[JohnN]

Personally, if I was a Yahoo shareholder I would be calling up my lawyers to start suing the Yahoo board. Financially this deal is clearly good for shareholders coming at a 60% premium.

I can't personally see why Yahoo would be worth $38 a share. The job of the board is to do what's in the best interest of shareholders but ultimately it personally seems this deal was not rejected because of the numbers but because of the sentimental attachment to Yahoo independence.

Expect some litigation

[JayNeely]

Nothing personal, but that's the kind of shareholder that ruins good businesses. The language of Ballmer's letter is clearly intended to cause precisely that kind of action from Yahoo! shareholders.

The shareholders sue the management, the management spends its time defending itself from lawsuits rather than leading innovation and increasing stockholder value, department projects go awry and more employees leave, and the stock drops. Microsoft makes the same kind of offer a few years later, but at an even lower price. The new management, seeing what happened to their predecessors, will take the offer, and Microsoft gets all of Yahoo!'s assets at a bargain price.

It's absolute short-sightedness on the part of stockholders. Surely the mere fact that Microsoft was willing to buy the company at a 70% premium indicates that the stock was undervalued to begin with, and that people with the tech & business knowledge to see the big picture (not just the Microsoft execs, the Yahoo! execs too) knew the value of the company could be increased.

Even if the management at Yahoo! can defend itself from these lawsuits, they'll have been put on the defensive, on every front. No major initiatives, no bold new plans, no big mergers or acquisitions that could actually help the company; if they rock the boat a second time so soon again, they won't avoid being tossed out. So while they stay the course set by the backseat drivers who don't even have a full view of the road, Microsoft is free to out-compete.

[JesseAldridge]

Reading stuff like this makes me never ever want to run a publicly traded company.

[mwerty]

>Surely the mere fact that Microsoft was willing to buy the company at a 70% premium indicates that the stock was undervalued to begin with

That does not follow. MSFT might see more value in yahoo as a part of msft than yahoo run independently.

[JohnN]

>"Nothing personal, but that's the kind of shareholder that ruins good businesses. The language of Ballmer's letter is clearly intended to cause precisely that kind of action from Yahoo! shareholders."

Perhaps you are right. But shareholders rarely hold stock to build good businesses they are there to make money. They would happily invest in a bad company if it was about to be bought out for a huge premium. Once you go public, few things matter other than the numbers.

Plus 72% of Yahoo shareholders are professional money managers, arbitrageurs, and regular investors. These people are likely to want this deal to go through.

[umjames]

I cannot think of a better advertisement for staying small and profitable. Why work so hard for financial and creative indepenence, and then have money-hungry shareholders take that away for their own motives?

It's not only bad VCs that can do this, apparently bad shareholders can too.

[DougBTX]

Or to sell both A and B class shares :)

[JohnN]

Yer....I think Google did this.

[rms]

Wow, I'm surprised no one has defended the Yahoo shareholders here. They have a lot of good reasons to sue.

[rbanffy]

Why?

They should have dumped their stock when the offer was first floated (and stocks reached about the same premium MS was offering). Yahoo's management never said it would accept that first offer and all shareholders who "lost" money are those who expected a reversal of the initial positions ("we won't pay a penny more" and "we will not sell at this price").

Things like these happens all the time.

And I would not rule out an evil plan where all MS intended was to keep Yahoo's management buried in zillions of frivolous lawsuits (that would have to prove Yahoo's management somehow knew this offer was in Yahoo's shareholders' best interest and resisted despite of that)

IIRC, MS was buying back stock. By making this offer they got a nice discount.

[rms]

>They should have dumped their stock when the offer was first floated

It is not their responsibility as shareholders to do that, but it is the responsibility of the company to offer the best value to its shareholders.

[raganwald]

I beg your pardon? It absolutely is their responsibility as shareholders to do that _if they want the best price for their shares_. Example: Tonight after the markets close, I offer $35 a share for Microsoft, in cash, conditional on obtaining 51% of the company.

The market thinks about this, and MSFT's price when the markets open tomorrow morning reflects their guess as to whether I will get 51% of the company or not, whether Ballmer will have me killed^H^H^H^H^H^H tied up in litigation to prevent me buying the company and firing him, whether Yahoo will raise some money from Google to buy MSFT as a white knight, whatever.

The point is, the market price when a company is "in play" reflects a bunch of people making wild-assed guesses about the possible outcomes and the relative likelihood of each outcome.

If you are strictly in it for the money, it's your responsibility to make your own guess. If you guess is higher than the market value, you hang on to the stock. If your guess is less than the market value, you sell.

Lawyers will do anything, but IMHO, the only time you sue management is if they make a promise they do not deliver.

But what if Ballmer stands up and says, "Do not sell to Reg for $35, we are $28 today but I am going to buy Yahoo and our stock will be worth substantially more than $35 as a result of the transaction." I don't get my 51%, and then Ballmer doesn't buy yahoo. Now shareholders should sue, they hung on to their stock because of what Ballmer promised.

Consider what happens if MSFT's stock trades at $33 and Ballmer blocks me from buying MSFT in court, then the stock drops back to $28. I can see a lawsuit. But what really happened? Shareholders culd have had a sure $33 in cash by calling or emailing their broker and saying "sell."

They _chose_ to hang on. Why? because they gambled on getting $35 if I got 51% of the stock? or hoping for $40 if I had to raise my bid? That's their gamble, why should Ballmer be on the hook for their wagering?

Hanging on to your stock because you guess that the stock will be worth more is entirely your problem. Hanging on to your stock because management make vague promises about the long term value of the stock is also your problem. You certainly can't sue the week after the offer.

[goodkarma]

Yes, Yahoo management will probably end up defending themselves.

But Yahoo management has a legal obligation to do what's best for the company's shareholders. Unless they've got a silver bullet that will double YHOO's market cap soon, their performance on this front seems to be below average.

[cellis]

Then perhaps we will see some more antitrust lawsuits?

[cstejerean]

I'm tired of people complainig on behalf of the Yahoo shareholders, especially since I haven't seen anyone that actually owns Yahoo shares complain.

[bkbleikamp]

People would have said the same thing in 2003-2004 if someone offered $16 a share for AAPL...now they'd look stupid.

[raganwald]

What about offering $24 in 1996?

http://www.sunworld.com/swol-01-1996/swol-01-apple.html

The board turned Sun down and then went out and paid $400 million to buy NeXT. For all intents and purposes, they paidf $400 million to buy an operating system, hire an OS team headed by Avie Trevanian, and oh yes, provide a nice signing bonus for their new part-time CEO, some guy named Steve.

Lots of shareholders grumbled.

Of course, that was Apple and this is Yahoo. I don't personally think Jerry has Steve's touch, but I sincerely hope he makes me look like the wrong end of an Equine.

[raganwald]

What about offering $24 in 1996?

http://www.sunworld.com/swol-01-1996/swol-01-apple.html

The board turned Sun down and then went out and paid $400 million to buy NeXT. For all intents and purposes, they paidf $400 million to buy an operating system, hire an OS team headed by Avie Trevanian, and oh yes, provide a nice signing bonus for their new part-time CEO, some guy named Steve.

Lots of shareholders grumbled.

Of course, that was Apple and this is Yahoo. I don't personally think Jerry has Steve's touch, but I sincerely hope he makes me look like the wrong end of an Equine.

[signa11]

if yahoo! has a steve-jobs in the closet somewhere, it's about time he showed up...

[bkbleikamp]

Who's to say someone at Yahoo doesn't have the capability of coming up with the "next big thing?" Maybe the junior developer they hired last week will have a great idea tomorrow - you never know.

Steve Jobs came back in 1996 - it took 5 years for them to launch the iPod. It's anyone's guess where Yahoo will be in 5 years - maybe Jerry Yang will be looked at as a hero, maybe not. Predicting Yahoo's position five years from now is impossible.

[mikedouglas]

If your business plan is "maybe one of us will turn out to be the next Steve Jobs," it may be better just to sell to MSFT ;)

[phaedrus]

Maybe the junior developer does have a great idea tomorrow - the question is, will anyone listen to him? Or will his small voice not be heard in a big company? It's not that they lack people who have the potential to do great things, it's the size/culture, the organization itself, which in (most) large corporations stifles new ideas and creativity.

[anupamkapoor]

radical changes will flow top down not bottom up. at least not in any organization of yahoo!'s size.

[dmoney]

What do you suppose the size limit for a company is, for changes to flow from the bottom up?

[Jesin]

This could be the wrong way of thinking about it.

Maybe radical changes can only start within a certain distance from the top, and as the company gets bigger, the bottom moves further away from the top and can no longer initiate those sorts of things. Just a thought.

[daniel-cussen]

Cofounder Jerry Yang is back as CEO.

[jmzachary]

Good one, but don't quit your day job.

[edw519]

I don't think Microsoft shareholders should be feeling all that comfortable, either.

This is a company with virtually unlimited resources (talent, cash, experience, partners) that wants to win every war, but can't seem to win even a single battle as the world passes by. Whats missing? Leadership. Time for vision to replace bullying. Stay tuned...

[goodkarma]

In several markets - such as search, search marketing (i.e. pay per click advertising), web-based applications (i.e. Google Docs or whatever MS calls it), etc., Microsoft has really dropped the ball.

The two things they lack are respect for their competition, and respect for new ideas. The ideas were there, but Microsoft didn't listen. Their competitors did.

Probably the result of Microsoft getting huge and evil and not caring about their customers. They didn't notice that technology was passing them by.

And then there was Google. When you get a lot of smart people working on something and give them a head start, it makes it very difficult for a competitor to catch up. :)

I don't think Yahoo is much better. If the average Yahoo shareholder understood how bad "Panama" is given all the hype it got, they probably would have sued Yahoo by now.

[ks]

But it's a 60% premium on a very low price. It is only a good deal if the shareholders don't expect Yahoo to rise above $30. Only time will show, but I think they have the potential to climb above $30. Their deal with Google shows that they are slowly starting to see that they can't do everything.