Since the plan seems crazy, given the MicroHoo history, Mithras' small stake (.14 percent) and the current economy, I wondered who the heck Mithras Capital is, and a bit more about its investment strategy. Surprise, Mark Nelson of Mithras Capital is not a fan of the Yahoo-Google search deal! While Mithras has been pushing a sale of Yahoo to Microsoft for months, they also have ownership stakes in SourceForge (5.6 percent as of August) and Transmeta (4.9 percent in June). SourceForge owns the Slashdot web sites as well as ThinkGeek. Apparently Mithras has tried to meet with management at SourceForge, but management has refused.

Transmeta, the beleaguered chipmaker turned intellectual property shop, put itself up for sale in September, and has seen its stock reach a 52-week high while the rest of the market bombs. There's no indication in Mithras' SEC filings that they've met with Transmeta executives. Perhaps this Yahoo stunt is an attempt to get its name in the paper and strike fear in the hearts of management at its other investments. Or maybe given the economy, it feels it has nothing left to lose.

Or at least that is what Ben Schachter, Internet analyst with UBS, thinks. In an astoundingly sobering note to his clients this morning, he cut his estimates on his entire portfolio of coverage:

we are also lowering our estimates and price targets across the board to reflect a deteriorating macro-economic environment that we expect will inevitably impact the online advertising market and consumer spending, likely continued unfavorable foreign currency fluctuations (at least in the near-term), as well as other company-specific factors.

In a rather brutal assessment, he wrote, "[W]e see no business model based on advertising or consumer spending that will be immune to a downturn. Specifically for the advertising names, as corporate profit forecasts come down, we expect planned advertising spending will be delayed and/or cut."

UBS also had the following thoughts on the third quarter of 2008:

• September was difficult.
• Google held up better than others, though Schachter still thinks that results might be below expectations.
• Stronger dollar is going to cause issues for guys like Google.
• More cautious on 3Q results from Yahoo and ValueClick (s VCLK)

Looking beyond to the fourth quarter of 2008 and 2009, UBS noted more optimistically, "[W]e think that the continuing shift to online will be somewhat accelerated by the macro weakness."

Now here we are talking long term, and even as I trust Ben's analysis, I am one of those folks who is assuming the absolute worse. Why? Because these are irrational times. Guys, General Motors has a market valuation that is lower than its value in 1930. Yahoo is a company that is likely to hit a massive air pocket, because it is highly exposed to financial- and automobile-related advertising.

Regardless, Schachter sees no near-term bottom in sight for the Internet stocks and is advising that people don't try and catch a falling knife. In particular he was sour on ValueClick, an online advertising network. I think this is a bad sign for all advertising networks out there, especially the startups that are trying to get traction in this market. He did point out that Google will get beefier and bigger in these lean times.

Mas nem toda a gente tem a noção exacta do medo que esta crise esta a criar nos americanos. Na Yahoo - por exemplo - já houve despedimentos. Os receios vão desde o simples perder dinheiro para as universidade dos miúdos por causa das acções, passando pelo medo da ruptura em bens essenciais como gás, comida e gasolina até ao medo de um ataque eminente devido a aparente fragilidade dos EUA perante esta crise. Certo é que, mesmo não sendo analisa, o perigo de uma possível reacção em domino é enorme. Fica o gráfico das acções das empresas de informática mais representativas (segundo a minha opinião, claro) no dia em que as acções da IBM baixaram dos 100 USD.

Bem vou exprimentar o IBM Lotus Notes para Mac OS. Se correr bem vou tentar meter a w3 a correr no mac. Já agora já testaram o software da greenhouse? Se conseguirem avisem, eu já testei em 3 browsers (firefox, ie e chrome) e não consegui.

TechCrunch Reports

Disclosure:  Long on YHOO

According to Web traffic analysis companies (including Compete.com, comScore, Alexa Internet, Netcraft, and Nielsen Ratings), the domain yahoo.com attracted at least 1.575 billion visitors annually by 2008 according to a Compete.com study. The global network of Yahoo! websites receives 3.4 billion page views per day on average as of October 2007. It is the second most visited website in the U.S., and the most visited website in the world.

From Wikipedia, the free encyclopedia

Eric's second company seems to be a tad less visible than MyBlogLog. It has raised $1 million in seed funding from First Round Capital, Foundry Group and SoftTech VC. Eric calls it an infrastructure play and an information router. Marshall Kirkpatrick called it the Grand Central Station for the social web. Here is a video of my conversation with Eric. (You can check out the Gnip blog for a better description of the service.)

Updated

But Google isn't exactly happy about this new prudishness on privacy and whines that losing such detailed information so quickly could be bad for business (and innovation!):

While we're glad that this will bring some additional improvement in privacy, we're also concerned about the potential loss of security, quality and innovation that may result from having less data. As the period prior to anonymization gets shorter, the added privacy benefits are less significant and the utility lost from the data grows. So, it's difficult to find the perfect equilibrium between privacy on the one hand, and other factors, such as innovation and security, on the other.

Unfortunately for Google, there's no rational equilibrium or cost/benefits analysis in this debate because people are different. Privacy is one of those things that people have a hard time putting a dollar value on, and everyone is different. Some people will take their clothes off for free, for money or never at all. Maybe the Google engineers can create an algorithm that respects that continuum and factors in the way heightened scrutiny affects where people lie on that continuum. Until then, we're checking in with other search providers to see how Google's decision will affect their own data retention policies.

Update: Through a spokeswoman, Yahoo has said it anonymizes data for 13 months and will still "continue to engage in a thoughtful dialogue with regulators and legislators in the EU and the U.S. about the best practices for protecting user privacy while improving our leading set of Internet services."

Microsoft didn't disclose any details, but sent a statement from Brendon Lynch, director of privacy strategy at Microsoft, that said, "The Article 29 Working Party has asked all major search companies to look into reducing their search data anonymization timeframes and how they anonymize search data, which we believe is equally as important as the timeframe. We will have more to share in the next few months."

Well obviously that acquisition never materialized, but Ma Bell and Yahoo have just inked an agreement that is good news indeed for the Sunnyvale, Calif.-based search and online media company. As part of the deal, AT&T will offer Yahoo’s search engine as the default network to its broadband computer, Internet TV and mobile phone users.

Under the partnership, announced in January 2008, Yahoo!’s oneSearch will provide Web services relating to topics including news, finance, weather and access to its Flickr photos. The deal replaces a 2001 agreement where Yahoo! split revenue with AT&T when its customers signed up for broadband computer Internet services.

I'm sure we will soon find out the financial implications of this new deal. My suspicion is that it isn't going to be fiscally meaningful for either party. Yahoo, regardless of how great some of its web services may be, is a laggard in what matters most: monetization. The deal is, however, a morale booster for the beleaguered firm -- and could provide some lift to Yahoo's traffic as well.

* AT&T, Yahoo alliance on the rocks
* Yahoo, saved by the Bell.

Gandhi changed the world. The steam engine changed the world. Heart transplants changed the world. The Internet changed the world. Google simply made a small (albeit important) contribution toward making Internet a better experience for all of us.

Google's (s GOOG) contributions are still worthy of praise. It is no longer impossible to find relevant information on the fast-growing Internet. I remember tearing my hair out looking for relevant information. Today it is as simple as acting on our impulse to seek that knowledge--and that has infinitely changed the way we interact with the machines.

The article triggered a chain reaction and a trip down the memory lane. I had been a Google-addict for a while and loved its simple elegance over rivals such as AltaVista and Inktomi-powered searches. I had talked to the company earlier, but I didn't meet the Stanford duo in person up until September 1999. The company had just raised about $25 million in venture money.

"I have never paid more money for so little a stake in a startup," John Doerr of Kleiner Perkins Caufield & Byers was heard saying. Good thing he did - for he paid next to nothing for what could arguably be the Internet-equivalent of Alaskan oil and gas fields.

Larry Page & Sergey Brin had stopped by at the Forbes.com offices and we talked at length about the company. It ultimately resulted in this feature, How Google Is That? Larry still had the same disastrous haircut he supports today. Brin was measured and logical as always in his responses. They thankfully made no meaningless and "do-no-evil" hypocritical statements. They were just two guys out to change the world. I remember getting along with them famously, but never saw or talked to them since, though I have been to many Google press events.

Then & Now: You've come a long way baby

The company was 12-months old. They had just come up with their version of contextual-text advertisng system. They had 40 employees, were looking for an inhouse chef, and were doing about 4 million page views a day and about 4 million searches a day. That's 45 searches per second. No one in the company owned a glider, though their venture backers had their own private planes. The company was housed in 165 University Avenue in Palo Alto and the co-founders were single.

In July 2008, Google registered 7.23 billion searches - about 242 million a day. That works out to about 4 10 million searches in an hour or over 1100 2772 searches per second. (Funny, it turned out to be much bigger than the market estimates used by Google.) It had sales of $5.4 billion in the second quarter of 2008 alone. It now employs over 19,000 people. Larry and Sergey are billionaires and own a Boeing 767 & a Boeing 757. They are both married. The company has offices in multiple locations and data centers that are sprinkled around the globe.

After meeting with them and discussing the merits of search-only approach versus portals, I came to this conclusion: "Perhaps the other Stanford duo, Yahoo! cofounders David Filo and Jerry Yang, should be a little concerned--their media ambitions have superseded their customers' desire for a really smart search engine." In hindsight, I am surprised I was able to get away with making that statement and my editor didn't catch what clearly was an opinion - a no-no in the non-blog mediascape. After all, it seemed so stupid to suggest that because Yahoo (s YHOO) had 240 million page views a day and was literally printing money.

Brin tried to convince me that the text-based contextual advertising (first popularized by LinkExchange, a company that was bought by Microsoft) was their way of making money. "Banners are not working and clickthrough rates are falling, I think highly focused ads are the answer," Brin said, and pointed out that Google would be in black in 24 months. By 2001, I could have kicked myself for doubting the kid!

Why did they win?

Fast forward 9 years, and most of Google's competitors have gone to the great technology graveyard, nary a tombstone. Simpli.com, Dogpile, Direct Hit and Northern Light were all part of the new search engines that were taking on the incumbents like Yahoo, Lycos and HotBot and wanted to make web searches simpler and more accurate.

"Google is essentially trying to categorize and catalog the web. We have a very different product and a different approach," Jeffrey Stibel, cofounder and CEO of then Providence, R.I.-based Simpli.com told me for the Forbes.com story. He was taking a more exotic linguistic approach to search. It is now owned by Valueclick, an ad-network.

In comparison, Google's analysis of the link structure of the World Wide Web and large-scale data mining and ability to ranks a page against similar pages turned out to be the right approach. Was it just the algorithm and a better monetization scheme? Was it a right solution at the right time? I think it was a bit of all that - but most importantly, it was a farsighted approach to infrastructure and the network.

It's the infrastructure stupid.

This was the critical difference - I wrote about it recently - between winning and losing. I was reminded of this by an old PowerPoint presentation. They talked about using commodity compute infrastructure to out muscle everyone and doing analysis of the web like it has never been done before. It seems so obvious today - but back then it was an idea ahead of its time. The impact of pizza box servers was yet to be seen, and companies like Cobalt Networks (sold to Sun Microsystems for $1 2.4 billion) were selling early versions of Linux-powered thin servers, but they were not cheap by any means.

Many on Wall Street question why Google spends so much money on infrastructure. The question is why not - after all every millisecond of performance means more searches and more searches mean more advertising. More infrastructure means more crawling, more indexing and better results. I think that slide reminds us of the fact that infrastructure-as-an-advantage is in the DNA of Google. And that is unlikely to change - and that is why world's smartest engineers and computer scientists still want to work there.

History has made a genius out of all who bet on Larry and Sergey - the investors, the employees, journalists who were enthralled by their story. In reality to those who built Google, it was the only option.

Tomorrow: What You, Me & Corporations Can Learn From Google

You remember .. Netscape's browser had the huge market share, the company had the soaring stock price, and then Microsoft decided to get into the game.  Made its browser a free giveaway, launched all sorts of court cases, and eventually all but put Netscape out of business.

Now, years later, Microsoft has about 75% of the browser market, and it's no longer a big deal to get a browser for free.  It's expected.  And, not the Microsoft's (MSFT) share price is soaring, but it's still a tech leader.

Now .. comes Google (GOOG).  A new browser called "Chrome."  Enough to give Microsoft a run for its money?  It's free, too, of course, and the tech industry is already taking notice.  For example, this from Yahoo's (YHOO) "Tech Ticker:"  http://finance.yahoo.com/tech-ticker/article/52101/Google-Launches-Cloud-Operating-System-Calls-It-a-Browser?tickers=goog,msft,aapl calling the new browser "cloud computing."

And this from various blogs (Google's and others): http://www.google.com/googlebooks/chrome/index.html laying it all out as a cartoon.  Really.  If you haven't seen it yet, check it out .. maybe the end of the instruction manual as we know it.

Anyway, call it what you will, it will be interesting to see if Chrome can carve out some of Microsoft's browser dominance.  Is this the next Firefox?  Or the next Explorer? 

We'll give you a look tonight at 6.

For Microsoft, the hope is that the deal will help boost its search business overseas. After the failed bid for Yahoo, Microsoft has been reeling around like a spurned lover trying desperately to fill the gap -- with cash-back rebates for search engine users -- while strategically looking for markets where it has a real chance at gaining share in search.

But Europe might not be that market. According to the most recently available comScore data, Google had almost 80 percent of the European search market in March while Microsoft had close to 2 percent. However, Google's own comparison shopping engine, Google Product Search, is currently an English-only service. With Ciao, Microsoft could take advantage of Google's relative absence in certain languages. As of January, Ciao was the top comparison shopping engine in Europe with 30 percent of the market, while Google was 18th, with 2.5 percent. It's an opening, but it appears to be a small one.

image courtesy of Ciao

[qi:004] Unfortunately, not everyone seems to be pleased with NBC's coverage -- too many ads, inane and bland commentary and time-delay tactics have got people hopping mad. While Zucker seems to be crowing about how well the Olympics are doing online, Rafat Ali of PaidContent points out that Yahoo's Olympics section beat out NBCOlympics.com, and sees it as a missed opportunity, thanks to what is described as "bottled excitement." Russell Beattie, a good friend, pointed out in his typical no-bullshit style that NBC has ruined the Olympics. "What should be a privilege for a national broadcaster has been turned into an extortion racket, holding the Olympics hostage with all of us paying the ransom," he wrote. NewTeeVee's Chris Albrecht added, "This could have been a golden moment for online video — too bad NBC just couldn’t stick the landing."

What grade would you give the NBC coverage, both on TV and on the Internet? Take our poll and leave a comment.

Is this really all that surprising? Wasn't that one of the reasons Google paid $3.1 billion for DoubleClick? AOL also confessed to using tracking cookies and said relatively few (tens of thousands out of more than 100 million) users opted out of its targeted advertising program. Yahoo said it also uses behavioral ads but noted in its letter that it plans to announce the ability for consumers to opt out of such "customized ads." It will still track users, though.

Looking beyond the major portals (excluding Microsoft, which hasn't yet responded), the letters from the companies surveyed by the House Committee on Energy and Commerce turned up a few surprises such as Cable One, CenturyTel and Knowlogy using NebuAd's deep-packet inspection technology in trials. I also noted that business providers such as Cbeyond, TW Telecom, and even large bandwidth providers Covad and XO Communications don't use targeted advertising to their customers. Cablevision, Windstream, Comcast and Cox were the rare ISPs who aren't using any real advertising efforts on their subscribers. Many providers did confess to typo squatting, however.

I'm not impressed by ISPs using invasive measures to track surfing habits to sell advertising, unless users are given some sort of price break and have a choice on whether they can opt-in. To me such tactics are undisclosed and give the consumer few outs if they don't want to be tracked.

However, for free services, such as Google's search engine or other web content providers, advertising is their lifeblood, and consumers (and Congress) should expect as much information tracking to take place as the portals can both devise and get away with. In the absence of regulatory protection and any other way of making money, it's no surprise that advertising has become more invasive. Nothing in life is truly free.

For more on the topic check out these posts:

• Of Course the Government Cares About Your Privacy
• Bob Dykes CEO of NebuAd on DPI
• A Privacy Manifesto for the Web 2.0 Era
• How to Safeguard Your Privacy Online

image courtesy of Congressman Ed Markey

With shares now trading about $19 you'd think shareholders would be out in force with torches and pitchforks, but Yahoo management - at enormous cost to shareholders and the company - has kept the corporate raiders and Microsoft at bay partly by granting a newly sheepish Carl Icahn a seat on the board and two more seats.     Icahn noted last week that enough large shareholders were sticking with the current board, making it impossible for him to take over the company.     His plan was fairly simple - buy a lot of Yahoo and then sell the company to Microsoft at a huge profit.    As a shareholder I remain  *totally* confused as to why large shareholders were unwilling to support this move - the obvious choice in terms of maximizing shareholder value with minimum risk.

However with challenges come opportunities.  Yahoo at $19 is looking pretty ripe right now given that Microsoft offered $31 just months ago when Yahoo's prospects were not significantly different than they are right now.    Either MS is horribly miscalculating Yahoo's value, or the Market is underestimating that value.     Clearly the current board is convinced there is a lot more value, and in this at least I would agree with them.

It'll be interesting to see how the rank and file Yahoo folks are feeling at SES San Jose in a few weeks.   SES is the biggest search conference of the year in the heart of Silicon Valley, and hundreds of Yahoo folks will be there.  It will be interesting to get a feel for the current morale challenges at the company.

Disclosure:   Long on YHOO.  Considering buying more.

The cloud will comprise six physical locations where mostly HP servers containing between 1,000 and 4,000 mostly Intel cores will run Apache Hadoop. The goal of the project is to give cloud access to academics and research institutions trying to build out services and work within the clouds. HP also hopes to use the testbed project to develop tools and software to push its Everything-as-a-Service idea. Researchers will be able to access the cloud through a proposal process later this year.

Such efforts parallel Google's attmepts to create clouds for university students seeking to understand how their software might perform in a cloud environment. As Chris Bisciglia, a senior software engineer with Google, pointed out to me in June, most universities don't have the resources to help a young programmer see if their application can work across hundreds of servers and achieve "Internet scale," but it's an important criteria for today's developers.

Today's announcement brings HP one step closer to offering a cloud service of its own rather than merely selling boxes to cloud providers -- something that's becoming more apparent after its deal for EDS and the launch of it's new Scalability Computing Initiative in May. We'll update the story with more information about testbed's limits and what it means for other industry players later this morning.

Update: After chatting with the powers that be at all three companies, it's clear that this cloud has two goals. The first is to figure out what people need to learn about building applications for the cloud and to tie such clouds together, and the second is to crush Google when it comes to building a cloud for researchers to play around with.

Prith Banerjee, SVP of research at HP and director of HP Labs, points out that the Yahooptel (thanks, Alistair) cloud is open all the way down to the hardware, which will allow researchers to use any programming language, operating system or other software to build applications at various layers of the cloud computing stack.

"We want, unlike other partnerships including Google and IBM's where the lower-level stacks are not provided in a open manner to the world, open access to all levels of the hardware," Banerjee said. "The Google approach is a proprietary way of building the hardware, and essentially all you see is the software layer at the top."

For all of the openness, not everything built on the cloud testbed will be open sourced. The intellectual property of some applications and research could be owned and kept by the academics using the system or the companies building it. Prabhakar Raghavan, head of Yahoo research, which has played an instrumental role in Hadoop, said the details of IP ownership are still being worked out.

Much like the question of IP ownership is still in flux, the way this cloud will function across the six locations is still up in the air. As Banerjee points out, there is still too much they don't know about allocating resources efficiently, security and linking disparate databases together in a cloud. But if this cloud gets the open-source community some useful code, Intel some chip sales, Yahoo a way to scale applications easily across its infrastructure and HP some tools to make money off of cloud software and hardware, then that's good, too.

Here is a video interview by Kara Swisher at AllThingsDigital, a Wall Street Journal publication, of Google, Yahoo!, and Microsoft lawyers impression on the hearings:

[brightcove vid=1659860828&exp=716696183&w=300&h=260]

My personal opinion is that this deal is win-win situation for advertisers as well as publishers. Creating a standard, open platform for publishers to choose where their advertising goes is beneficial to the industry. My hope is when I do my ad buys on Google AdWords, I can do placement targeting and choose Yahoo!'s web site as one where I want to place my ads. Otherwise, I would have to have two separate budgets for Google AdWords and Yahoo! Search Marketing. Why not create a platform that is beneficial to the users? Let me know your thoughts by adding a comment to this blog entry.

-Randy
P.S. I'm cycling 100 miles on September 28, 2008 in Honolulu, Hawaii to support cancer research and patients like my teammate Gene who is a 4-year survivor. Make a 100% tax-deductible donation today to the Leukemia & Lymphoma Society at http://djksar.wordpress.com/honolulu-century-bike-ride/

The deal gives Icahn and two other board members of his choosing spots on an 11-member board. Shareholders will choose from Icahn's previously named slate of potential directors and newly named Jonathan Miller, currently a partner in Velocity Interactive Group and former chairman and CEO of AOL. This will settle the proxy battle Icahn began after Microsoft's failed bids for Yahoo earlier this year, and make the Aug. 1 shareholder meeting a less contentious one.

However, it's unclear what this peace offering means for Microsoft, which has expressed interest in doing a deal with Icahn should he gain control of Yahoo. Icahn's board presence isn't likely enough to sway Microsoft to put up the cash required to do a deal that Yahoo might sabotage while waiting for the closing. We'll update the story as Microsoft comes out with its stance.

The latest installment is a letter to shareholders from Yahoo CEO Jerry Yang that accuses Microsoft of flip-flopping, creating confusion and generally not wanting to make a deal. The letter also also reiterates Yahoo's desire to sell the entire company at $33 per share -- or if that's not interesting, just the search assets.

Let me tell you, Yahoo, playing hard to get is smart, but this letter is no way to get the guy of your dreams. In fact, rumor has it Microsoft is seeing AOL now, and everyone knows AOL hasn't always made the best choice in relationships.

This stuff may play well in Silicon Valley, but outside of it the world is not watching. While Kara Swisher dutifully calls her sources and provides us with the ins and outs of the wheeling and dealing, the audience outside the tech world is yawning. This started back in February (2007 if you believe the original offer from Microsoft). Let's finish this, so the world can really focus on the banking crisis or high gas prices.

.

Microsoft hasn't lost many of these matches and the smart money remains on them to "win" this battle and take over Yahoo.   My take is that there is now enough ego investment on all sides that you can expect Microsoft to be pretty ruthless in their efforts to replace the board and overhaul the company.  Of course with with management leaving Yahoo at a record pace anyway, Microsoft is likely to inherit more of a management skeleton than a burden, and they are probably fine with this.

How poison will Yahoo make the pill?     As a shareholder I'm concerned about this but comforted that the current board and Jerry Yang have a huge financial stake in this outcome.    To Bostock and Yang's huge credit they has been playing this game with their own money, though I'd argue they have not been playing it very well or with anybody's best interests in mind (including their own).    My take is that Yahoo simply could not readjust their expectations from the dramatic success story they enjoyed early on and the belief they could see that kind of success again.     This gave them a perception of the current value of Yahoo that was completely out of line with the market perception, which by definition is the real value of a company.    The $33 sale price has come from the desparate realization by Yahoo that they are going to lose the battle and possibly be forced to sell well below this price, though I think it'll be in Microsoft's interest to keep the tensions to a minimum and keep their new "post Yahoo merger" shareholders marginally happy with an offer above $30.

That said, Ballmer is clearly smelling the blood in the water and could probably force an eventual sale of Yahoo in mid to high twenties by jerking the strings for a few more months to soften up Icahn and other major shareholders who are clearly looking for something above the $31 offer Yahoo rejected a short time ago.  Without Microsoft Yahoo's share price would be well under $20 and this is now clear to everybody.

So the boxing match moves into the final rounds.   It's pretty much a corporate death match between Jerry "the Yahoo" Yang and Steve "the Basher" Ballmer.    Although my money is invested with Jerry right now, I'd be betting on Ballmer to win this fight.

Disclosure:  Long on YHOO

Obviously this was a strategic rather than serious move by MS as noted by Henry Blodget, though he's wrong to think this is just a small play to soften up the Yahoo board before the proxy fight in August.

In fact this is the end game of a very smart plan by Ballmer / MS to aquire everything for less than they have been planning to pay for over a year. Yahoo's intransigence has simply delayed the process by a few months and saved MS a few dollars per share on what they would have paid.

Over at Silicon Valley Insider we have Henry basically begging for an offer over $31 and indicating support for less.

Yahoo board is now *begging* MS for the $33 they could have had easily a few months ago but may not see again. MS can get it all for less so I'm now guessing the meeting offer will be $31 or $32. That will make MS look generous for keeping to the original plan in the face of a weakening Yahoo, and it will be acceptable to shareholders fearful of YHOO at $18 or lower if this all collapses.

Although this is likely to be resolved at or soon after the upcoming Yahoo board meeting it doesn't have to resolve to work in MS's favor. Yahoo's pretty much exhausted all their options to the extent that it's either Yahoo in the 30 range with Microsoft or Yahoo under 20 without MS.

Disclosure: Long on YHOO

Isn't that essentially Yahoo!'s philosophy? You don't notice the fire so much when you're tripping over the furniture and admiring the odd new view.

As long as you can find your favorite outfit, it doesn't matter that your husband, lover, best friends are leaving you.

From the Yahoo! viewpoint, it's like shuffling a deck of cards when you've had a bad run at blackjack. Perhaps from the dealer's point of view, this is good, if the dealer is Google. It keeps the people you're playing with from counting cards and making statistical calculations. Business, however, isn't about luck. It is about calculations and statistics. Yahoo!'s stats do not look good.

As a matter of full disclosure, at one time, I worked for Yahoo!.  At my request, a state government agency is investigating their employment practices.

I've experienced a few reorganizations. When I left the company, I couldn't remember the name of the department nor the team that I worked for because the department and team names had been changed so often, that even some managers had a hard time identifying department names. Apparently, Yahoo!'s board hasn't read much Shakespeare, where even the 13-year-old Juliet knew names really do not matter.

I came on as an Associate Editor; I left as a Search Enhancement Associate. What is a Search Enhancement Associate? That's just another obfuscation. It looks nice because several different categories of workers in the same pay bracket can be classified by this phrase and yet, let's face it, on a resume it means nothing. I wonder how much time was spent thinking up that job label.

New names, same faces and unfortunately, too often, same dumb strategies. Well, not all the same faces. According to PC World, in the reorganization announced on 26 June 2008, obviously some old faces weren't going to be around with this latest re-org including:

• Jess Weiner, Executive Vice President of Yahoo!'s Network Division
• Vish Makhijani, Senior Vice President of Search
• Qi Lu, Executive Vice President for Search and Advertising Technology
• Usama Fayyah, Executive Vice President
• Stewart Butterfield and Caterina Fake who helped create Flickr
• Brad Garlinghouse, Senior Vice President for Communications and Communities

Garlinghouse wrote the infamous peanut butter manifesto.

Is this re-org caused by the defection of these people or is it just a matter of habit? If you haven't been keeping track, Yahoo! also had a major reorganization at the beginning of December 2006. Terry Semel was still chairman and chief executive officer at that time. The press release claimed four main objectives:

* Expand customer-centric culture and capabilities -- Yahoo! will develop rich experiences for each audience segment and deliver solutions to meet the needs of all advertisers and publishers worldwide. Yahoo! will organize its services around audience segments and advertising customers, rather than around products.

* Create leading social media environments -- Yahoo! will leverage its strong positions in community, communications, search, as well as media content across its global network to create leading social media environments, which will encourage every user on the Yahoo! network to participate in the consumption and publishing of information, and knowledge through tagging, reviewing, sharing of images and audio, and other social media activities.

* Lead in next-generation advertising platforms -- Yahoo! will extend its industry-leading breadth of offerings to give the most diverse array of advertisers, from large brand marketers to local merchants, every opportunity to connect with audiences on and off Yahoo!.

* Drive organizational effectiveness and scale -- Yahoo! will recruit and retain the best industry talent and focus its resources on high-impact, network-wide platforms to help capture the most significant long-term growth opportunities.

Somehow they don't seem to be able to recruit and retain the best talent. Granted, Semel did get Tom Cruise to Sunnyvale in January 2006, which was after his May 2005 couch-jumping but before Katie Holmes became an unwed mother in April 2006. Despite the coup which was meant, I suppose, to help Yahoo!'s newly launched Answers, I think more Answers about Tom Cruise can be found on Gawker.com although, to be fair, the Scientology video was posted in February of this year, 2008.

In June 2007, Yahoo! unloaded chairman and CEO Terry Semel, who, after five years, had earned $500 million and had stock options worth $70 million according to Wikipedia. That touched off a reorg that brought Jerry Yang, Chief Yahoo and Yahoo! co-founder, to the CEO position. In February 2008, Yahoo's re-org included downsizing, unloading about a thousand people. Under Jerry Yang and Sue Decker these people weren't offered the Golden Parachute that Yahoo! had been negotiating for its other full-time employees with Microsoft as reported by CNET on 19 February 2008.

The golden parachute was not for those employees who had been laid off on 12 February 2008 such as myself. It was for those remaining employee should they lose their jobs in a Microsoft buyout.

Maybe Yahoo! should be less concerned with retaining the employees they have, particularly since some are leaping from what looks like a sinking ship, and checking into what those employees are doing and have been doing wrong.

According to the PC World article:

Reporting to President Sue Decker will be three new teams:

-- the Audience Products Division, which will oversee product strategy and product management and will be led by Ash Patel, former manager of Yahoo's Platforms & Infrastructure group;

-- the U.S. region, which will be led by Hilary Schneider, previously chief of the company's Global Partner Solutions group; and

-- Insights Strategy, which is in charge of centralizing and executing "a common strategy for the use of data and analysis across Yahoo," and the chief of which will be named later.

The new organizational structure will improve Yahoo's products and speed up decisions, the company said.

Apparently the customer-centric policies of June 2007 weren't so effective. I and every employee of Yahoo! did receive a purple card to remind us of our purpose in the house of purple. One one side it reads:

Our Purpose (in orange)
Yahoo! powers and delights our communities of users, advertisers and publishers--all of us united in creating indispensable experiences, and fueled by trust.
YAHOO!

The other side reads:

OUR VALUES
Excellence, Innovation, Customer Fixation, Teamwork, Community, Fun
OUR BEHAVIORS
Delight, Decide, Deliver,
Act as One Yahoo!

I wonder how much time and money was spent on those little "Our Purpose" cards, made to fit on our lanyards along with our ID cards. Looking at this all now, it reminds me of that IBM commercial about "ideating."

“Their motivations are suspect and there is simply no good reason to think they will actually show up at the end of the day.”

Huh?   MS is clearly prepared to buy Yahoo.   This is obvious to everybody including Jerry.   He could argue that they are going to screw up Yahoo after buying it, but that rings a bit hollow given the sad conditions of the company right now.     In fact it's hard to imagine how Yahoo, a key brand in the key global sector, can be doing so poorly right now.   How in the world could Microsoft screw the company up more than Yahoo is screwed up right now?

Even if Microsoft *is* going to bring devastating changes to Yahoo, there is a shareholder obligation here that probably is not met without a sale to Microsoft.     It is simply no longer viable to suggest that an independent Yahoo is likely to show the revenues required to bring the stock to 33+ within a year.    Without any Microsoft interest  YHOO would be trading at about $18, so the likely Icahnesque MS offer can arguably be viewed as a premium of close to 100% on what shareholders can expect if this deal *really* crumbles, which is what Yang clearly wants to happen.

I agree with Swisher:

... even with all the noise, it should be entirely clear by now that Microsoft and Yahoo need each other.

Disclosure:  Long on YHOO

In this corporate showdown at the Yahoo Corral  I think Jerry Yang and David Filo have drawn the unfortunate roles of Billy Clanton and Frank McLaury

I got a huge kick out of Kara Swisher's disturbing picture of the corporate death match:

... another boost today with a classic wrestling double-body slam that Icahn and Microsoft CEO Steve Ballmer perpetrated on Yang today by unveiling their own dysfunctional love match–united in hatred of current Yahoo leadership.

I think however that Kara is very wrong to suggest that Icahn toppling the Yahoo board is "unlikely".   Most of the small shareholders do not have the vested interest in the company of a Yang or Filo and are likely to support Icahn.   More importantly, I think that Yang has lost what appeared to be a sort of hypnotic impact  on some of the existing board members and large shareholders and even if they are not stating this publicly I'm fairly confident they'll be voting for Icahn in August.    For small investors it is painful to turn away a 50%+ boost in share value - for big investors it could spell their eventual ruin.     With billions at stake I think the predictive model here is fairly simple:   Yahoo will be sold either in part or whole to Microsoft at a share price of about $34.     I've been saying this for some time and see nothing to suggest it's not going to happen in August- just a bit later than a rational market model would have suggested because egos and exaggerations, and the legendary Silicon Valley v. Microsoft animosity got in the way.

Disclosure: I'm Long on Yahoo

The whole thing just gets more and more dramatic -- the lack of teen girls notwithstanding. Today, Carl Icahn, who holds a large stake in Yahoo, released a letter to Yahoo shareholders where he says he has spent, like, HOURS on the phone with Ballmer, who was still totally interested in Yahoo. But Ballmer's, like, so worried that Yang and current Yahoo management might "mismanage" the company during the time it takes to get a deal done (because The Federal Trade Commission can take FOREVER, ya know?)

And Ballmer is putting, like, a ton of dough on the line here, so he needs, like, some kind of assurance that Yang and Co. aren't going to go screw things up. And in the last attempts, he just didn't get that, ya know? So Ballmer just HAD to walk away, right? But with a different board, you know, like Icahn's board? Then, maybe Microsoft could forget about the past and get a deal done. In his letter Icahn says:

I strongly believe that in very short order the new board would, subject to its fiduciary duties, be presenting to shareholders either a purchase offer for the whole company or a very attractive offer to purchase "Search" with large guarantees. I hope to continue to be speaking to Steve over the next few weeks; however, since I do not as yet represent the Yahoo! board, both Steve and I do not wish to get into details over price, or even which of these transactions makes the most sense.

So Icahn, who has, like totally, put up his own slate of directors who would work with Ballmer, could really make this deal happen if shareholders would just, you know, LISTEN to him and vote for his board. Totes!

BTW, the whole crew, including Google and AOL guys, will be in Sun Valley this week for the swanky Allen & Co. media conference. It's like a high-power slumber party where deals get done and the press gets excluded. Maybe Yang will ditch Ballmer and Icahn for Time Warner CEO Jeff Bewkes who head AOL. Tune in next week for the latest on Gossip Guys.

Update: Microsoft issued its own statement backing Icahn. If Icahn gains control of the board at the Aug. 1 shareholder meeting, Ballmer would talk deals again, either buying just the search assets or possibly the whole company.

Update 2: Yahoo tells Ballmer, "If you want a deal, say that to my face."

It's now clear that strategy failed and I'm sticking to my prediction when all this began - Yahoo will be sold to Microsoft, who might work with other partners in the deal, for very close to $35 per share.

Microsoft and Yahoo are clearly back at the table and I think it is even clearer than before that a deal will be done.    I'm compelled to say "I told you so" and I'm looking forward to looking up the many foolish stories written last month that suggested the deal was clearly over when it was obvious then and now that this is a deal that is very unlikely to die.

Disclosure:  Long on YHOO