by Ed on February 2, 2008

Well, unless you were hiding under a rock yesterday, you saw the announcement that Microsoft offered a bid to acquire Yahoo! Inside the company there was a range of reactions, as you can imagine. But I’ll tell you my own perspective. There’s no inside dirt here, so if you’re looking for secrets, stop reading now.1

Not So Worthless Now, eh?

Yahoo! has always been a somewhat misunderstood company. And certainly a company that is very undervalued. That’s not to say that it does everything right. There are valid reasons some users don’t appreciate Yahoo! practices at times. But we do in general get a bum rap.

Clearly millions upon millions of people use Yahoo! services every day (and like them). If you consider the amount of traffic, users and the raw strength of the brand, our Thursday stock price of $19 was incredibly undervalued. So if nothing else, Microsoft’s fairly generous bid for Yahoo! proves that there actually is value to be had, and my guess is it’s northwards of the $31 per share number they threw at us. Clearly people liked the news since the stock jumped to $28.

At least now you’ll actually start to see articles and blogs pointing out the value that Yahoo! has instead of everything they hate about it. And there is a lot of value. But there’s also still a lot of fat (not just the 1000 people who are about to get layed off). I see people who I really don’t know why they’re still there or quite frankly what they do these days still walking around collecting salaries. It’s more than a little frustrating at times. But I digress…

So Should We Do It?

My feeling (and let’s face it, what the hell do I know) is that we might be stupid not to. In the end, I think it might be the right thing for both Yahoo! and Microsoft. If they could figure out a good way to structure things (keep Y! brand, properties, etc. ditch MSN and merge its technology into Y!), I believe it would be a smart move. I’m sure any agreement we enter into will be well thought out and argued about from top to bottom in lawyer-land (a place of unintelligible language, unthinkable evil and attachĂ© cases). (Update: actually, here’s an interesting way it could be done)

But of course, from the other more emotional angle, it would be pretty sad to have to do it, right? I mean, it’s Microsoft. You know, with the mild-mannered Steve Ballmer. That makes me a little scared. To some of my coworkers, it makes them physically ill. But objectively it also has me a bit intrigued at the possibilities such a merger would unlock.

I look at it this way: this is about the 3rd (or more?) time that MS has tried to do some sort of deal with Yahoo! Each time, Yahoo! said no, we can fix ourselves. But we apparently can’t. I don’t feel the management team has focused Yahoo! enough and I also feel they took way too long to start trimming the fat (I wouldn’t have stopped at 1000). So maybe this is a blessing. I’m sure Microsoft thinks so.

Other Bidders?

I’ve heard about other bidders in the mix from various blogs, but I tend to agree with comments that these other bidders are a much more iffy scenario than a Microsoft deal. And Microsoft is going to be tenacious at this point. There’s no way they can hope to compete with Google without some big game-changer like this. The fact that the letter to the board went public was clearly intentionally done to create I think a reaction from shareholders to force Yahoo!’s hand or something. Also, if you saw that letter they sent out internally (if real), they act like it’s a done deal. Who knows, maybe it is. But I can’t believe that for a second, since there’s so much they’d need to talk about before saying yes.

A Kick in the Pants

But no matter what happens, we’re way more stronger and more valuable now than we were on Thursday. That, plus the potentially more positive press should put us in a much better position than we were. And that is a great thing.

And in Parting…

As you may have heard, Terry Semel left our board the other day. Apparently we paid him half a billion dollars to tank our company. I think it’s time for me to have a go at CEO. Hell, I can screw us up good for that kind of money!

  1. Speaking of secrets, the amount of stuff that happens at Yahoo! that gets broadcast to the outside is out of control. People, shut up!

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