Corporate Wolves Circle Yahoo’s Goose

Prediction: Yahoo broken up in 2009

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Alright, my first prediction for 2009: Yahoo gets carved up like a Christmas goose. No more corporate pussyfooting, no more billionaire shouting matches, just the stealthy, calculated approach toward the crippled wheezing of the would-be carrion. Soon it will all be over in a rush of feathers and blood.
Corporate Wolves Circle Yahoo's Goose
Surely only Kevin Bostock, Jerry Yang, and Steve Ballmer know what really happened to cause Microsoft’s courtship to go sour. The Occam’s Razor version is that Ballmer was generous, Yang and Bostock were proud, and Balmer got his feelings hurt and retaliated against their all with his nothing. But perhaps just before Yahoo was about to accept the original proposal, Ballmer, like Blockbuster later did with Circuit City, got a glimpse of the inevitable future: the heart on Yahoo’s sleeve would hit the ground shortly before the rest of it did.

For even as Carl Icahn seemed certain to wrest control of Yahoo’s poison pill and force the sale, Ballmer kept his cold distance. What seemed like pride at the time may turn out to be prudence. Ballmer’s strategy (my imagining of his strategy) matched President-Elect Obama’s in the end. Stand back, hold your punches and let the other side defeat itself. When it does, buy from the clearance rack just ahead of liquidation.

Last week Icahn purchased seven million more shares in Yahoo, at around $10 and not $25 like last spring, upping his stake to five percent. A quietly confident move as Yahoo prepares to layoff employees, somehow speaking louder than his finagling of proxy to veto Bostock and Yang amid those gloriously venomous letters between the three.
Corporate Wolves Circle Yahoo's Goose
Again, just as Icahn was about to force his hand, he suddenly (and anticlimactically) withdrew it, and spectators marveled at the sudden appearance of mercy at the hands of a corporate raider. Perhaps it wasn’t sincere mercy, but instead a sense of clairvoyant faith that time would prove him right, that the fog of Bostock’s righteous anger would clear and the simple truth would emerge.

Now, as Bostock and Yang are bled of credibility, as Google’s search deal with Yahoo, thanks to Microsoft and mysterious corn growers,  collapses under government scrutiny, and as Icahn ups his stake, there are new players on the stage. Amid speculation Google CEO Eric Schmidt could exit Mountain View for Washington, or even (in a Hail Mary pass of predictions) sidle over to Sunnyvale to take over Yang’s intended-to-be-temporary reign, new heavy-hitters emerge, each with their own entangling alliances.

While America feasted last week, Britain’s Times Online was reporting ex-chairman and CEO of AOL Jonathan Miller and Ross Levinsohn, former president of MySpace parent Fox Interactive Media, were selected to lead the new management team as Yahoo and Microsoft reenter discussions, this time with only the search business on the table.

The rumored asking price for Yahoo’s search business: $20 billion. Levinsohn has since told Kara Swisher that the report was “total fiction,” and Swisher notes Yahoo’s current entire market cap is just $16 billion.

Since Levinsohn’s denial new reports have emerged that Levinsohn, Miller, and News Corp. President Peter Chernin all met with Yahoo to audition for the role of the new CEO, and that Miller himself—whose candidacy as an Icahn-backed alternative board member was withdrawn due to his noncompete agreement with AOL—was tapping foreign investors to raise money for a different bid on Yahoo, this one as reported also severely overpaying at an offering of $30 billion. Then again, he may have just been raising money for his own venture capital firm.

Nevertheless, rumors were enough that Yahoo shares took a couple of steps up the long hill toward restoration. In other words, all we have at this junction is chatter, but the same names keep popping up, all of them excellent corporate chess players, all them intricately tied to one another. Icahn holds a significant stake in AOL/TimeWarner as well as Yahoo. Miller has his obvious ties with Icahn, and now with Levinsohn, who was personally tapped by Rupert Murdoch to run his digital media division and who no doubt worked closely with Chernin at News Corp., a company Microsoft once propositioned in a half-hearted revisiting of a Yahoo buyout. News Corp. sort of sniffed and walked away.

But that’s a long list of rich white guys with overlapping goals and histories. Icahn’s wanted a sale all along and will not, if he can help it, lose billions in front of everybody. Murdoch and News Corp. lack one major online moneymaker: a search engine; MySpace and Yahoo could make a beautiful combination as well. Microsoft and AOL/TimeWarner have similar lusts for larger search markets, and Yahoo is a golden ticket to that missing revenue.

And if Schmidt steps down? Those circling wolves just eat sooner rather than later. I don’t want to get too grandiose about this prediction by using a term like megaconglomerate. It’s tempting, exciting, and spooky to think of the sudden congealing of News Corp., Microsoft, AOL/TimeWarner, and Yahoo as the collective Power Ranger required to take down Google.

It may also give Google a little too much credit. Instead, let’s keep it in simple and bloody reality by saying Yahoo’s days are numbered as the company stares down a three-headed beast waiting for the right moment to tear it apart.    

Corporate Wolves Circle Yahoo’s Goose
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