• YAHOO’S BOARD AND ITS SHAREHOLDERS

Here we are again at the whining post of shareholders lamenting the sale that might have been. There is a rueful cry heard from Yahoo shareholders that $34 would have been a great price at which to have sold their shares. The original $42 billion plus in cash and shares bid from Microsoft was at the time, and in retrospect, an astronomical sum. By any objective measure, this was an overpayment inflated with ebullience. Yahoo’s share price currently languishes at around $25 and Microsoft’s has slid from over $37 last year to today’s $29. The well over $40 billion dollar hoard would have even choked Microsoft, … and Yahoo’s response?

The Yahoo Board responded with a nonplussed, and perhaps baffled, “the proposal substantially undervalues Yahoo!” Where have these Board Members been for the past five years? More importantly, where have they been since Microsoft stepped forward? Was anyone surprised at the time of the offer that there was no parade of sign-brandishing shareholders marching up and down First Avenue in Sunnyvale, California? Why were they not clamoring for the Board to get the deal done? Greed, and absurd expectations had long set-in.

It was also evident that for the few Yahoo shareholders remaining with any signs of common sense, the corporate structure provided little real possibility for input or influence on direction. When large shareholders have to file lawsuits to be heard, such as the Detroit public employees pension fund and the Detroit firefighters and police pension fund, the cracks in the corporate system are evident. This is another glaring example of broken corporate governance and the need for reorganization, particularly in the Boards of Directors. This is also evidence of some abject and shameful incompetence.

On behalf of the shareholders, if for no one else, the Yahoo board should have dispatched an emissary to set up a tent inside Balmer’s office, keeping the dialogue alive face to face. At least the shareholder interests would have been more diligently attended to, while the rest of the misguided Board Members, as well as their ineffective consultants and advisors, were going about embarrassingly scrambling for dead-end negotiations with AOL or Google. Microsoft might have actually been convinced to remain at the table with something close to the original and enormous offer. Something might have been negotiated, providing some level of autonomy to the Sunnyvale organization within the fold of the giant’s garment. Details of a relationship with respect to merging of some services, methodologies and technologies might have been set out, and provided evidence of “good faith.” This would have been the minimum expectation of conscientious and assiduous management. This should have also been an expectation of the shareholders. They were failed by pride first, and bad advice second.

On the Microsoft side, the shareholders also need to find the next leader that will lead this giant into this century. Microsoft is so large and flush with cash, it still doesn’t know the year 2000 came and went. It hasn’t needed to. For continued growth, Microsoft should be injected with some vision on what the Internet can become over the long term, or purchase a company that does. Even if tempted in the future, it should leave Yahoo alone. This didn’t start out well and probably wouldn’t end well on the domains of synergy. For the rest of us non-Yahoo-shareholders seeking innovation and competition, the breakdown of the deal is to our advantage in the long term. Thanks, Yahoo Board Members.