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May 6, 2008

If he wants to remain CEO, Yahoo's Jerry Yang will have to show a viable turnaround strategy for the number two search company that would appease angry shareholders in light of Yahoo's refusal to accept Microsoft buyout bid.

Time is running out for Yang and now all the spotlights are on him. Now he needs to prove that his strategy is better and needs to demonstrate (with strong earnings this time) why he thinks his company is worth at lot more than what Microsoft offered.

Yesterday, Yang was quoted as saying "the company is doing a lot better than it was just three months ago. I honestly believe that in many ways this takeover threat has been good for us. We still have a lot of work to do to demonstrate that we can be successful, and I am very focused on that."

Yang has promised that a more sophisticated ad network will accelerate Yahoo's net revenue growth by at least 25 percent in 2009 and 2010, up from the recent pace of 12 percent increase.

If Yang fails to really deliver, that could entice Microsoft to return with another takeover bid that would be more difficult to turn down, but this time at a much lower price...

Although Microsoft has publicly indicated it will focus on measures besides buying Yahoo in its effort to make its Internet division profitable, several analysts predicted the software maker will revive its offer in the summer or fall if Yahoo doesn't snap out of its two-year doldrum.

With similar opinions reverberating everywhere, Yahoo's shares didn't sink as dramatically as many analysts anticipated. But Yahoo's stock still managed to drop $4.30 a share to close at $24.37, wiping out nearly half the gain it made since Microsoft made its bid January 31.

Yahoo has officially set its annual shareholders meeting for July 3rd, after indefinitely postponing it in early spring as part of its effort to foil a possible hostile takeover attempt by Microsoft.

Now it may be Yahoo's shareholders who try to oust Yang and the rest of Yahoo's board instead of Ballmer, who had threatened an attempt to dump the 10 directors if they didn't accept Microsoft's offer.

Lawyers for two Detroit-based public pension funds that sued Yahoo in February, alleging it failed in its fiduciary duty to act in shareholders' best interests, will amend their complaint to include the weekend's events, according to a statement Monday from the firm, Bernstein Litowitz Berger & Grossmann.

Meanwhile, Google appears poised to grow even stronger without Microsoft in the picture, at least for now. Unnerved by the prospect of its two biggest rivals joining forces, Google reached out to Yahoo to help thwart Microsoft's bid.

While Google could boost Yahoo revenue by anywhere from $850 million to $1.6 billion annually, it might also hurt Yahoo by undercutting the appeal of its own ad platform.

The collaboration has prompted Yahoo to consider turning over some of its advertising space to Internet search leader Google, whose technology yields higher profits from commercial links.

If Yahoo announces an ad partnership with Google, that could preclude a renewed bid from Microsoft because Ballmer thinks the alliance will diminish Yahoo's long-term value.

While analysts debated how Yahoo and Microsoft should proceed, most agreed Google will benefit from the aborted takeover attempt.

Even if Google doesn't end up selling ads on Yahoo's heavily trafficked Web site, it has kept some of the Internet's biggest services out of Microsoft's clutches.

But meanwhile, the question is, will Yahoo ever find a higher offer for the company? If so, who would have that kind of cash? Food for thought.

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    This article was featured on Business 5.0.

Source: Tech Blog.