If I were part of the Yahoo! family of shareholders, I’d be having similar thoughts about Jerry Yang. This just in..Yang wants to go back to the table with Steve Ballmer to open up the deal. Of course this time, the price will be a fraction of what was originally offered.

Yang isn’t stupid. This is hubris disguised as stupidity, which is worse. Hubris deludes the holder into thinking they know more than they do. It’s pride that overcomes rationality, clouds judgement and obscures reality. Effective leaders should know better, they should be able to see through hubris, especially when acting on behalf of shareholders. Yang failed miserably. He has, through hubris, crushed Yahoo! beyond repair. Semel started the decline through his arrogance, Yang simply took it in a new direction. When humble self evaluation was desperately needed, Yahoo! got bravado and blind delusion.

This isn’t new for Yahoo! Those goes back to the very cultural foundations of the company. In their glory days, they had a cockiness that makes Google seem positively Uriah Heep-ish (the Copperfield character that was "ever so humble"). But at some point during the past decade, you would have thought that Yang and company would have realized that they were a rapidly fading second place player and would have made the necessary adjustments. Not so. Yahoo! has been suffereing from a massive and chronic case of denial.

Here’s the thing. If Microhoo happens (can’t see how it won’t at this point) it’s still going to be a disaster for search. I’ll reserve judgement on the Display side of things, but I tend to agree with some opinions saying that Microsoft should get out of the media business. Yahoo deal or not, Microsoft doesn’t have the culture to build a successful media business. But let’s just talk about search. If Yahoo! is cocky, Microsoft is ten times so. Microsoft just doesn’t know how to play catch up. This, as I said when people started talking about the original Microhoo deal, is two dysfunctional families joining together. It will distract Microsoft from what they need to do, which is become truly innovative and disruptive in redefining search. They’ll think they bought breathing room. They’re wrong. Yahoo’s search business is obsolete and bleeding market share quickly. And the enormous task of integrating two cultures under the given circumstances will sink both ships. There can be no good that comes from this.

Which is sad. At this point, the only hope for search is Google and some amazing start up somewhere. The mighty haven’t fallen yet, but their shoelaces are tied together in what is essentially a sprint, so it’s only a matter of time.

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Under a newly announced settlement, Carl Icahn and two of his cohorts will be elected to Yahoo’s board of directors.

Following the 2008 annual meeting, the Yahoo! Board will be expanded to 11 members. Carl Icahn will be appointed to the Board and the remaining two seats will be filled by the Board upon the recommendation of the Board’s Nominating and Governance Committee from a list of nine candidates recommended by Mr. Icahn, which includes the eight remaining members of the Icahn slate of nominees and Jonathan Miller, currently a partner in Velocity Interactive Group and former Chairman and CEO of AOL.

OK, so is Icahn still going to press Yahoo for a Microsoft sale? Well, there appears to be some conflicting positions.

Yahoo says (emphasis added)…

“This agreement will not only allow Yahoo! to put the distraction of the proxy contest behind us, it will allow the Company to continue pursuing its strategy of being the starting point for Internet users and a must buy for advertisers,” said Yahoo! Co-founder and Chief Executive Officer Jerry Yang. “No other company in the Internet space has our unique combination of global brand, talented employees, innovative technologies and exceptional assets, attributes that will help us take advantage of the large and growing opportunity ahead of us. I look forward to working together with our new colleagues on the Board to make that happen.”

Everything from Yang screams "we’re not selling, we’re building." Meanwhile Carl Icahn clearly sees things differently…

“I am very pleased that this settlement will allow me to work in partnership with Yahoo!’s Board and management team to help the Company achieve its full potential. While I continue to believe that the sale of the whole Company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo!’s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders…"

He seems to still be gung-ho for a sale to Microsoft, and when you consider that his statement is included in an official Yahoo press release, it’s clear that Yahoo’s board feels the same way.

So, with the proxy battle behind them, will we finally see a Yahoo/Microsoft merger?

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I’ve stayed out of the Microsoft attempted merger of Yahoo so far. But EVERYONE seems to be talking about it from all sorts of angles.

Me? I take the user’s point of view and that’s one I haven’t seen discussed much yet.

Will Yahoo moving to Microsoft be a good thing for users? Let’s take a tour.

Yahoo Messenger users and MSN Messenger users. Wash to bad things for Yahoo’s messenger. They already work together and I doubt that having two huge teams with two huge user bases of hundreds of millions of people trying to work together will bring much new. At worst case the Yahoo team will leave and so Yahoo’s Messenger will stop seeing new features.

Yahoo Mail and Hotmail users. Wash to bad things for Yahoo’s Mail. Same as with the messenger side of things. Eventually I can see Yahoo’s Mail get frozen and so bugs and things won’t get fixed on Yahoo’s side and I can see pressure (advertising, etc) to pull people off of Yahoo and put them on Hotmail or whatever they are calling it now (Microsoft Windows Live Mail).

Flickr. The users of Flickr are very scared of what a Microsoft purchase might mean. But here Microsoft has no significant player, so they’ll probably try to keep the development team intact. Plus, there are a lot of smart people at Microsoft who are into photography (Ansel Adams’ son Michael was at Microsoft Researcher Curtis Wong’s wedding, for instance) So, good things could happen here for Flickr’s users.

Delicious? No real Microsoft competitor and tons of Microsofties love Delicious, so good things ahead, just like Flickr.

Yahoo Maps and Live Maps? I like Microsoft’s Maps better, but there’s some tricks that Yahoo does better. So, if these teams get along we’d probably see an improved version of both services, although I doubt they’d remain separate code bases.

Yahoo Search and Microsoft Live Search? Microsoft is already gaining on relevancy, so that tells me there are still a few smart people at Microsoft working on search. They just don’t have a brand name worth s**t. So, Yahoo’s brand name on top of Microsoft’s search will help Microsoft out a lot. I doubt that we’ll see a Google killer out of the joining of these two companies, though. The sales teams will be joined and will prove profitable for Microsoft. For users, though? I doubt we’ll see anything for years in terms of dramatically better search.

Developer tools and such? Microsoft isn’t threatened by anything Yahoo is doing, although the Pipes and Fire Eagle and other Yahoo teams will probably love working at Microsoft. For users? Join those tools into Ray Ozzie’s new Mesh and we could see some cool new stuff.

Portals? Yahoo’s has more users, more respect, and more features. I don’t see anything major for users either way there.

Finance and Personals sites? I doubt users will see much change there.

So, for users, there’s some negatives, and some positives.

How do you see the Yahoo/Microsoft merger affecting users?

As to Microsoft employee morale? That’ll end up a positive in this deal. After all, Microsoft employees will see their stock go up, not down. That drives morale more than anything.

For board members? Marc Andreessen covers that.

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