D.F.

Krause

Read D.F.'s bio and previous columns

February 4, 2008

Still Thinking About That $44.6 Billion Offer? Say Yes, You Yahoo!

You are Yahoo. Oh, sorry . . . you are Yahoo! You have problems. Your business model has never really translated into the profit margins you envisioned. Your chief competitor has taken your concept and done it better than you, which is robbing you of market share and eating away at your share price.

You’ve just axed your CEO, but he shouldn’t feel bad. The rancid fourth-quarter earnings reports are expected to be followed by as many as 2,500 new layoffs, so he’ll have lots of company. At least when Ford lays people off by the thousands, and loses money by the billions, it can offer the excuse of being part of an old-fashioned, dying industry. What’s Yahoo’s excuse? “No one uses the Internet anymore”?

Even more amazing, Yahoo has managed all these losses while pulling 130 million unique viewers per day. Do you know how much money I would have if that many people looked at my web site one time? Let alone every day?

So what do you suppose the good folks at Yahoo – sorry, it’s just that this is so stupid – Yahoo! said on Thursday morning when they woke up with their stock at $19 a share, only to receive a call from the folks at Microsoft offering $31 a share, or $44.6 billion total, to take over the company?

You don’t suppose, perhaps, that they gave the only conceivable, logical answer, which would be, “Yes! Oh God Yes! Oh God Thank You Microsoft!!!!!!! Oh Dear Sweet Jesus In Heaven, Where Do I Sign?”

Of course they didn’t say that. That would be logical. That would make sense. That’s not the Yahoo! way of doing things.

They told Microsoft they’d think about it and get back to them.

Now, you may be thinking, “D.F., you moron. You’re in business. You know how this works. This is a negotiating tactic. They’re not going to really say no. They couldn’t possibly be that stupid.”

I would agree with you that even the yahoos! at Yahoo! couldn’t possibly be that stupid, except that they already have been that stupid. Microsoft offered to buy Yahoo a year ago, but then-CEO Terry Semel said Yahoo would be better off on its own. The Yahoo board rewarded Semel for that and many similar decisions by sending him off to Yahoo! Help Wanted Ads to look for a new job.

Now Microsoft is back, this time offering a 62 percent premium over the previous day’s closing stock price because, Microsoft CEO Steve Ballmer says, he is not going to take no for an answer.

I understand it is hard for Yahoo to know what to do. It’s not like it’s obvious or anything. So let me help. The following dialogue from “Ghostbusters” should be instructive:

Gozer (after Dr. Ray Stantz orders her to relocate): Are you a god?

Ray Stantz: No.

Gozer: Then die!

(At this point, lightning flies from Gozer’s fingers and nearly drives the Ghostbusters off the roof of the high-rise where they are standing.)

Winston Zeddemore: Ray, when someone asks you if you’re a god, you say yes!
 

I’m sure you’re picking up what I’m metaphorically putting down. When your company is in a complete tailspin, and some gigantic company with resources up the wazoo (or, if you prefer, Wazoo!) offers you your stock value plus 62 percent to take it off your hands . . . you say yes!

Yahoo offers a great service. I use it every day. But it’s apparently not great enough to be profitable on its own. The best thing about it – the fact that it’s free – is also its biggest problem. Its best chance at long-term viability is to add to the capabilities of a larger company with complimentary products and services.

Yahoo can take the money and turn things over to the people who can hardly breathe without making a profit. Or they can continue spiraling into bankruptcy. I know. It doesn’t sound hard to me either. But then, I’ve never stood atop a high-rise battling a prehistoric Sumerian god. Maybe those who have know something I don’t. But I doubt it.

Yahoo! You say yes!

Click here to talk to our writers and editors about this column and others in our discussion forum.

To e-mail feedback about this column, click here. If you enjoy this writer's work, please contact your local newspapers editors and ask them to carry it.