Sue Decker's Next Move

Remember Sue Decker? She was formerly the next CEO of Yahoo! (YHOO). That was until a tough 18 months following Terry Semel's abrupt departure after shareholders voted against his re-election in large numbers at the 2007 annual meeting.

Decker came to Yahoo! from DLJ, as the Internet analyst who used to throw tough questions at Tim Koogle and Jerry Yang. She took over as CFO and, by all accounts, did a great job in that role.

When she got promoted to president, the problems started. She's very bright, but seemed to not grasp the technology as well as she might have and didn't manage the business as well as was required. She left under a cloud a few months ago when Carol Bartz was given the top job.

She's taken on a number of directorships over the years: Intel (INTC), Costco (COST) and Berkshire Hathaway (BRK-A). She'll be in Omaha this weekend for that annual fiesta. She got on to the Berkshire board, after serving with Charlie Munger on the Costco board and getting to know him.

She's serving time in the penalty box now after her Yahoo! experience, but there's no question she'll be back at a firm soon. However, I believe (and stated so after her departure from Yahoo!) that she's more likely to end up in a financial role (or financial firm) next than a tech firm.

I think Berkshire would be a good fit for her -- not to take over for Warren, but for an important senior role. Omaha's a little different from NYC or the Bay Area but I think she would love the opportunity to be part of the Berkshire team and prove to the world how good she is. I expect some kind of announcement in the next six months.

Position: None.

Originally published in RealMoney.com on 5/1/2009 4:39 PM EDT

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Carol Bartz's Version of the Straight Talk Express

Yahoo! (YHOO) held its Q1 earnings call last night with Carol Bartz (in her first call since starting as CEO) and Blake Jorgensen (in his last call as CFO).

It was classic Bartz: direct, under-promising, and a few vulgarities thrown in for good measure -- to show both her exasperation with YHOO's ways of the past and her determination to fix them.

YHOO shareholders should like what they heard. After years of neglect, the company is being retooled, so that the deadwood is removed -- not just in headline reductions (a new 5% in reductions was announced last night), but in being able to speak in specificity about where and why those cuts are being made. It's clear that she has her hands around the problem; something her predecessors never conveyed on these calls.

What I also liked about Bartz was that she's clearly a techie who can also speak to CMOs about advertising spend and their needs. She laid out some of the pluses and minuses of the YHOO engineering organization, but also the earful she's getting from YHOO customers and the general macro environment and how that's affecting where and how dollars are spent. Sue Decker, who was very bright, came from a Wall Street background and never really was able to speak with credibility to an engireering or a marketing audience.

Bartz and the rest of her team have a lot of work to do -- something she went out of her way to reiterate to the analysts last night. But she's on the right track. As I said the other day, the biggest payoff to YHOO shareholders will come at the end of the year after more of Bartz's seeds begin to sprout.

Originally Published in RealMoney.com on 4/22/2009 9:10 AM EDT

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CEOs and Other Execs Should Be Barred from Serving on Outside Boards

Where do current CEOs and even their underlings get the idea that it's a good idea for them to sit on another public company's Board of Directors?

This was a big beef I had with former Yahoo! (YHOO) CFO Sue Decker. Over the last two years of her tenure at Yahoo!, she received two promotions, going from CFO to eventually president (although she always referred to herself as Jerry Yang's "partner," which I assume means she thought of her job as co-CEO). With each promotion, she received increased responsibility and an increased number of direct and indirect reports to oversee.

The pressure on her and the rest of Yahoo!'s board and management to turn around the fortunes of the floundering Internet company remained intense -- yet, the stock collapsed. Through it all, Decker continued to serve on no less than three other public company boards: Costco (COST), Intel (INTC) and Berkshire Hathaway (BRK)). I asked her and Yahoo! Chair Roy Bostock at last August's annual meeting how they justified her spending what I calculated to be an extra 187 hours a year on different outside board and committee meetings (although I didn't factor in travel time to Omaha, Neb., and Issaquah, Wash.). Neither Decker nor Bostock really had an answer.

Bostock said the Yahoo! board was "proud" of Decker's associations with this other board. As a shareholder, I understood how these directorships were a benefit to her personally but didn't see how they were helping Yahoo!'s stock price. Decker left the company a few months ago when Carol Bartz was hired as the new CEO.

I recently was going over Citigroup's (C) board of directors from last year (before the bottom fell out on the company). I was stunned to see that Alcoa's (AA) then-CEO Alain Belda, Xerox's (XRX) CEO Anne Mulcahy and Dow Chemical's (DOW) CEO Andrew Liveris were all taking time out of their busy jobs to hobnob in NYC on that board.

In retrospect, shareholders for all three of these CEOs' companies should have been ringing the alarm bells when they saw this. These three companies' stocks are down 70% on average over the last 12 months. To make matters worse, Mulcahy also serves on the boards of Target (TGT) and Washington Post Company (WPO).

Let's be honest: The only reason these busy CEOs agree to serve on these other boards is vanity; it's not for the knowledge they glean or the social contracts they make. In this post-Sarbanes-Oxley world where directors have to slog through binders of risk disclosures and company updates, it makes no sense for any officer to sit on an outside public company board.

Not only does it hurt their own firms' stock prices, it hurts the stock prices of the companies on whose boards they sit. Did Liveris and Mulcahy really have enough time to go through the full extent of Citigroup's risk exposure last year? The composition of Citi's board is another story entirely.

Originally published in RealMoney.com on 4/20/2009 4:18 PM EDT

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WSJ: Departing Yahoo President Has History of Missteps

From The Wall Street Journal

JANUARY 14, 2009, 10:02 P.M. ET

By JESSICA E. VASCELLARO and JOANN S. LUBLIN

On Monday night, outgoing Yahoo Inc. Chief Executive Jerry Yang delivered some tough news to Yahoo President Susan Decker: The Yahoo board had picked someone else as its new CEO. On Tuesday, Ms. Decker announced her plans to resign from the company whose ranks she scaled rapidly during her nearly nine-year tenure.

Her exit caps more than a year of stumbles, during which Ms. Decker -- a well-regarded finance whiz and strategist -- failed to execute her plans. Among other things, she planned multiple reorganizations and growth strategies to get Yahoo back on track, only to see few of the initiatives bear fruit. She also played a significant role in advising Yahoo's board to reject Microsoft Corp.'s offer to acquire it last year, a move that incited Wall Street's ire.

Carol Bartz, a Silicon Valley veteran who got the CEO job Tuesday, and several other external CEO contenders "happen to be better athletes than Sue," says one person familiar with the matter, who notes Yahoo directors wouldn't have considered outside CEO candidates "if she (Sue) was a great president." But "sometimes, CFOs don't make great presidents."

Ms. Decker's fall from grace is all the more eye-catching because she had once been viewed as a near shoo-in for Yahoo CEO. The onetime Wall Street analyst catapulted from chief financial officer to head of Yahoo's advertiser business to president in 18 months. She had sealed several high-profile deals, including an ad deal with eBay Inc. several years ago and Yahoo's purchase of ad-technology company Right Media Inc. And she had pushed the development of Yahoo's new search-advertising system Panama, which was delayed but is now showing results.

It's unclear where Ms. Decker will go next. "She would like being a CEO but there are other things in life she likes, too," says Warren Buffett, chairman and CEO of Berkshire Hathaway Inc., where Ms. Decker is an outside director. He added that he doesn't plan to hire her into Berkshire because he likes her work as a board member too much.

Many of the challenges that Ms. Decker ran up against at Yahoo -- such as questions over the company's strategic direction and her financial background in a company founded by engineers -- may end up dodging Ms. Bartz as well. One person close to Ms. Decker said her expansive knowledge of Yahoo's business would have made her an excellent CEO if given the chance. Ms. Decker declined interview requests through a spokesman.

Ms. Decker joined Yahoo as its chief financial officer in 2000 following 14 years in equity research for investment bank Donaldson, Lufkin & Jenrette. At Yahoo, she quickly she won over Wall Street with her sharp mind and focus on cash flow. Over the next few years, she sought and was given more management experience.

In mid-2005, Yahoo's then-CEO Terry Semel handed Ms. Decker responsibility for sealing a sweeping ad-sharing agreement with eBay that would move Yahoo into the business of selling ads on other Web sites, not just its own. Ms. Decker pushed a deal through in intimate meetings with Mr. Semel and eBay's then-CEO Meg Whitman, say people familiar with the negotiations.

In December 2006, Mr. Semel rewarded Ms. Decker by tapping her to run one of Yahoo's two major business units, the advertiser and publisher group. Yahoo's then-chief operating officer Dan Rosensweig resigned in the reshuffling. Employees began whispering that the CEO job was Ms. Decker's to lose.

At the same time, however, Yahoo was facing more challenges. Google Inc. continued to expand its share of the online ad world through search ads, stealing Yahoo's thunder in the market. Yahoo's stock price sank. In June 2007, Mr. Semel resigned and Mr. Yang took over the CEO job. Ms. Decker was appointed president.

In her new role, she soon intimidated managers with how quickly she could pick up the nitty-gritty numbers of their business and spot flaws in their financial models without picking up a pencil, say Yahoo employees. She inspired employees with a company-wide presentation about Yahoo's potential in mid-2007, predicting the stock would soar if the company increased traffic a little and pricing a lot, according to people who attended.

But Ms. Decker struggled to turn that theory into practice. In mid-2007, she pushed a new business decision-making framework called RAPID, which stood for "recommend, agree, perform, input and decide." She required managers to fill out grids assigning employees to each letter for decisions ranging from who could veto an ad or set a privacy policy. The ordeal irritated employees, who turned the phrase "Who's the D?" into a company-wide joke.

In late 2007, Ms. Decker stepped back into her comfort zone when Mr. Yang asked her to devise a three-year financial plan to boost the board and investors' confidence. The plan projected Yahoo would grow revenue 25% in both 2009 and 2010, well above analysts' estimates of 13% and 11% growth, respectively.

The exercise took on new urgency after Microsoft made a $45 billion bid for Yahoo last January. Yahoo rejected the bid as too low.

Ms. Decker, Mr. Yang and other Yahoo executives took to the road to defend their three-year plan in March 2008, facing heat from shareholders and analysts who had picked it apart. "The analyst community had a really tough time making sense of the numbers," says Ross Sandler, an analyst with RBC. Employees also questioned the model's assumptions -- including that Yahoo could nearly double its share of the display market, according to people familiar with the plan.

Back in Sunnyvale, Calif., in early 2008, Ms. Decker created two task forces. One was dubbed Judo to review Yahoo's advertiser strategy. The other was called Aikido to review the company's consumer products strategy. The mission was to determine whether Yahoo should think of itself as an advertising or consumer business, according to people familiar with the process. In an initial vote, advertising won, say these people.

But after months of presentations, Ms. Decker concluded the company should stick to its strengths and the consumer lens, while innovating in advertising as well. Some claimed it wasn't decisive enough and that the whole experience was a waste of time.

Around the same time, Ms. Decker embarked on an ambitious corporate reorganization designed to rethink how the company builds products. The plan -- which created different geographic product regions and a central product management group to service them -- broke apart the powerful group that had been previously in charge of running all of Yahoo's consumer products, from Yahoo Finance to Yahoo Mail.

Some executives started to catch wind of the plan in May 2008. At the same time, activist investor Carl Icahn, who had built up a big stake in the company, announced his campaign to replace the Yahoo board.

When Jeff Weiner, Yahoo's executive vice president for consumer products, announced he wanted to leave in June 2008, Ms. Decker was forced to rush out the details. Several other senior executives also resigned. "Change produces change," Ms. Decker said in an interview at the time.

By now, Yahoo's stock price had sunk to around $20 a share, down from around $30 in February, after Microsoft's offer. Yahoo, crippled by a proxy battle, was also facing shareholder lawsuits over its handling of Microsoft's acquisition offer.

At a tense annual shareholders' meeting in August 2008, weeks after Mr. Icahn settled his attempt to topple the board and replace Mr. Yang, Ms. Decker found herself in the hot seat. Investor Eric Jackson, founder of Ironfire Capital, took the microphone and challenged the hours Ms. Decker spent in meetings on three outside boards. How are "these extra 168 hours a year best serving our company?" he asked.

Yahoo's Chairman Roy Bostock piped up to defend Ms. Decker as the hardest-working executive he knew. Ms. Decker said she had learned a lot from all these companies, citing how she had applied supply-chain knowledge from Costco to Yahoo.

In the fall, as the economy collapsed, Ms. Decker's attention turned to more cost-cutting and reshuffling. Mr. Yang began discussing his willingness to step aside with board members, say people familiar with the process. On Nov. 17, Yahoo announced they were commencing a search to replace him.

When Yahoo board members began their search, they brushed aside a hefty list of candidates from recruiting firm Heidrick & Struggles International Inc. for a shortlist of names of executives with experience running public companies. They also considered Ms. Decker as the internal front-runner, according to people familiar with the process.

At a meeting on Dec. 4 at Yahoo's headquarters, board members discussed external candidates and Ms. Decker. Outside contenders then included Ms. Bartz, Arun Sarin, a former chief executive of Vodafone Group PLC who later withdrew from consideration, and Bill Nuti, NCR Corp.'s president and CEO, say people familiar with the matter. An NCR spokesman declined comment Wednesday. Board members focused more on outsiders than Ms. Decker because they already dealt with her regularly, according to one informed person.

Ms. Decker sat for interviews with most of Yahoo's 11-person board, according to people familiar with the matter. She told some people she felt they went well, according to two familiar with the matter, but she wasn't sure where in the board's estimation she sat. On Monday night, she found out.

In a farewell email to employees, Ms. Decker said she did not make the decision to leave "lightly," according to her memo. "I want to congratulate Carol on her new role and put my full support behind her," it read. "I would ask that you all do the same."

Write to Jessica E. Vascellaro at jessica.vascellaro@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

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TheStreet.com: Reasons Behind Yahoo!'s Four-Year Slump

From TheStreet.com

12/22/08 - 10:33 AM EST
YHOO , C , AAPL , HPQ (Cramer's Pick) , GOOG , MSFT

By Eric Jackson

The press has shown little mercy in criticizing Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks) this year. And deservedly so.
The four reasons most often cited for the Internet company's missteps over the last four years have namely been the people at the top:

(1) Terry Semel;
(2) Jerry Yang;
(3) Sue Decker;
and (4) the Board of Directors.

They all received glowing press coverage when Yahoo! was riding the general ad market recovery and shift to digital ads in 2002 to 2004. But now they are being slammed in various business media for their actions, and in some cases inactions, that have since led to stagnation and decline.

It's normal to blame organizational failures on the leaders at the top -- consider Dick Fuld at Lehman Brothers, Vikram Pandit at Citigroup (C Quote - Cramer on C - Stock Picks) or even a market-maker like Bernie Madoff. Group leaders and their choices are, in the end, responsible for group actions and outcomes.

But there are four other reasons to account for Yahoo!'s decline in the past four years: (1) A lack of product leadership; (2) self-isolated leadership; (3) a culture tolerating non-performance; and (4) the use of a matrix organizational structure.

Each of these problems traces back to choices made, consciously or not, by senior leadership. Until Yahoo! recognizes and understands these issues, the company won't be changed. This is why the choice of the company's next CEO is so important.

The right CEO will see these issues clearly from Day One and change them; the wrong CEO will be oblivious to them. Unfortunately for Yahoo! shareholders, the people selecting the next CEO will be the people on the board who've missed the four reasons for the company's recent poor performance of late.

Even though they had moved on to exciting new jobs, they expressed regret about the current state of Yahoo!, especially since they felt that they had gained a lot from their time at Yahoo!. Each person agreed that the company was fixable and that the decision about who will be named as the next CEO was critical. Most were pessimistic that the company would achieve its potential.

Here are their top four reasons for Yahoo!'s decline:

1. Lack of Product Leadership

Google (GOOG Quote - Cramer on GOOG - Stock Picks) had search. Apple (AAPL Quote - Cramer on AAPL - Stock Picks) had the Mac. Yahoo! has always had a collection of multiple products, and that has been a blessing and a curse.

It's a blessing because -- unlike AOL, which had just the dial-up business -- Yahoo! has always had multiple revenue streams that were mutually reinforcing (e.g., home page, Finance, Mail, Search). It's never been a one-trick pony.

But the multiple products are a curse because, from Yahoo!'s founding, the company has had its fingers in a lot of pies, and that has hindered it from developing a corporate focus. Through Bubble 1.0 and Bubble 2.0, the Yahoo! M&A machine was always humming to suck up venture-backed firms at healthy valuations. Integrating them cohesively was a different story and left a string of disparate businesses under the Yahoo! roof.

Several former Yahoo! employees complained about the lack of vision and the lack of product leadership from the top executives to string all the pieces together. Said one, "I always wanted to know 'what's our North Star?'" They felt that there was a lack of focus from the executive team about what Yahoo! did that created value and what it should be moving toward to better create more value.

In their views, the next CEO needs to be great at products. The core of Yahoo! is a great user experience and great products. Discussions about undertaking a search deal with Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks), spinning off Asian assets, and closing the revenue-per-search gap with Google are secondary.

2. Self-Isolated Leadership

Several years ago, I worked with Dartmouth Business School Professor Sydney Finkelstein on building a consulting practice based on the research from his book Why Smart Executives Fail. He researched more than 60 one-time industry-leading companies that in the end drove off a cliff in terms of their performance.

These companies' executive team members always looked great on paper: the best business schools, the perfect career trajectory, many achievements to point to. Yet, these same people were responsible for bringing down their companies. One key reason for this -- common across all the failures -- is that the top executives got rid of or discouraged anyone around them who voiced a different perspective than theirs. This appears to have happened at Yahoo!.

According to those I spoke with, executives often didn't engage in detailed discussions with lower-level managers responsible for areas that were under-performing. "I would have liked to talk to them more," said one ex-Yahoo!. "I had one good conversation with [one Yahoo! executive] and one good one with [another executive] in [the last few years]. That's it. I know others tried to educate them on the issues. Nothing came of it."

There was not enough debate about key decisions made at Yahoo!. The last six months have seen a steady drain of senior talent. One employee contrasted that with how President-elect Barack Obama has selected key members of his Cabinet: "He's put former rivals around him in Clinton and Richardson, who definitely don't agree with him on some issues. You know they're going to speak up. You also could see any of them leading the country if necessary. We definitely don't have that depth of talent on the Yahoo! senior team."

One group that Yahoo! executives were not shy about consulting in the last four years: the consultants. "There were way too many consultants and too many planning sessions. We needed more execution," said a former employee.

3. Tolerating a Non-Performance Culture

It's obvious that every company has a unique culture. No one working there would be able to tell you step-by-step how it was created, and yet they all live and breathe it every day. The best cultures give that company an amazing advantage vs. its peers. The worst cultures hang around the company's neck and are next to impossible to shake.

"When I first started at Yahoo!, people cared. They'd challenge you if they disagreed. That changed," said one ex-employee. Another added, "Transparency about problems or mistakes used to be rewarded. Not anymore. There were some people who made mistakes and ended up getting promoted."

Over time, it appears most employees stopped pushing for the changes they wanted to see. When they tried and it fell on deaf ears, they backed down. "I think a lot of people also knew they wouldn't get similar jobs elsewhere and decided to keep quiet." The tone got set from the top, and it trickled down to permeate the organization.

4. Matrix Organizational Structure

One of the recommendations that Yahoo!'s consultants made a few years ago was to institute a so-called matrix organizational structure across the company. A matrix structure was popular about 10-15 years ago, especially in engineering-oriented companies. It seeks to overcome the complexity of a large global organization by assigning multiple bosses to employees in different geographies working on similar product or functional tasks. In other words, you report up to two or more bosses -- a product or functional boss and a geographical boss.

The intent of a matrix structure is that you understand what your local peers are working on as well as what your functional peers are working on globally. In theory, the company becomes tighter-knit, despite its size.

In practice, matrix organizational structures have greatly fallen out of favor in the last five years because they create confusion about who is responsible for certain actions. The "shared" ownership of tasks and projects across multiple groups and bosses means that it's difficult to go back and assign blame for and learn from failures. Whose throat do you choke? "It was hard to point out who specifically was responsible for mistakes because of that," said one former employee.

Thankfully, this structure has recently been done away with and products have now been centralized. Combined with the risk-averse culture described above, the legacy of this structure has been deadly for Yahoo!.

Yahoo! executives and directors aren't the first "smart" ones to fail. Otherwise, Professor Finkelstein wouldn't have a book full of stories on Enron, Worldcom and Webvan. The solutions for Yahoo! senior executives, based on the lessons in the book, are:

• admitting when you/the company have screwed up and dissecting the underlying reasons for the failure;
• encouraging others to admit their mistakes and learning from the mistakes instead of shooting them or encouraging them to cover up mistakes;
• surrounding yourself with other smart people who often will disagree with you in search of the best answer for the company; and
• demanding accountability from everyone in the company including yourself.

The right new CEO can spearhead this kind of effort for change. Mark Hurd at Hewlett-Packard (HPQ Quote - Cramer on HPQ - Stock Picks) is probably the best example of this type of turnaround. He didn't have to fire the old senior team and board. They got with the program early on and supported it further once they started to see evidence that the ship was turning.

The rest of Yahoo!'s senior team and board will have to buy into a new approach as well, admitting their own past mistakes at the same time. This assumes they pick the right person to serve as Chief Yahoo!, and that remains a big question mark.

At the time of publication, Jackson's fund had no position in YHOO. Jackson owns a small long position personally.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

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TheStreet.com: Activist Investor: Sell Yahoo!

From TheStreet.com

10/13/08 - 11:30 AM EDT

For nearly two years, I've been engaged in an activist campaign to aimed at improving the performance of Yahoo! (YHOO Quote - Cramer on YHOO - Stock Picks). No more. I sold my fund's stake last month. The risk/reward ratio of continuing to hold the stock had become too high.

When I started my activism with Yahoo!, I was attracted to the Internet company's strong brand, which continues to drive impressive traffic to its many popular properties. It's still the No. 2 search engine in the world and it's also No. 1 for email.

Any new Web company has no hope of emulating those numbers. Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks), with its online services division, has been trying to achieve credible numbers in all those areas for the last 12 years -- with little success to show for its efforts.

I believed that with better oversight from a new board and management, Yahoo! could finally capitalize on its many strengths. We've had no significant changes at either level. The company is still muddling ahead with just as many priorities, just as many staff and just as many boxes on the organizational chart. I came to the conclusion that this company is doomed to failure with the current board and leadership.

Leadership matters. It helps companies to pull away from competitors or to catch up. Unfortunately for shareholders, Yahoo! has lacked a strong CEO for seven years now. Its board has continued to approve excessive pay to executive management and themselves. They will always be remembered for turning down $31 and then $34 a share from Microsoft.

When Yahoo! Vice President Brad Garlinghouse penned the infamous Peanut Butter Manifesto in October 2006, there was reason to hope that some new ideas and energy might actually spring up from within Yahoo! to shake some of the scales from this organization's eyes.

Two years later, that letter's call for changes have gone unanswered and the prescriptions are as relevant now as they were then. I suspect the same will be said again two years from now.

Anyone holding a long position in Yahoo! is doing so for the potential value their assets might fetch in a company sale to Microsoft, not for the potential increased value current management might create from extending the current assets. It is likely that some kind of deal with Microsoft will happen. Microsoft continues to be exactly nowhere in terms of search and Web services traction.

Yahoo!'s proposed deal with Google (GOOG Quote - Cramer on GOOG - Stock Picks) appears to have stalled in regulatory approval. Most importantly, Yahoo! is trading at its early-2003 levels -- 59% below its Feb. 12 close after the Microsoft bid earlier this year.

I judged I couldn't continue to hold Yahoo!'s stock based on a strategy of hoping that Steve Ballmer will come back to the negotiating table. As he's bidding against himself, he has no incentive to come back now versus waiting and watching Yahoo!'s stock continue to drop. And, with the frozen credit markets and large media companies having seen their market capitalizations drop 30%-60% in the last month, make no mistake: Microsoft is still going to be the only bidder for Yahoo! in the foreseeable future.

A scary thought for Yahoo! longs is that, as much as Yahoo! has dropped, it could still have further to go. Yahoo! has stubbornly kept a higher price-to-earnings ratio than Google over the last two years, when it would not appear to be warranted. Today, Yahoo!'s forward P/E for 2009 is still 23, vs. 14 for Google, 15 for InterActive Corp (IAC Quote - Cramer on IAC - Stock Picks), 16 for Apple (AAPL Quote - Cramer on AAPL - Stock Picks), and 11 for Research In Motion (RIMM Quote - Cramer on RIMM - Stock Picks). If Yahoo! were to see its forward P/E contract to be in line with Google's, its share price would drop another 40% to $7.50.

Yahoo! bulls will argue that Yahoo! has $2/share in cash and that its Asian assets are worth another $3/share, so a $7.50 price target is too low. However, Yahoo! had the same amount of cash on its balance sheet in 2002, when its stock price hit its post-bubble nadir of $4.87. The current advertising market downturn likely will be longer and deeper than the one we saw in 2000-02. Those Asian assets have certainly dropped 25%-35% in the last month with the rest of the Internet sector.

Lower forward-looking guidance during next week's analysts' call could prompt more dumping of Yahoo! shares.

Nothing will change at Yahoo! until its board is revamped. Chairman Roy Bostock was unapologetic about his handling of the Microsoft negotiations when he spoke at the August shareholders' meeting. Bostock wasn't embarrassed that 33% of shareholders voted against his reelection in 2006. He should be. Over 40% voted against him in 2007 and next year he will likely break the 50% threshold. Bostock should leave now, along with other longtime directors who were hand-picked by Terry Semel and still serve.

Jerry Yang and Sue Decker also need to be replaced. They have carried on Terry Semel's Yahoo! There is little different about the company today vs. two years ago. An outsider needs to come in and clean house. There is still great talent within the company and great assets.

I wish the current Yahoo! longs well, and I suggest they find inspiration from Gordon Crawford of Capital Research Global Investors (now a 10% owner of Yahoo!). Crawford has been absolutely on the mark in his criticisms of the board (and correctly recognized that there was a major vote-counting error that understated the degree of anger aimed at the board at last August's annual meeting).

If you're a long investor in Yahoo! and think you can free-ride off the activist efforts of Crawford (or Carl Icahn), this movie will end in tears. This board will retain power and this company will drift rudderless. Passive investors who keep doing what they've been doing will keep getting what they've been getting from Yahoo!.

At the time of publication, Jackson's fund owns no Yahoo!. Jackson still holds a small long position in Yahoo! in his personal account.

Eric Jackson is founder and president of Ironfire Capital, LLC, and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

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TheDeal.com: Yahoo! still lacking a significant catalyst

[Posted on September 24, 2008 - 10:02 AM]

We're not sure whether this amounts to truly fresh news since people have been writing about it since at least Monday, but the Financial Times is reporting that Yahoo! Inc.'s [YHOO] revamped board has given the go-ahead to negotiate a combination with AOL LLC. At this point, there shouldn't be that much to talk about since the two were reportedly in discussions when Yahoo! was madly searching for alternatives to a deal with Microsoft Corp. [MSFT], or at least looking for some leverage in any Microsoft talks.

If the two sides are talking, the question becomes whether a deal really does anything for Yahoo!, or is just the combination of one large and struggling Internet company with another. At least one analyst thinks the deal would do little for Yahoo!, though it could depend on terms.

Cowen & Co. LLC analyst Jim Friedland says he believes it's possible Time Warner could exchange AOL for a 20% to 40% stake in Yahoo!, but that valuation is likely to be a major hurdle to getting a deal done. In a research note issued earlier this week, Friedland writes that such a deal would give Yahoo! incremental scale, but that a combination of two assets that are experiencing the same secular challenges would not yield material value.

If an AOL deal is not enough to shake Yahoo! out of the doldrums, what could? Eric Jackson, a Yahoo! shareholder who has been openly critical of the company, believes there's one way the company could possibly turn things around.

"The only thing that would do that is for the company to name a new CEO who's not [current CEO] Jerry Yang and not [president] Sue Decker who would look at this thing with a fresh set of eyes," Jackson said in an interview. "I bet the shareholders at Lehman wish they would have had someone with a fresh set of eyes rather than an insider over the past eight months."

Jackson said the only time he's been optimistic about Yahoo! in the past six months was when activist investor Carl Icahn announced he was staging a proxy fight for control of the company's board of directors. But with Icahn unable to garner a majority of seats on the board, Jackson said it will be difficult for him to enact major changes at the company or to get Microsoft back to the bargaining table.

"I'm pretty skeptical whether Icahn and his colleagues are going to push this forward and do anything," he said. "They can't push Microsoft. It's up to Microsoft whether they want to do something, and my guess is that Microsoft is going to wait for Yahoo!'s shares to collapse further and try to get it on the cheap." -- David Shabelman

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News from Yahoo!: Sounds good to this Yahoo! Investor

PaidContent covers the recent Yahoo! management reshuffling. Fewer silos, less bloat, more thinking about what users want? Hey, it sounds like what the doctor ordered to this Yahoo! investor....

Yahoo Interviews: Jeff Weiner, EVP & Scott Moore; SVP: Super Mass vs. Super Niche

By Staci D. Kramer - Tue 04 Dec 2007 11:10 PM PST

For a sense of how important the properties are that make up the newly constituted media group at Yahoo, (NSDQ: YHOO) consider this: more than half of the 137 million uniques visiting Yahoo sites in October—70 million or 51.2 percent—visited at least one of the media sites. (That’s an un-duplicated ComScore (NSDQ: SCOR) number provided by Yahoo PR at my request.) And for a sense of mission consider this: it isn’t enough. That’s why Scott Moore, whose news, sports and finance sites already are the kind of “starting points” demanded by Yahoo’s latest strategy, has been given the entertainment properties as well. Moore reports to
Jeff Weiner, EVP of the Network division, also home of search, the front door experience, communities, e-mail, and more. I spoke with the two separately by phone following the official announcement of the changes. Lots more after the jump…

Timing: Why now? Weiner: “I think it’s very consistent with the timing of Jerry and Sue articulating the company’s strategies and priorities.” One of the three primary objectives now: to be the leading starting point, the place people go to begin their online experience. To achieve that, Yahoo wants as many of its areas as possible to be top starting points; it’s up to Weiner’s team to deliver.

Slimfast and silos: Weiner wanted greater efficiency so the division shed product lines, reducing from 6 to 4, and broke up as many silos as possible. Also a change in approach: “We’ve historically taken more of a product approach, want to take more of a consumer approach.” That means thinking about the network experience across sites and product lines. As for media, “we want to think more holistically ... in the past, we had more silos than we liked.” He added later: “We’re increasing Scott’s span of control. He can now prioritize. ... This is the best way to leverage.” Moore: “The properties in my group are areas Yahoo has to decided to invest in to create an experience for the audience.”

Graphical media model: Trying to figure out how autos and real estate wound up with media while travel, among others, went to search? In Yahoo-speak, the media properties are based on the “graphic media model”—display advertising and increasingly video. Weiner: “It gives us an opportunity to start to create a more unified go-to-market approach in terms of those media assets.” Moore thought he might get travel, too, but it turns out that the bulk of travel’s revenue comes from transactions/listings, not display, so it went to search. Ditto for the marketplace units based on listings.

Thinking big: Moore is in the process of undoing his own ideas about creating and evolving sites, moving from a belief in niche sites like food and tech—which he launched—to the realization that Yahoo needs to think bigger—not smaller. Moore: “We couldn’t just keep launching smaller sites. We couldn’t just keep adding sites like food or tech or that kind of thing indefinitely. We need to chunk things up into larger areas.” Instead, he’s looking at a very small number of categories with high frequency. News, finance, sports, entertainment probably. Lifestyles is the same—lots of subcategories don’t meet the bar. “We have to think about what the audience cares about and work back; we don’t have to build the deepest food site out there.” Think super mass vs. super niche. “We want to win in every category where we compete.” Sometimes that will mean partnerships, sometimes building.

Music: Moore is still coming up to speed on the entertainment properties, including music. He points to the 22 million in traffic it gets, but admits it needs work. As for the possibility of shutting down streaming music because of the change in royalty fees, Moore said: “All that is going to hinge on the negotiations going on right now. ... My guess there is that the industry will work out some form of agreement.”

Video: In the last year Yahoo has cut the number of video players down from 16. “We want to get very quickly to a place where we have a cohesive video strategy about how we play back video across different experiences.”

Media leadership team: Moore: “This is like a merger, not a takeover” so don’t expect a lot of changes. (Should have more clarity on this Wednesday when media holds an all-hands meeting.) After we spoke, Valleywag started pitching a story about Neil Budde, VP-news, leaving. I just heard from Budde and it doesn’t sound like he’s going anywhere other than on the road promoting Yahoo.

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The Beat Goes on for Yahoo!

The response from the Street since Yahoo! pleasantly surprised with an upbeat quarter has been increasingly upbeat with each passing day.

The Microsoft investment in facebook make the Yahoo!'s valuation seem cheap by comparison. (Yahoo! actually surpassed Motorola in market cap a few days ago).

However, late afternoon trading in Yahoo! went stratospheric yesterday as investors considered its stake in Alibaba's upcoming IPO. Let's not forget who got Yahoo! into Alibaba in the first place a few years ago: Jerry Yang.

Sue Decker also looks prescient in buying $1 million in YHOO stock back in August near its low. Hopefully other execs and directors at the company will be emboldened to follow her lead.

It's great as a Yahoo! investor to follow this string of good news for a change. There is still lots of work to do, but congrats to the team.

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TheStreet.com: What Should Yahoo! Do?

Interview with Vishesh Kumar of theStreet.com from Monday...

Yahoo! investor Eric Jackson and Vishesh Kumar vet the company's options ahead of its third-quarter earnings results Tuesday.

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Flipping a Question to Yahoo! Management from Quadra Island, BC

Just in time for next week's Q3 Earnings Call, I wanted to pose a question - as a shareholder - to Jerry Yang, Sue Decker, and Blake Jorgensen. This one comes from the dock on beautiful Quadra Island, BC, at sunrise.

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CNBC: Future of Yahoo!

A Wall Street analyst says the sum of Yahoo's parts may be greater than the whole, with Jim Goldman, CNBC; David Garrity, Dinosaur Securities director of research; and Eric Jackson, Jackson Leadership Systems CEO.

Here's the interview from CNBC earlier this afternoon.

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More Questions on "Sale" of Overture Japan KK to Yahoo! Japan

Last week, I published a post (in response to a suggestion from a Yahoo! "Plan B" supporter) focusing on the recent sale of Overture Japan KK by Yahoo! to Yahoo! Japan. I complained that the sale price of just over $13 million was way too low for a company that did $395 million last year.

I was contacted by Yahoo!'s Investor Relations (IR) team the next day. I signed an earlier NDA with Yahoo! (due to previous discussions I've had with them this year) which prevents me from disclosing information they reveal to me which isn't public. Therefore, I want to respect that, but I did speak with them yesterday and had an opportunity to further press my case that they share more information to shareholders. They attempted to better explain the deal to me. Obviously, they believe this is a good deal for shareholders and they made their case for it. However, I -- and shareholders -- need more information from the company before coming to a conclusion.

So I call upon Yahoo! to share more information on this deal publicly -- even before the Q3 earnings call -- so that all shareholders can review it. The way this transaction has happened -- with only a release to date from Yahoo! Japan and no public comment from Yahoo! since then -- creates questions in the minds of shareholders that Yahoo! shouldn't allow to linger.

There was nothing in Yahoo!'s last 10-Q on the Overture Japan sale because the deal hadn't closed yet. The only public comments to date on this subject came from Blake Jorgensen during the last earning call. Here is a summary of those comments:

Let me spend a moment on our pending deal with Yahoo! Japan. We've been working towards transferring ownership of the sales operations of Overture KK in Japan to Yahoo! Japan. We're excited about this transaction because it should allow us better alignment of search and display advertising sales in Japan, making the business more competitive and essentially securing a favorable and very long-term revenue stream to Yahoo!.

The terms are not yet final, but once the deal closes, you will see several changes in our financial statements. We will no longer pay TAC to Yahoo! Japan and they will instead pay us a service fee, which we expect will be included in our marketing services revenue. As a result of the transaction, our GAAP revenue is expected to be between $200 million and $250 million lower in the back half of 2007 and TAC will come down commensurately.

Revenue ex-TAC will decrease modestly under the new structure as the new service fees will largely offset the lost affiliate revenue. The impact to operating cash flow is expected to be broadly neutral near term, but accretive for both companies long term, versus our prior arrangement. The transaction is structured to deliver value through a long-term service fee arrangement with only a very nominal upfront payment to us.

So, given only these details of the transaction (which are here), my questions as a Yahoo! shareholder to Blake are as follows:

• Why did Yahoo! do this deal in the first place? How are Yahoo! shareholders better off today versus prior to August 31st (when the deal was announced)? Better "alignment" sounds great, but why can't you get people aligned when they work in very close proximity in the same Tokyo neighborhood? Yahoo! Japan office is in Roppongi Hills Mori Tower, 10-1, Roppongi 6-chome, Minato-ku, Tokyo and Overture Japan's office is in 4-3-1, Toranomon, Minato-ku, Tokyo (in other words, the same Minato neighborhood). Beyond alignment, and given that Yahoo! received the "very nominal" $13 million for Overture Japan and that Yahoo!'s go-forward "revenue ex-TAC will decrease under this new structure," why do this deal? How are Yahoo! shareholders better off?
• Was Yahoo! at Risk of Losing the Paid Search Business for Yahoo! Japan? The only reason I can imagine for doing this deal from the Yahoo! perspective is the risk that they might lose the "favorable and very long-term" business from Yahoo! Japan. However, if that's true, how could Yahoo! have let itself get into that position in the first place? It seems inconceivable that Yahoo! -- when it was first negotiating an agreement with Softbank 10 years ago to set up Yahoo! Japan -- would allow Softbank (or Yahoo! Japan) to turf out Yahoo! in the future in favor of using a competitor for some services. In Yahoo!'s defense, the company didn't compete with Google 10 years ago and didn't have any idea that paid search would be as big an area as it is. Perhaps it is possible that Yahoo! Japan had this "out card" and decided to play hardball with Yahoo! If this is true, it raises questions about how Overture Japan's relationship was set up in the first place with Yahoo! Japan after Yahoo! acquired Overture in 2003.
• Is there a difference between "transferring ownership of the sales operation of Overture Japan KK to Yahoo! Japan" and selling Overture Japan KK to Yahoo! Japan for US$13 million? Blake's language specifically doesn't state that this is a sale. However, if Yahoo! has transferred ownership of the sales operation to Yahoo! Japan, what's left of Overture Japan KK? Isn't this a de facto sale? If it is a sale, how does Yahoo! justify this "very nominal" sales price of $13 million for a $395 million a year business?
• How does this deal in and of itself create more cash-flow for Yahoo! and Yahoo! Japan in the long-term? The language above from Blake implies that Yahoo!'s near-term revenue ex-TAC will take a hit, although cash flow will be "broadly neutral." Yet, both companies are supposed to see the deal be long-term accretive for cash flow. This deal appears to be about moving around how revenue, costs, and marketing service fees are reported from an accounting perspective, but I haven't yet seen such a deal between two JV partners which in and of itself made more money (or cash flow) to be shared between the partners than what existed before the deal. If this is the case here, how does the deal create more cash flow for both long-term?
• How are Revenue and TAC calculated between Yahoo! and Yahoo! Japan? As of March 31st, 2007, Yahoo! Japan had a trailing 6 months of revenue of $945 million (or about $1.9 billion annualized). Yahoo! recognizes 34% of this revenue itself on a trailing basis (as per its ownership stake in Yahoo! Japan) -- or $642 million of the annualized amount. That's roughly 10% of Yahoo!'s overall annual revenues. Yahoo! Japan reports TAC of about 28% of its revenues of $529 million of the earlier annualized amount. More light needs to be shed on how these two companies calculate revenues and costs both ways through their JV and what is changing under this new agreement. Blake's comments suggest that Yahoo!'s revenues ex-TAC will decrease from this deal, but that Yahoo! Japan will increase its service fees to Yahoo! He also says that affiliate revenue to Yahoo! will decrease. Can we get some more details on how all of this will actually play out? Is Yahoo! Japan -- in addition to sharing 34% of its revenues with Yahoo! -- also paying Yahoo! a fee for use of Overture Japan, which is additional revenue to Yahoo!? If so, how significant is this to Yahoo!? Is this the revenue that will now become the "service fee" under this new agreement reported as "marketing services revenue" by Yahoo!? Until we really understand what is happening under the terms of the deal, it's difficult for a Yahoo! shareholder to judge the benefits or negatives of the deal.

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Yahoo! and Motorola "Plan B" Investment Update

Back in January, I began a campaign against Yahoo!'s current management team and board. I was unhappy with the current direction of the company under then-CEO Terry Semel. With the help of input from many Yahoo! investors, we finalized a "Plan B" for the company, which was sent to General Counsel, Mike Callahan, in February. We met with the company in April, ran an "against" vote campaign directed at 7 of 10 directors leading up to the annual meeting in June (at which we spoke out against more aggressive changes at the company), and have continued to communicate our points to management.

Here is a quick update of the points in the plan and what has happened over the last 9 months. We are not "claiming credit" for these changes. The press has well-documented our involvement on behalf of shareholders earlier in the year. We are simply updating supporters on what we asked for and what has happened since (and we are not including our original arguments supporting each point, but refer here if interested):

1.Terry Semel should be immediately replaced as Yahoo!’s Chairman and CEO

• Positive Result: Semel resigned on 6/18 six days after the Annual Meeting at which 35% of votes went against 3 of the directors and each other additional director received considerable "against" votes. These were historically high "against" votes laid at the feet at all directors. Yahoo! still hasn't really responded to this, except with Semel's departure. They also dragged their feet on releasing the data to shareholders until one of the last days possible by law, as part of their 10-Q, instead of making the data available within a day of the vote (because of most certainly the firestorm it would have caused in the press and with shareholders).

2. Terry Semel, Robert Kotick, Roy Bostock, Ron Burkle, Eric Hippeau, Arthur Kern and Gary Wilson should be immediately replaced on Yahoo!’s Board of Directors

• No change: All still on board; one new director (Maggie Wilderotter) added on 7/27 -- and one our group supports. The company appears to believe that Semel's move upstairs to Chair alone is sufficient to placate shareholder ire expressed in the June 12th vote.

3. Shutter the (original content aspects of) Yahoo! Media Group and campus in Los Angeles

• Positive Result: Rumors (according to TechCrunch and PaidContent) of internally announced shutting down of “premium services” in favor of free services and cutting jobs in Los Angeles on 9/27; a step in the right direction but not as aggressive as we would have liked.

4. Make additional R&D Investments in the Technology Group

• Positive Result: David Filo (co-founder) now at least acting CTO; hopefully, Filo's continued involvement will ensure this group gets adequate investment moving forward.

5. Reduce overlapping internal divisions within the Company

• Positive Results: Killed Webjay, Yahoo! Auctions and combined Yahoo! Photos with Flickr in May; Killed Yahoo! Bill Pay on 7/6; Killed Yahoo! Podcasts on 9/26

6. Institute a “pay-for-performance” plan for all Yahoo! Management

• Positive Result: No policy change but Sue Decker bought $1 million in stock on 8/4 and 8/5. Would be nice if she and others on the management team and board would buy even more (or some, in some cases).

7. Step up the pace of the $3 billion stock repurchase plan announced in October 2006

• Positive Result: Company announced that it had done this on Q107 Analysts Call (4/17)

8. Begin a modest cash dividend immediately

• No change

9. Remove anti-takeover provisions which are not shareholder-friendly

• No change

We stand by our original plan and call on the company to continue to take steps that are in line with the points laid out above.

So: have we made any money on our investment? Yes, but we've lagged the market.

As of today, our group consists of about 100 supporters owning 2.1 million shares worth $55 million. Yahoo! has returned 6.81% (or 9.24% on an IRR-basis) since I took my position on 1/5/07 compared to 9.61% for the S&P 500. (Other supporters of our "Plan B" obviously have their own entry points for their YHOO investment.) Not great -- however, it's staged a significant comback in the last 6 weeks, amidst a general sense that expectations are so low that it has nowhere to go but up.

The best news I've heard since being a YHOO shareholder came out of last Friday's town hall meeting (as reported by Kara Swisher). No more Tom Cruise visits on First Avenue. This time Steve Jobs was brought in by Jerry Yang. I could care less about the motivational speaker du jour though (although can you think of a better choice for this company at this time?); I was much more relieved to hear that there appears to actually be hope and even belief from company employees that they can succeed.

I still have several criticisms with the management team and board of this company -- which I won't be shy to air, as I did last week -- but I wouldn't be a shareholder in the company if they didn't have a huge upside. But Kara's review offers shareholders a glimmer of hope that the company's leadership and employees are starting to see that Yahoo!'s destiny is in their hands -- instead of thinking that things will come around of their own accord to put the company back on top.

We said we are long-term holders of stock in the company and we still believe that.

Our Motorola "Plan B" campaign -- launched on July 9th -- has been more successful than Yahoo! in some ways and less so in others.

Today, we have 132 supporters owning 600,000 shares in MOT worth just under $12 million. After putting together a good last week of trading sessions (based on analyst upgrades of the industry and Samsung shortages predicting increased demand for Motorola's products), our MOT investment has returned 5.22% since July 9th (or an IRR of 22.44%) compared to 0.95% for the S&P 500 over that same time period.

That's the good news.

Unfortunately, Douglas Warner III and Motorola's other independent directors have refused to meet with our group to discuss our "Plan B" for Motorola. As a result, much of the plan remains unfulfilled.

Here is a recap of what we asked for and what they've done (or haven't done):

1. Ed Zander Must Leave Immediately as CEO and Chairman

• No Change

2. Replace Judy Lewent, Nicolas Negroponte, Samuel Scott III, and Dr. John White on the Motorola Board of Directors

• No Change; in fact, they added 2 new directors on 7/25

3. Appoint Edward Lampert to the Motorola Board and others with Deep Communications Experience

• No Change

4.Reduce the Size of and Insiders on the Board

• No Change: In fact, they added a new insider to the Board (President and COO Greg Brown) and one outsider on 7/25; the board now has a bureaucratic 14 members.

5. Outline Motorola’s Strategy and How You Will Add Exciting New Products

• No Change, although new Mobile Devices head, Stu Reed, tells us to wait for "wave upon wave of new announcements"... we're waiting.

6. Appoint a Permanent Head of the Mobile Devices Business

• Positive Result: Stu Reed appointed on 7/11, 2 days after the draft “Plan B” first appeared.

7.Give Motorola’s Culture an Inspirational Transfusion

• No Change

On Friday, they announced the sale of their embedded computing group to Emerson for about half of its revenues from last year. It was a continued focusing of the company on its Mobile Devices Business.

Today, Nokia went to Motorola's backyard to make its largest acquisition ever of Navtaq, where, with delicious irony, Ed Zander's predecessor - Chris Galvin -- is now Chair after leaving Schaumburg. Since Galvin joined the Navteq board on Oct. 22, 2004 through today, Navteq has returned 101% to its shareholders, while Motorola has returned 1.89%. Navteq's $8.1 billion valuation is now one-fifth of Motorola's -- not bad for a company which did less than $400 million in revenues in 2004.

The Navteq deal underscores how Nokia is consciously choosing to believe industry supremacy will be fought in the future in (high-margin) software and services. Until recently, Motorola didn't have a lead software architect for the company - so, clearly, it's playing catch-up in this arena.

Stu Reed was unimpressive in his debut at last month's Financial Analysts' Meeting in New York, promising fixes to problems created under the watchful eye of CEO, Ed Zander, and COO, Greg Brown (as well as the board, of course) without any details on how.

So, the bottom line is that Motorola hasn't yet taken the steps within its control to best position the company for future growth and to ensure it will not repeat the mistakes of the past. Put another way, there is still lots of opportunity to turn this company around. But it will need to make some tough decisions -- not just cut R&D spending, cut jobs and wait for an industry rebound to pick it back up, which -- along with "Seamless Mobility" -- appears to be the strategy.

In a few weeks (although the date hasn't been released by the company yet), we'll see how things are going for Motorola in its turnaround when it discusses its Q3.

We will be watching and continue to hope this board will be open to listening to thoughts and views from its shareholders. Onwards, "Plan B."

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The Deal: Yahoo!

From September 19, 2007 Dealscape from the Deal:

Yahoo! Inc.'s M&A machine may be humming away, but is a spate of smaller deals enough to appease investors? The company announced a $350 million deal for e-mail software company Zimbra Inc. Sept. 17, days after a $5 million deal for news aggregation site Buzztracker, which came shortly after a $300 million deal for behavioral advertising technology firm BlueLithium Inc. In June, Yahoo! grabbed college sports site Rivals.com for $100 million.

The acquisition spree comes at a critical time for Yahoo!, with co-founder Jerry Yang back at its helm since the June departure of Terry Semel and under fire to boost its financial outlook. Trouble is, investors are restive, and some have argued larger deals could foretell growth, as
The Deal's David Shabelman writes:

Yahoo!'s shares have risen of late on rumors of a potential buyout of the company by, among others, online auction giant eBay Inc. of San Jose, Calif., or Microsoft Corp. of Redmond, Wash., although no acquisition appears imminent. Yahoo!'s stock price rose last week after an analyst at Bear, Stearns & Co. named the company a "top pick" for the next 12 to 16 months. "Yahoo! will continue to be a takeover target for the next few years, and that will be the leading driver in the stock rather than any operating results," Karbasfrooshan predicted.

Rewind to June. After drawing shareholder fire for his generous compensation package and the company's financial performance, Semel stepped down June 18, and Yang stepped in to replace him. The board also named Susan Decker, the former head of Yahoo!'s advertiser and publisher group, as president. What's next for Yahoo! is a question analysts kicked around the next day and remains relevant months later.

Should Yahoo! be the acquired, analysts told Shabelman and The Deal's Kate Gibson at the time Microsoft, with whom Yahoo! previously discussed a merger, topped the list, while Viacom Inc., News Corp. and Comcast Corp. could move to acquire the company outright or stake partnerships.

One suggested Microsoft could spin off its MSN portal and Live search products to Yahoo! in exchange for a large stake in the company or that News Corp. could do likewise, spinning off its Internet properties, which includes social networking pioneer MySpace.com, for a Yahoo! stake. Further, some suggested Yahoo! could orchestrate an acquisition of its own, along the lines of social networkers Facebook Inc. or Bebo Inc., or professional social networker LinkedIn Corp.

Separately, Nollenberger Capital Partners senior analyst Todd Greenwald told The Deal's Stacey Higginbotham the management change suggests Yahoo! plans to remain independent:
"I don't think there's a deal around the corner because if there is going to be a deal Terry would be a better CEO for that job than Jerry would be," he said. "Terry has the experience and could have brokered a deal with a media company like News Corp. or Time Warner [Inc.] If there were any talks at all going on, Terry would have stayed on and seen that through before riding off into the sunset."

SHAREHOLDER ACTIVISM GOES WEB 2.0

The June news came nearly one week after the company's annual board meeting saw significant shareholder resistance, as much as 30% in one case, to the board's candidates, though they were all elected. Ahead of the meeting, the company drew criticism from Web 2.0-inclined activist shareholder Eric Jackson.

The minority investor used social networking to argue his case, with tactics including a blog, a MySpace.com account, a LinkedIn site and YouTube videos of himself, in an effort to rally shareholders as he called for the ouster of Semel.

Jackson took issue with Semel's compensation package, out of line with stock performance.
At the time, Shabelman pointed out, Semel's fate could have rested less with angry shareholders than on Yahoo!'s new Panama search platform, aimed at putting more relevant advertising in front of users. Having launched the platform in February, Yahoo!'s second-quarter results to be announced in July should be telling, he wrote.

WAVES OF CHANGE

The management shift is the latest for the transitioning company and follows the departure of chief technology officer Zod Nazem, who had a crucial role in developing Panama, a month earlier. At the time, the move raised questions about Panama falling short of expectations, Shabelman wrote.

Nearly two weeks after The Wall Street Journal reported Yahoo! was considering linking up, via merger, with Microsoft, the company landed a new CFO, Blake Jorgensen, a Thomas Weisel Partners LLC co-founder who could help drive some M&A activity, Shabelman suggested in May. M&A fuel or not, his experience will be an asset to the company, which is not lying down among fierce competition from Google Inc. and Microsoft itself.

The Microsoft news came a year after talks between the two fell apart. The Sunnyvale, Calif., company has been rejiggering itself, through product launches and grabbing small and midsize Internet companies for its arsenal and assault against its archrivals. One of its larger deals to date, Yahoo! said April 30 it would pay $680 million for the 80% stake it did not already own in Right Media Inc. in hopes of bolstering ad sales. The deal came two weeks after Google acquired DoubleClick Inc. for $3.1 billion.

Four months earlier, Yahoo! kicked off 2007 with the launch of its upgraded Web-based applications, including its search service, oneSearch, and the acquisition of MyBlogLog.com, a social network built around blogs, which a Yahoo! exec confirmed — via blog — late Jan. 8. The news came about a month after the company launched a corporate shakeup of sorts after an internal memo likened its operating structure to peanut butter on bread — spread too thin, and further, too bureaucratic, according to The New York Times.

Daniel Rosensweig took his leave after three years as chief operating officer, as did one-time NBC exec Lloyd Braun, who led the company's media operations. Yahoo! said it would realign itself into three units focused on: audience; advertisers and publishers; and technology. Decker, the company's then-chief financial officer, moved to head the advertising and publishing group, raising speculation at the time, the Times said, about her positioning to succeed Semel, with Rosensweig out of the picture.

Leading up to the announcement, the company made a series of moves to make up for some areas in which it has been dragging, one being advertising.

In November, Yahoo! announced striking a partnership with at least seven U.S. newspaper companies to lend its advertising and search technology to their collective crop of Web sites that are home to 150+ dailies. The news came weeks after Yahoo! sparked buzz as it readied its next-generation search platform, due out in early 2007, but which analysts told The Deal would never surpass Google's. It also came on the heels of Google's plan to dabble in offline newspaper ads, offering advertisers already using its online services, participation in a three-month pilot program for print advertising. In August, Google also said it would lend its search advertising technology to eBay Inc. for the e-tailer's non-U.S. advertising needs. Even still, Yahoo! doesn't look poised to shy away from a challenge.

PAYING DEARLY

To fuel the two-armed expansion — international and offering-wise — Yahoo! has made a series of acquisitions and taken stake in what it sees as key markets, paying top dollar and lining the pockets of its venture capitalist friends and neighbors.

Earlier in November, Yahoo! acquired polling Web site Bix.com for undisclosed terms. According to BizJournals.com, Bix previously raised $6.77 million in a Series A round of funding from investors that included Palo Alto, Calif.-based Sutter Hill Ventures and Trinity Ventures of nearby Menlo Park, Calif., The Deal's Cheryl Meyer pointed out at the time of the sale to Yahoo!.

In October 2006, the company bolstered its online advertising holdings, acquiring AdInterax, as well as a 20% stake in Right Media through a $45 million Series B venture round.

On June 7, 2006, Yahoo! announced swapping $60 million for 10% of South Korean auction site Gmarket Inc. The deal provided a partial exit for Oak Investment Partners, which, according to one South Korean press report, paid $7.6 million in 2004 for a 34% stake.

In December 2005, Yahoo! scooped up Del.icio.us Inc. for an undisclosed amount, reportedly between $17 million and $19 million, allowing an exit for VCs Union Square Ventures and BV Capital along with Amazon.com Inc. and Netscape Communications Corp. co-founder Marc Andreessen, among others.

Also in 2005, Yahoo! grabbed 40% of China's e-commerce heavyweight Alibaba.com Corp. for a cool $1 billion, which landed Granite Global Ventures, virtually unheard of until then, on the map, giving its portfolio company a $4 billion valuation. GGV wouldn't say how frothy its return was, but generally makes investments between $3 million and $8 million. Its Alibaba.com investment was no different.

The company also has its name all over the online auction arena in Taiwan and Japan with Yahoo! Taiwan and Yahoo! Japan.

WE CAN DO THAT, TOO

Ramping up its product offerings to compete with Eastman Kodak Co.'s EasyShare and Hewlett-Packard Co.-owned Snapfish, Yahoo! grabbed popular photo-sharing service Flickr in 2005 — for undisclosed terms, but reportedly $25 million — and announced launching Yahoo! Photos on June 8, 2006, offering users such features as the ability to send photos over instant message and drag-and-drop for easy organization. Just days before, Yahoo! announced launching Yahoo! Video to go up against megapopular YouTube, with some of the same elaborate features as
Yahoo! Photos like tagging for easy browsing.

Other products, too, target the competition. Launches in 2006 include:

AT&T Inc. and Yahoo! joined forces to offer Internet-based phone services in April.

The company added a map function for travel planning, also in April.

Yahoo! teamed up with IBM Corp. to enhance its instant message capabilities in January.

The company also said in May that it had aligned itself with megacompetitor eBay to share the U.S. auction market.

And in 2005, Yahoo! debuted Yahoo! 360, where users can build a blog and a homepage.

—Carolyn Murphy

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What Now, Yahoo!?

Several people have asked me in the last few weeks whether I'm still involved in a "campaign" against Yahoo! My "Plan B" activist effort against the Internet company started in early January and culminated in a substantial "against" vote, which was registered by shareholders at the June 12th annual meeting. The 3 Compensation Committee members all received at least 35% of votes cast against them. However, all other directors -- including benevolent co-founder and now CEO, Jerry Yang -- received 6 - 8% of votes cast against them.

These are historic negative votes. To put them in perspective, Michael Eisner -- at the height of his unpopularity, when Roy Disney campaigned against his reelection as Disney CEO -- received a 43% against vote. This led to his removal shortly thereafter.

Yahoo!'s vote also led to some changes, namely Terry Semel's move upstairs to Chairman - with Jerry taking over as CEO and Sue Decker assuming the role of President.

In some press accounts of my involvement with this result through the "Plan B" campaign, it was portrayed as a victory - and it was, of sorts (although I certainly don't take full credit for this result).

However, no one can look at Yahoo! and claim that all the work is done. Removing Terry Semel was point 1 of a 9 point "Plan B." They are endeavoring to reduce the overlapping divisions and closing underperforming groups. They have added one new highly qualified director, but the rest of the board remains the same.

I've been quiet publicly since the change in the leadership ranks announced June 18th - but, by no means do I consider my work done at Yahoo! as an activist investor. Anyone who pledged their YHOO shares towards our current count of 2.1 million shares can be assured that I am not going away.

I have communicated several times with Yahoo!'s management since the annual meeting. Although I can't disclose what was shared to me at past meetings I've had with Yahoo! management, I commend them for their open-mindedness in meeting with me and having an open and constructive dialogue around several continuing criticisms I have with the company.

This is a far cry from the response that I have received from Motorola's non-executive directors. I'm currently involved in a fervent battle to unlock shareholder value at that company and have proposed another "Plan B" with a different recipe to ail that once proud communications company. Though we have a significant number of shareholders behind us, a credible plan -- which looks even more credible as the days tick by and MOT's stock price continues to drift lower and under-perform Nokia's -- we received nothing more than a cursory form letter from one of Motorola's directors who declined to have a meeting.

Not so at Yahoo! For that, the company's leadership deserves kudos. As yesterday's reorg announcement came out in another painfully awkward way, the company has again drawn more complaints from the press -- some justifiable.

I'm not going to outline every beef I shared with Yahoo! I had the chance to speak to them on behalf of our supporters and they responded to each and every complaint that I laid out to them. Several of their responses I found comforting. Some, I frankly disagree with -- but they have their arguments and I have mine.

That said, here are three high-level recommendations which I suggested are critical for the company to address in the coming weeks:

1. The V Word - Vision. We need to know what the new Yahoo! will stand for. There have been hints at this in the last earnings call, but they need to hit us all over the head with it. In "Built to Last," the precursor to Jim Collins' "Good to Great", co-authored with Stanford GSB Prof JerryPorras, the authors used the term "Big Hairy Audacious Goals." Yahoo! needs to articulate what these will be - both internally and externally.

2. Renewing the Org Culture and Flattening the Org Structure. The company's culture needs to demand and reward performance - from all employees. Partly, this will happen through flattening the organization and pushing out decision-making aggressively. I don't think it's a bad thing that there has been turnover recently at the company. It's never easy when people leave - voluntarily or forced. Hopefully, the changes will be done soon and the organization can move forward with the new group/structure in place.

3. Renew the Board. After the high "against" votes that I referred to earlier, it's a must. With change comes opportunity. Bringing in new blood with industry experience and diverse views will make Yahoo!'s management team stronger and this will trickle down. More youth would be a plus too. After all, by any standard, Yahoo! is still a young company competing with even younger companies. If their directors don't have Facebook pages, do they really understand the world in which Yahoo! is operating in? (Bravo, Ed Kozel.)

I am as energized as ever about Yahoo!'s future prospects, but I am a realist and see the good and the bad. I will continue to speak out on behalf of Yahoo! shareholders who believe this company can be better. We will speak with the voice of a friend who is respectful - but a friend who isn't afraid to be honest with you when you make a mistake.

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SJ Mercury News: Yahoo's Decker's stock buy seen as sign of confidence in firm

Here's some welcome news to Yahoo! shareholders. Let's hope other Yahoo! execs and directors follow her lead. Good move, Sue.

By Ari Levy
Bloomberg News
Article Launched: 08/10/2007 01:37:07 AM PDT

Yahoo President Susan Decker boosted her stake in the Internet company by 12 percent, a sign she may be optimistic about growth prospects.

Decker, 44, purchased 47,000 Yahoo shares for $1.1 million last week, according to a filing Thursday with the U.S. Securities and Exchange Commission. That brings her ownership to about 425,000 shares, or $10.1 million, based on Bloomberg data.

Sunnyvale-based Yahoo named Decker president June 18 in a management shake-up that brought in co-founder Jerry Yang as chief executive to replace Terry Semel. The company, which has lost market share in Internet search to Mountain View-based Google, is investing in new advertising software and upgrading its mobile-phone and video services.

"Usually, the buying and selling of stock by management is part of the normal landscape of business," New York-based JPMorgan Chase analyst Imran Khan, who rates the shares "overweight," said in a report Thursday. "However, we believe that this isolated incidence is evidence of increasing management confidence in company performance."

Yahoo spokeswoman Joanna Stevens declined to comment.

The company reported last month that second-quarter profit fell 2.3 percent as Google extended its lead in Internet search and new rivals took market share in online advertising. Yang said in a conference call after the July 17 report that he would spend the next 100 days developing a long-term strategy.

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