Wednesday, May 30, 2007

Zod's Departure is an Opportunity

Zod Nazem announced this afternoon that he'll be leaving his post as head of one of Yahoo!'s three pillars (Technology Group) on June 8th - just prior to Yahoo!'s annual meeting.

Zod is a longtime Yahoo! Over the years, he's had his share of Valleywag critics, but insiders I've spoken to talk about the many strengths he brought to the organization. I wish him well in his new endeavors.

For Yahoo!, this creates some more management uncertainty -- which had started to be resolved with Blake Jorgensen's hiring a couple of weeks ago as CFO. Today, two of the 3 main groups for the company are without a leader. (We're still waiting on a head of the Audience Group, even though Jeff Weiner's been doing his best not to leave that group rudderless.)

Yet, every crisis brings opportunity. In our view, the Technology group at Yahoo! has been underfunded and overlooked over the past 6 years. The neglect of Overture leading to the current "catch-up" frenzy with Panama is one example. The group deserves a strong new leader and some more resources to get the job done. Let's hope it takes less than 6 months to find that person. More drift is not what Yahoo! needs now.

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Friday, May 25, 2007

Don't Give Yahoo! Another Blank Check

June 12th is fast approaching. That's the date for the Yahoo! Annual Meeting in Santa Clara.

If you're a Yahoo! Shareholder, you've likely already received your company proxy. You're also likely disappointed by Yahoo!'s performance relative to Google over the last 3 years. Google's shareholders have seen their holdings rise 333%. Yahoo!'s shareholders have seen their holdings drop 8%.

If you support a "Plan B" for Yahoo! and simply are not willing to sign a blank check to the current board and management for the coming year, we recommend you use your shareholder rights at the Annual Meeting and vote "AGAINST:"

  • Terry Semel
  • Robert Kotick
  • Roy Bostock
  • Ron Burkle
  • Eric Hippeau
  • Arthur Kern
  • Gary Wilson

If any of these men receives less than a majority vote, he will need to immediately leave the board.

It's time for a change. It's time for a "Plan B" for Yahoo!

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Tuesday, May 22, 2007

Is Your Business Sustainable?

Several weeks ago, I had the good fortune of being able to begin consulting with The David Suzuki Foundation of Vancouver, BC. I've had the opportunity to better get to know their leaders at the Board and Management levels, as well as its charming and inspiring founder.

The Foundation has several noble goals which guide it. However, perhaps its most dominant mission statement is "sustainability within a generation."

"Sustainability" is a term now heavily used by Arnold, Leo, and corporate leaders (such as Yahoo!'s David Filo). However, beyond these glitzy references, what does it mean for you and me?

I recently found a link to the following YouTube video from one of my Facebook contacts. It is a 9 minute video (from TV Ontario) of David Suzuki Foundation Board Member Ray Anderson. He is the Founder and Chair of Interface, Inc., the leading carpet manufacturer in the world - based in Atlanta. Until 1994, he never gave "sustainability" a thought.

Watch this video, and reflect on if your business is a sustainable one:

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Thursday, May 10, 2007

The Economist Asks: Is Terry Semel the right man to lead Yahoo! against its nimbler rival?

As reported in today's Economist.

JERRY YANG, who co-founded Yahoo! and remains on its board, says that the internet company is in the middle of a “transformation” and that its board members are “all in lockstep” behind Terry Semel, the chairman and chief executive. Meg Whitman, the boss of eBay, a Silicon Valley neighbour as well as an advertising partner to Yahoo!, says that Mr Semel has done “a spectacular job” and is “well loved at Yahoo!”. Clearly, Mr Semel has a lot of impressive supporters.

He may need them now. Mr Semel became Yahoo!'s boss six years ago this month, after a long and distinguished career in Hollywood, where he ably led Warner Brothers, a film studio. He had a good start at Yahoo!, turning losses into profits, although some of the credit for this was down to timing: he arrived during the trough of the dotcom bust, when the online advertising market was just about to recover. Of late, however, Mr Semel has been taken aback by the astonishing rise of Google, which today dominates the market for web-search and keyword-related advertising, having left Yahoo! far behind. His fate at Yahoo! now depends on whether it can catch up with its more agile rival.

Increasingly the view on Wall Street is that Yahoo! by itself cannot catch Google, so it must either merge with a compatible partner—eBay has been mentioned—or, more likely, sell itself for the highest possible price to Microsoft, a software giant that has fallen even further behind Google in its web business. Yahoo! and Microsoft have been talking, off and on, since last year.
This union of two also-rans against the winner has a clear logic. Microsoft once licensed Yahoo!'s search and advertising technologies (Inktomi and Overture, respectively) before building its own, so the technical integration ought to be feasible. Both Microsoft and Yahoo! have far more users than Google does in services such as web-mail and instant-messaging, and together would be formidable. However, melding the two firms and their cultures would distract the new company for at least a year, during which Google might speed ahead even further.

For Mr Semel, who is 64, a sale might also hold the appeal of a graceful exit. It would be a rueful one, however. Back in 2002 Mr Semel considered buying Google, which was just then rising out of obscurity, but balked at a price in the single billions (Google's stockmarket value today is $145 billion, about 3.5 times that of Yahoo!'s). Having belatedly grasped the money-making potential of web-search, Mr Semel then bought Inktomi, another search engine, and in 2003 he bought Overture, the pioneer of paid-search advertising.

But Inktomi and Overture languished ignominiously inside Yahoo!, which Mr Semel was simultaneously trying to turn into a new sort of media company. With much fanfare, Mr Semel even opened a Hollywood branch—in Los Angeles under Lloyd Braun, an old-media star—to produce content. This turned out to be a misreading of industry trends, so Mr Semel soon switched the emphasis towards “user-generated content” and, during a corporate reshuffle this winter, closed his Hollywood branch and bade farewell to the hapless Mr Braun.

During all this, Google was outmanoeuvring him not just technologically but also strategically. Mr Semel was at one point talking to his old-media friends at Time Warner about buying AOL, its web portal and a natural fit. But Google swooped in and took a defensive equity stake. Mr Semel was interested in YouTube, a video site built on user-generated content, but Google bought it instead. He wanted a social-networking site, but couldn't capture Facebook and lost an advertising deal with MySpace to Google. He wanted to buy DoubleClick, a firm that specialises in online display advertising, where Yahoo! is the leader, but Google again pre-empted him. So Mr Semel has had to content himself with consolation prizes. Last month he bought Right Media, a display-advertising firm far smaller than DoubleClick. In search advertising, Yahoo!'s weakest area, he has launched Panama, a new system for placing text advertisements that appears to be as good as Google's in drawing mouse clicks and thus money, and which is Yahoo!'s greatest hope.

The odd man out?

The question for Yahoo!'s shareholders, and thus its board, must be: is that enough? “First you have to get to parity before you leapfrog,” says Ms Whitman, in defence of Panama as well as Mr Semel. (A leapfrog may seem unlikely, given Google's reputation as an innovator, but its diversification into so many fields beyond web-searching might yet cause it to stumble.)

The view among the engineers of Silicon Valley is different from Ms Whitman's. They see Mr Semel as the odd man out in their industry. Google is led by esteemed computer scientists: its founders, Sergey Brin and Larry Page, and chief executive, Eric Schmidt. Microsoft has Bill Gates as chairman and Ray Ozzie, a titan of engineering, as software architect. Mr Semel, by contrast, was a Hollywood dealmaker who did not use e-mail before his arrival at Yahoo! in 2001. He has learnt a great deal about technology since then, of course, but an online-advertising entrepreneur, who deals with all three firms, says that Mr Semel still does not know enough “to go deep with the innovators”.

Instead Mr Semel, charming and funny in private, increasingly resorts in public to pre-cooked, vague grandiloquence laden with the jargon of “Web 2.0”. The founder of another online-advertising company, who counts Yahoo! as his biggest customer, even compares him to Chance, the character played by Peter Sellers in the 1979 film “Being There”. Chance is a gentle gardener whom fate thrusts into the high society of Washington, DC, where he is mistaken for a profound genius as he regurgitates gardening phrases that he has heard on television (“In the garden, growth has its seasons”). In Chance's case, however, the doubters kept quiet. Mr Semel's critics are getting noisier.

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Saturday, May 05, 2007

An Open Letter to SEC Chairman Christopher Cox on the Importance of Proxy Access

Via Email

May 5, 2007

The Honorable Christopher Cox
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C.

Dear Chairman Cox:

I have been following, with great interest, the discussion and debate inside and beyond the Commission on the subject of whether shareholders should be granted more access to company proxies to, for example, run for election to the board of directors.

I know that you and the other Commissioners will be discussing this issue intensely over the coming months.

I wanted to provide you with my story of how I've tried as a 34-year old individual investor (holding only 45 shares) in Yahoo!, for the last 5 months, to band together support of like-minded individuals (and institutions) via the Internet, my blog, a wiki, online polling, and YouTube videos, who wish to effect change at the company.

As of today, I have the support of approximately 75 other individuals who collectively own 2 million Yahoo! shares, worth $64 million (or about 0.2% of the total shares outstanding).

As you will see below from a recent article I published in Seeking Alpha, I nominated myself to the Yahoo! board last February. Despite many people telling me to give up on the idea of running for the board, as it would cost about $200,000 to run my own proxy contest, I had an individual who was part of my group willing to pay this cost. Recently, I was instructed that I couldn't run for the board leading up to Yahoo!'s annual meeting in June, because, although I was a shareholder on the date I nominated myself (well in advance of their requirements, according to their current corporate by-laws), I wasn't a "shareholder of record." Apparently, because my online broker had not at the time of my self-nomination yet informed the company's transfer agent that Eric Jackson owned 45 shares, I couldn't run for their board.

Life is full of technicalities. Of course, I'm disappointed. However, we need to focus on the bigger picture and I believe this story demonstrates the importance of the work you and the other Commissioners are doing in seeking to find a way to allow forthright and well-meaning shareholders to have a more meaningful voice to all shareholders through the company proxy.

The "Plan B" for Yahoo! that my group submitted to the company for consideration (which was essentially the platform I was running on for election to Yahoo!'s board) was not devised purely by me. It was edited greatly through the use of a wiki and online polling. Only after it was improved, by the democratic input of other shareholders, did we see the tremendous support from others. If our ideas didn't have credibility, no one would have supported us and "pledged" their shares.

The critics of open proxy access say that special interest groups will high-jack the agendas of corporate management. We say: let the best ideas circulate and rise to the top. There will be no support for ideas that have no merit. Knowing that shareholders can raise their voice when necessary will be a great motivator for management to do a better job before the fact, rather than afterwards.

I hope you find this "case study" of interest.

Please let me know if I can be of any further assistance to the Commission as you deliberate on this very important topic. I also hope that I'll be able to follow your rules in the 2008 proxy season.


Eric Jackson, Ph.D.
President & CEO
Jackson Leadership Systems, Inc.

With a link to:

Sphere: Related Content News and Interview: Blogger activist will run for Yahoo! board

This article came out last week in Unfortunately, I won't be running for a seat on Yahoo!'s board this year, but the "withhold" campaign as a lever for change is still alive and well.

The interview that supplements the article is available here for download; the interview starts at the 2:00 minute mark.

OUT-LAW News, 03/05/2007

The activist shareholder spearheading an online campaign against Yahoo!'s management will seek a seat on its board in June. Eric Jackson says wealthy supporters will cover the $200,000 cost of the campaign.

"I have nominated myself for a spot on the board and the annual meeting is on June 12th," said Jackson, who is behind a shoestring campaign which uses blogs and YouTube videos to attempt to unseat chief executive Terry Semel. "Between now and then to get elected I need to run a proxy contest, and that costs a lot of money."

Jackson owns just 45 Yahoo! shares, currently around $1,200-worth, but is running an online campaign to motivate other disaffected shareholders to back his 'plan B' for Yahoo!, which involves firing Semel and finding a way to claw back market share from Google.

Jackson said that he has requested meetings with management, and that he will run for a seat on the board of the company in June, which he says will be a costly exercise.

"The estimates are usually in the area of $200,000," he told OUT-LAW Radio, the weekly technology law podcast. "It's pricey, but in our shareholder group we're fortunate that some of the members are well heeled and are interested in pursuing that."

Jackson's is the kind of plan usually put in place by more traditional activist shareholders, who target a company and buy stock, and therefore control. But Jackson is trying to do it without spending billions of dollars on shares.

"I don't have a $6 billion hedge fund so I thought how can I get the same impact as that?" he said. "I thought, well I have my blog, I sat down in January and recorded a YouTube video of myself making a call to action for Yahoo! shareholders."

Jackson uses the currently fashionable tools associated with the so-called web 2.0 phenomenon to exert an influence out of proportion to his shareholding, gathering supporters to his cause at almost no cost.

"It was a combination of my own blog, where people could leave comments and make suggestions, the use of YouTube videos, where I would give periodic updates and the third major web tool that was used was a wiki for the actual plan B itself," said Jackson.

His efforts have met with surprising success. He now has almost 200 million shares pledged to his cause by proxy, which is $55 million-worth of stock accounting for 0.2% of the company. Traditional activist shareholders often change the direction of a company with as little as 0.5% of a firm.

Jackson, a business advisor in his day job, said that his new plan for Yahoo! centres on replacing Semel as chief executive. "We're advocating nine steps. We think the company could benefit from a new leader," he said. "We think the company should look to replace seven of the 10 directors. There appears to be a certain amount of drift at Yahoo! and a lack of coherent explanation as to what's next for this company."

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Friday, May 04, 2007

Check out my Slide Show!

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Foreshadowing Microsoft and Yahoo! Deal

This morning, the news is all about Microsoft and Yahoo! merging their operations. Is it a good thing for Yahoo! shareholders that the stock got a 18% bump on the news? Of course. This more than makes up for the shrinkage in value which happened following the disappointing Q1 numbers.

Will it happen? I think it's more than likely. It's almost out of a Hollywood script, riding off into the sunset in Redmond. Fin.

Will it make Yahoo! or MSN any more competitive with Google? Not clear.

Henry Blodget is correct that an immediate spin-off of the MSN-Yahoo! would be critical to employee retention. Otherwise, it could be quite a poor deal for Microsoft.

I can't help but wonder if Yahoo!'s path could have been a different one than this ending. Yet, it seems that this fate has been in the cards for some time. See below for a blast from the past.

The following is an excerpt from a February 7th post called "What's the Strategy Inside Yahoo!?":

Time Magazine's Jeremy Caplan (and Jeff Ressner) recently profiled the latest news on Yahoo! with the full article here.

For it, Yahoo! was complicit in allowing Timothy Archibald access for some artistic signs within the Yahoo! campus (of the basketball court and sign directing the Yahooligans to the cafeteria). It's clear that there are other points Yahoo! wanted to get across in the article.

What I find discouraging as a Yahoo! shareholder are intimations in the article that Yahoo! could join forces/be bought later this year with Microsoft, AOL, or Bertelsmann. This possibility is attributed to "analysts," including blogger and commentator Paul Kedrosky and is reiterated later in the full article, and not directly to Yahoo! management. Yet, it doesn't seem to be an accident that it's there.

Of course, there's nothing wrong with increased shareholder value and one way for this to happen would be for one of these companies (or any other) to come in and pay a 40% premium to take over the company. Since proposing a "Plan B" for Yahoo! a month ago, my primary goal was to raise shareholder value for all Yahoo! shareholders.


I do have a big problem with the fact that Yahoo! ... has failed to articulate a clear strategy about how the company will be dominant for years to come independently. Better monetizing search is not a company strategy, it's a tactic. Improving a lead in graphical ads is not a strategy, it's a tactic. Doing lots of ankle-biter acquisitions is not a strategy.... Getting snapped up by Microsoft and assimilated into MSN is not a strategy.

I would like to hear one. Jeff Weiner has proudly stated that Yahoo! now has a mission: "Connecting people with their passions, communities and the world's knowledge." Stewart Butterfield has given this his seal of approval, because "A year and a half ago there wasn't a satisfying articulation of what the mission of the company was." I'm still waiting for the articulation for the strategy. The company, investors, and employees need one and deserve one.

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Wednesday, May 02, 2007

Why I Can't Run for Election to Yahoo!'s Board of Directors

Since January of this year, I've been formally advocating for changes at Yahoo! - the Internet titan, which has gone through a difficult last 2.5 years when comparing its performance to Google, its closest and most direct competitor.

Since August 6th, 2004, through today, Google's stock has increased 333%, while Yahoo!'s has decreased by 8.4% and the NASDAQ has climbed 35%. In other words, $10,000 invested in Google's aftermarket IPO price would be worth $33,300 today. That same $10,000 invested in Yahoo! at that time would be worth $9,160 today. That's a 3.6x differential.

I became a shareholder of Yahoo! at the beginning of this year -- purchasing 45 shares, which I still own. On January 7th, I began to advocate for change at Yahoo!, issuing a "draft" Plan B via a YouTube video and a blog posting and asking for others who shared my sentiments to help refine and improve the alternative plan, in order to take it to the company.

The response was immediate and strong. Several current and former Yahoo! employees, long-standing shareholders (including an actual widow - no orphans, though, to my knowledge), and even a former castmate of the Apprentice LA joined the campaign. Press coverage was strong too. There was an novelty aspect to it. "Web Warrior Takes on Yahoo" was one headline.

Pledges of Yahoo! shares immediately started to pour in via the blog (in the comments section) as well as suggestions for improving the plan. To help keep this collective shareholder action better organized, the folks from YouChoose.Net helped create a form to track the various pledges of shares and Wikia helped create a Yahoo! wiki, where our supporters could actually go and directly edit the "Plan B."

I had no idea this would happen when I sat down in my guest-room on a Sunday morning in January to record my first video. However, it did strike me that, with the power of blogs and social networking (the tools that Yahoo! itself promotes to draw groups of users together for their collective benefit and Yahoo!'s), which had worked it the political realm, perhaps now was the time for shareholders to be able to band together and help influence the direction of a public company for the betterment of all its shareholders.

Within a few weeks, we were up to a total number of pledged Yahoo! shares of 1 million. Today, we are just shy of 2 million Yahoo! shares - worth approximately $55 million.

On February 22nd, we finalized our "Plan B" and formally submitted it to Yahoo!'s Corporate Secretary. We asked to bring forward the nine points of our "Plan B" as business at the 2007 Yahoo! annual meeting. All nine points, we believe, if implemented, will create significant additional value for Yahoo! shareholders.

We couldn't include it as a formal stockholder proposal, as the submission date (set by Yahoo!) was back in December 2006. We also put forward my name as a nominee for the Yahoo! board -- also to be voted on at the 2007 annual meeting. There were certain requirements, as set forth in Yahoo!'s corporate by-laws, that anyone must meet, in order to be nominated to the board. We believed we fulfilled all of them, including (of course) being a stockholder at the time of nomination.

I regret to say that I have been informed that our reading of the requirements to stand for election as a director for Yahoo! was apparently not accurate. It isn't sufficient to be a stockholder in the company to run for election to the board, you need to be a stockholder of record. That is to say, that Yahoo!'s master list of stockholders needs to have a record of you as a stockholder before you nominate yourself to its board. Not enough time had passed for E*Trade to inform Yahoo!'s transfer agent that Eric Jackson now possessed 45 Yahoo! shares.

To say I'm disappointed is an understatement. I believe that Yahoo!, despite its problems over the past years, has an incredible collection of assets and a bright future -- if it acts swiftly and wisely in the coming 6 - 12 months. If it drifts, acting swiftly and wisely 18 months from now will be too late. A fresh perspective to the Yahoo! board of only one person, but someone representing a sizable group of shareholders, would signal to all Yahoo! shareholders that their voices are being heard around the board table.

However, for those of you who support a "Plan B" for Yahoo! and would like your voices to be heard by Yahoo!'s board and management, your support now is more important than ever. On June 12th, Yahoo! will hold its annual meeting in Santa Clara. The company proxy was released earlier this week. There are 2 ways you can make your voice known - in support of "Plan B" - at that meeting.

(1) Our group is entitled -- just as any other shareholder is -- to speak up at the Q&A session preceding the formal meeting. Continuing to pledge your shares to our plan will give us a greater collective stake when we stand up to make our points.

(2) Every Yahoo! shareholder can vote "for" the 10 directors on the company's slate of directors or they can "withhold" votes for any or all directors. Because Yahoo! has moved from plurality to majority vote counting this year (for which they deserve kudos), any Yahoo! director receiving less than 50% of shareholder votes will be required to immediately leave the board. In recent years, there have been a number of high-profile companies receiving high "withhold" votes. In all these cases, the results were symbolic -- not requiring the company to take action. This could be one of the first examples in a post-Enron world where a company actually sees one or more of its directors voted down by majority vote.

Therefore, my fellow Yahoo! shareholders, I ask you to continue to support a "Plan B" for Yahoo! and read your Yahoo! proxy wisely. We live in a shareholder democracy, after all. Every vote counts. If you don't believe in Yahoo!, please sell your shares. Many did over the past two weeks following the Q1 earnings call. Those of you who didn't sell obviously still believe in the company.

If you want to help influence Yahoo!, for the benefit of all shareholders, but don't just want to sign a blank check for the Yahoo!'s current board and management based on the last 2.5 years, support "Plan B" and withhold your votes for some of Yahoo!'s directors.

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