time for managers who aren't just treading water.
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