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Yahoo CEO Under Pressure

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The Associated Press

The Tampa Tribune

Published: May 5, 2008

SAN FRANCISCO - Yahoo Inc. Chief Executive Jerry Yang has gotten what he wanted: a chance to prove his company is worth more than the $47.5 billion Microsoft Corp. offered for the Internet pioneer.

It will be a daunting challenge, as Yang likely will be reminded today when investors are expected to show how little they think of Yahoo without a takeover bid on the table. Faced with resistance from Yang and the rest of Yahoo's board, Microsoft withdrew its offer Saturday.

People close to Yahoo said Yang and his team, who told Microsoft they would not sell for less than $37 a share, saw Microsoft's decision as a win.

Yet some Yahoo shareholders, large and small, have indicated that they favored a deal at around $34 to $35 a share. Even those who were holding out for a higher price said a merger with Microsoft made strategic sense.

In the aftermath of the failed takeover, Yahoo shareholders, and probably some among its management, are wondering how low the company stock will go today, and how long it will stay there.

Much will depend on Yahoo's next moves, which could include a partnership with its chief competitor, Google.

Many analysts think Yahoo's stock price, which had climbed nearly 50 percent since Microsoft's initial offer, will surrender most, if not all, of that gain, leaving the Sunnyvale, Calif.-based company's market value around $30 billion.

"This squarely puts the pressure on Jerry Yang to deliver results and shareholder value," Standard & Poor's equity analyst Scott Kessler said. "You are going to see a lot of shareholders just throwing in the towel because they are going to realize it's going to take awhile for the stock to get back to where it was Friday."
Yahoo shares finished last week at $28.67, slightly below the $29.40 per share that Microsoft was offering before Chief Executive Steve Ballmer agreed to raise the offer to $33 per share in a last-ditch effort to get a deal done.

Disillusioned shareholders are bound to question whether the rejection of Microsoft's sweetened $33-per-share offer was driven more by emotion and ego than sound business practices.

"I don't believe that Jerry Yang as a founder, as someone who is emotionally attached to the company, was really looking out for my interest as a shareholder," said Darren Chervitz, co-manager of the Jacob Internet Fund, which owns about 150,000 shares of Yahoo. "I don't think anything Yahoo puts out there is going to be comparable with what Microsoft was offering."

Despite such negative sentiment, Yahoo shares are unlikely to immediately fall back to their $19.18 prebid price, partly because some investors may still be holding out hope that the software maker will renew its takeover attempt if Yahoo continues to struggle.

Yahoo defended its decision, saying it had always thought Microsoft's offer undervalued the company. Officially, the company has shed little light on what it might do next.

"We remain focused on maximizing shareholder value and pursuing strategic opportunities that position Yahoo for success and leadership in its markets," Roy Bostock, Yahoo's chairman, said in a statement late Saturday.

Yahoo and Google recently conducted a two-week test in which Google delivered ads on a small portion of Yahoo searches. The test, which both companies described as successful, was intended to show how much more Yahoo could earn by outsourcing some search ads to Google.

Now Google and Yahoo will have to decide whether to forge a broader partnership.

Information from The New York Times was used in this report.

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