yahoo – Silicon Valley Technology Blog

My Version of Yahoo’s Turnaround Plan – Focus on Management Team and New Players

Boomtown has a post speculating that Carol is taking the :bull by the horns” and charging hard to make changes. First up an earnings call that will surely be a bad report.

In the NFL they talk about franchise players. In business and startups they talk about the management team. Here Yahoo has one clear short term goal – GET A TEAM. More importantly get some ‘franchise players’.

There are more than a few great and wacky ideas that Yahoo could do, but if were advising Carol I’d say focus on the management team first. Overhaul that team. Waive all the people not performing, get a great staff, trade for players who want to play for you, and sign some fresh new talent.

Remember Yahoo still has a great revenue stream and a massive user base. Get the management and players then make the big moves.

Entire Offer Letter For Carol Bartz New CEO of Yahoo

I would have taken the job for $500k and 2.5 million shares. Well their email must have hit my spam folder. 🙂

Here is her offer: I wish her the best of success. I’ve been a big Yahoo fan and hope they can turn that ship around toward calmer waters.

January 13, 2009

Carol Bartz
701 First Avenue
Sunnyvale, CA 94089

Dear Carol:

On behalf of Yahoo! Inc. (the “Company”), I am pleased to offer you the position of Chief Executive Officer of the Company, reporting to the Company’s Board of Directors (the “Board”), with the authority and duties set forth in the Company’s By-laws. You will be appointed to the Board upon your commencement of employment and, subject to legal limitations, the Board will nominate you for reelection to the Board on an ongoing basis during the Term (as defined below) when your then term as a director expires. For purposes of this letter agreement (this “Agreement”), your first day of work at the Company, which shall be January 13, 2009, will be considered your “Employment Start Date”. Your employment with the Company will be subject to the terms of this Agreement for the period ending December 31, 2012 (the period commencing on your Employment Start Date and ending December 31, 2012, the “Term”) unless extended by the mutual written agreement of the Company and you or terminated earlier as provided herein. Notwithstanding the foregoing, certain provisions of this Agreement, as provided herein or implied by their terms (including but not limited to the Proprietary Agreement (as defined below)), will survive any termination of the Term or your employment. Certain terms used herein are defined in Appendix A hereto.

1. Compensation. Your starting annual base salary will be at the rate of one million dollars ($1,000,000) per annum, less applicable taxes and withholdings, paid in accordance with the Company’s normal payroll practices and subject to annual review for increase (“Base Salary”). You will also be eligible to receive an annual target bonus of two hundred percent (200%) of your annual Base Salary (“Target Bonus”) to be determined by the Compensation Committee of the Board (the “Compensation Committee”) in its discretion based on your performance and the Company’s performance for the relevant year. The bonus program will have a maximum bonus of two (2) times the annual Target Bonus. To the extent that the Company adopts a bonus program subject to Code Section 162(m), your bonus will be part of that program. Any bonus payment will be subject to applicable taxes and withholdings. To qualify for the bonus, you must remain continuously employed with the Company through the date that any bonus is approved by the Compensation Committee, subject to the provisions of this Agreement and the program. Bonuses, except as otherwise provided in any bonus or other plan adopted by the Compensation Committee, will be paid in the calendar year next following the fiscal year for which it is earned.

2. Inducement Stock Option Grant. As a part of the Company team, we strongly believe that ownership of the Company by our employees is an important factor to our success. Therefore, as part of your compensation, the Compensation Committee will grant you at its next scheduled meeting at which equity grants are to be made (currently scheduled for January 30, 2009) (the “Grant Meeting”) an option to purchase five million (5,000,000) shares of the Company’s common stock (the “Inducement Option”). The per share exercise price for the

Inducement Option will be the fair market value of a share of the Company’s common stock on the date of grant as determined by the Compensation Committee. The Inducement Option will be issued under, and be subject to, the terms and conditions of the Company’s 1995 Stock Plan, as amended (the “Plan”), and, to the extent not inconsistent herewith, the applicable notice of stock option grant and stock option agreement (including the price and share number adjustments therein). Vesting of the Inducement Option is contingent on your continued employment with the Company through each vesting date. The Inducement Option shall be exercisable for seven (7) years from the date of grant, subject to earlier termination as provided herein, in the Plan and the applicable notice of stock option grant and stock option agreement.

Except as otherwise provided herein, the shares subject to the Inducement Option will vest based on the attainment of average closing prices for the Company’s common stock as reported on the NASDAQ Global Select Market, or, if the Company’s common stock is no longer traded on the NASDAQ Global Select Market, the principal market on which the Company’s common stock is traded (the “Market”) for twenty (20) consecutive trading days after the Grant Meeting and prior to January 1, 2013 (or, if a Change in Control occurs prior to January 1, 2013, the price of the Company’s common stock on the Market immediately preceding the closing of the Change in Control (the “Change In Control Price”), even if such price is not maintained for twenty (20) consecutive trading days) (in either case, the “Average Price”) as follows: (i) one third (1/3) (equal to 1,666,667 shares) if the Average Price is equal to or greater than one hundred and fifty percent (150%) of the exercise price; (ii) an additional one sixth (1/6) (equal to 833,333 shares) if the Average Price is equal to or greater than one hundred and seventy-five percent (175%) of the exercise price; (iii) an additional one sixth (1/6) (equal to 833,334 shares) if the Average Price is equal to or greater than two hundred percent (200%) of the exercise price; (iv) an additional one twelfth (1/12) (equal to 416,666 shares) if the Average Price is equal to or greater than two hundred and twenty-five percent (225%) of the exercise price; (v) an additional one twelfth (1/12) (equal to 416,666 shares) if the Average Price is equal to or greater than two hundred and fifty percent (250%) of the exercise price; and (vi) an additional one sixth (1/6) (equal to 833,334 shares) if the Average Price is equal to or greater than three hundred percent (300%) of the exercise price (each such target price level shall be referred to as a “Vesting Level”). Furthermore, if: (i) an Open In Contemplation Event exists on December 31, 2012 as a result of a CIC Agreement entered into while you were employed by the Company; (ii) the related Change in Control contemplated by the CIC Agreement closes on or after January 1, 2013; and (iii) you are employed by the Company on the date of such closing or you were terminated by the Company without Cause or for Disability, you terminate for Good Reason or your employment is terminated as a result of your death between the signing of the CIC Agreement and closing of such related Change in Control, a special measurement of the Average Price shall be made based on the price of the Company’s common stock on the Market immediately preceding the closing of the Change in Control contemplated by the CIC Agreement, and, if an additional Vesting Level is attained, an additional portion of the Inducement Option shall vest at such time. If your employment terminates for any reason other than as specified above before the closing of the related Change in Control, or, if the obligation to close the Change in Control under the CIC Agreement terminates, the special measurement will not apply. Furthermore, the special measurement will be the only vesting measurement of the Inducement Option on or after January 1, 2013. Each Vesting Level will be equitably adjusted by the Compensation Committee at the same time as adjustments are made in

accordance with Section 16 of the Plan with regard to “Adjustments Upon Change in Capitalization, Corporate Transactions” in a manner similar to and subject to the same requirements as the exercise price under Section 16 of the Plan. Vesting shall occur only one time at each applicable Vesting Level.

The stock option grant agreement and notice of stock option grant will be substantially in the forms currently used under the Plan and filed with the Securities and Exchange Commission, as modified for the provisions hereof. Shares received upon the exercise of the Inducement Option must be held until January 1, 2013, except in the event of your earlier death or at or after a Change in Control.

3. Make-Up Grant. As a result of the forfeiture of equity grants and post-employment medical coverage at your current employer, the Compensation Committee will grant you at the Grant Meeting makeup equity (the “Make-Up Equity Grant”) and cash (“Make-Up Cash”) with an aggregate grant date value equal to ten million dollars ($10 million), payable twenty-five percent (25%) in cash and seventy-five percent (75%) in restricted stock measured based on the closing price of the Company’s common stock as of the grant date. The Make-Up Equity Grant will vest, and the Make-Up Cash will vest and be settled, in equal and proportionate quarterly installments during 2009 (with the final vesting on December 26, 2009) with payment of the cash within three (3) days of vesting.

The Make-Up Equity Grant and Make-Up Cash shall be subject to clawback (based on the closing price of the Company’s common stock at the time of vesting with respect to the Make-Up Equity Grant) if you are terminated by the Company for Cause or you terminate without Good Reason as follows: (i) one hundred percent (100%) if such termination occurs during 2009; (ii) seventy-five percent (75%) if such termination occurs during 2010; (iii) fifty percent (50%) if such termination occurs during 2011; and (iv) twenty-five percent (25%) if such termination occurs during 2012. Notwithstanding the foregoing, the clawback will only apply to the net after tax amount received by you (based on the full amount received by you, reduced by the shares and cash utilized to cover withholding or otherwise used by you to pay federal, state and local income tax obligations), except that in the first year of employment it shall include all amounts. In all other cases, there shall be no clawback.

The Make-Up Equity Grant restricted stock will be entitled to any dividends paid, provided that any cash dividends and any dividends of property payable with regard to unvested restricted stock shall remain forfeitable on the same basis as the restricted stock, and cash dividends will be paid out immediately following vesting. The Make-Up Equity Grant will be adjusted by the Compensation Committee at the same time as adjustments are made in accordance with Section 16 of the Plan with regard to “Adjustments Upon Change in Capitalization, Corporate Transactions” in a manner similar to and subject to the same requirements under Section 16 of the Plan. The Make-Up Equity Grant will be substantially in the form currently used by the Company and filed with the Securities and Exchange Commission for restricted stock grants, as modified for the provisions hereof.

4. Annual Grants. You shall be granted annual equity grants, with due regard for your position, at such time as grants are generally made to other senior executives of the Company, the amount and term of such grants being in the sole discretion of the Compensation Committee.

It is currently contemplated that the 2009 grants will be made in February 2009 and the Company will recommend a grant to you at that time of a grant date value of approximately eight million dollars ($8 million) based on the methodology utilized by the Company to value grants. Such annual grants shall be subject to the same terms and conditions as the standard awards generally granted to other senior executives, except as otherwise provided herein, and made when awards are generally made to other senior executives.

5. Benefits.

(a) Benefits. You will be eligible to participate in the benefit package available to senior Company executives upon satisfying eligibility conditions, including health insurance benefits (medical, dental and vision), life insurance, short term and long term disability, the Employee Stock Purchase Plan, 401(k) Plan, and Flexible Spending Plan (Healthcare Reimbursement Account and/or Dependent Care Reimbursement Account). Please refer to benefit plan documents for eligibility. Of course, the Company may change its benefits at any time. You will also be entitled to Post-Employment Health Coverage.

The Company will reimburse you for reasonable business expenses incurred in connection with your employment, upon presentation of appropriate documentation, in accordance with the Company’s expense reimbursement policies and you will be eligible to participate in the travel policy established by the Company generally for its senior management. The Company will also pay your legal, financial and other advisory fees incurred in connection with negotiating this Agreement up to a maximum of one hundred and fifty thousand dollars ($150,000) (based on your attorneys’ and advisors’ normal time charges).

(b) Paid Time Off. You will be entitled to four (4) weeks of vacation per year in accordance with the Company’s vacation policy, including as to usage, carryover and payment for unused vacation. In addition, the Company currently provides eligible employees with ten (10) paid holidays and two (2) personal floating holidays each year.

6. Termination of Employment. If your employment under this Agreement terminates, the provisions below will apply.

The Company may terminate your employment with or without Cause or for Disability. You may terminate your employment with or without Good Reason. Your employment will terminate upon your death, and your employment under the terms of this Agreement will terminate on December 31, 2012 (“Expiration”), unless you and the Company agree otherwise in writing or a Limited Automatic Extension occurs (in which case your employment under the terms of this Agreement will automatically terminate on the Extended Expiration Date, unless you and the Company agree otherwise in writing). Any continuation of employment after Expiration shall not be subject to the terms of this Agreement other than the provisions for Post-Employment Health Coverage, Section 6 (as specifically provided herein) and Sections 8 through 16 hereof, except to the extent otherwise agreed in writing. You shall, on a termination of employment, have the right to receive the termination benefits set forth below and continuation of your rights to indemnification and director’s and officer’s liability insurance with regard to your prior service with the Company, but no other rights to receive any amounts from

the Company or its affiliates. Termination of employment at or after Expiration shall not be treated as a termination without Cause or a termination for Good Reason, except to the extent specifically provided in this Section 6. Any equity grants made after Expiration shall not be subject to the provisions of this Agreement, provided that equity grants made prior to Expiration shall continue to be subject to the terms hereof.

Receipt on termination of employment (whether before or after Expiration) of any amounts, benefits or additional vesting or extended exercise periods (other than under equity awards granted after Expiration) beyond the Accrued Amounts and amounts, benefits, additional vesting or extended exercise periods which otherwise would be received on a termination by you without Good Reason (the “Standard Benefits”) shall require you to execute and deliver to the Company (with the period to revoke expiring without your revocation) within sixty (60) days of such termination a release in the form annexed hereto as Exhibit A (with such changes therein as reasonably requested by the Company to protect the enforceability of the release and the intent thereof) (the “Release”) and compliance with the last sentence of this paragraph. No amounts other than the Accrued Amounts and the Standard Benefits shall be paid prior to the effectiveness of the Release and no amounts that are “nonqualified deferred compensation” within the meaning of Section 409A shall be paid prior to the sixtieth (60^th) day following termination of employment, except as provided below. To the extent due on or prior to such sixtieth (60^th) day, such amounts shall be paid on the sixtieth (60^th) day, provided that the Make-Up Cash shall be paid, to the extent not previously vested and paid, on the first business day after the effectiveness of the Release. Upon any termination of employment, you shall promptly resign from the Board and all officerships, directorships or fiduciary positions with the Company and its affiliates.

Notwithstanding anything else herein, the timing of distributions of any “nonqualified deferred compensation” (within the meaning of Section 409A) that is part of the annual grants shall be set by the Compensation Committee at the time of the annual grants as part of the grant, and the provisions herein with regard to having the benefit of more favorable provisions of similar standard grants generally made to other senior executives or under the Change of Control Severance Plan or similar plan generally for senior executives shall not apply to equity awards that constitute “nonqualified deferred compensation” (within the meaning of Section 409A) to the extent necessary to avoid adverse taxation under Section 409A.

You shall receive the following amounts on a termination of employment prior to Expiration or, if applicable, at or prior to the Extended Expiration Date:

(a) Death, Disability, Termination Without Cause or Good Reason Termination.

(i) Accrued Amounts.

(ii) Pro Rata Bonus.

(iii) The Make-Up Equity Grant and Make-Up Cash shall fully vest and cease to be subject to clawback and the Make-Up Cash shall be paid, to the extent not previously vested and paid on the first business day after the effectiveness of a Release.

(iv) Pro Rata Treatment of the Inducement Option.

(v) Any equity grants made during the Term (other than the Make-Up Equity Grant and the Inducement Option) will be treated in accordance with their terms and as follows: (A) any vested options shall be exercisable during the applicable Exercise Period; and (B) any grants with time-based vesting criteria shall vest as provided in the applicable grant but at a minimum, pro rata (based on the relative number of months you were employed by the Company during the vesting measurement period to the number of months in the vesting measurement period) with any applicable performance-based vesting criteria for any open periods being established in the equity grant by the Compensation Committee as either remaining open until actual results are determined or paid at target, provided that with regard to the 2009 annual grant you shall be treated as having an additional twelve (12) months of employment in calculating the pro rata amount. Other than with regard to the Inducement Option and the Make-Up Equity Grant, if the standard grants generally made to other senior executives issued at the same time and of the same type as grants made to you during the Term contain terms that are more favorable to you, you will also have the benefit of any such more favorable terms for the related grant. If an award generally requires employment through a period to be received, the vesting measurement period shall be that employment period even if all or a portion of the award is measured over a shorter performance period.

(vi) Post-Employment Health Coverage.

(b) Additional Severance on Termination Without Cause or Good Reason Termination.

(i) If your employment is terminated by the Company without Cause or by you for Good Reason during the Term and (ii) and (iii) below do not apply, then in addition to the payment, benefits and treatment under Section 6(a) above, you shall receive an amount equal to your Base Salary and your Target Bonus, which amounts shall be paid in a lump sum on the sixtieth (60^th) day after termination of employment.

(ii) If your employment is terminated by the Company without Cause or by you for Good Reason upon or within two (2) years after a Change in Control that occurs during the Term (whether such termination occurs before or after Expiration) and (iii) below does not apply, then in addition to the payment, benefits and treatment under Section 6(a) above, you shall receive: (A) an amount equal to two (2) times the sum of your then Base Salary and Target Bonus, which shall be paid in a lump sum on the sixtieth (60^th) day following termination; and (B) in lieu of Section 6(a)(v) above with regard to vesting treatment of the 2009 grants, full vesting of the 2009 annual grants with, for any 2009 annual grant with performance vesting, performance vesting based on actual performance vesting for any closed periods and target levels for any open periods.

(iii) If after the execution of a CIC Agreement and prior to the earlier of termination of the obligations to close under such CIC Agreement or the two (2) year period after consummation of the related Change in Control contemplated by the CIC Agreement, your employment is terminated by the Company without Cause or by you for Good Reason, whether during the Term or thereafter, you shall receive: (A) if the Change in Control has occurred prior

to termination, the payment, benefits and treatment under Sections 6(a) and 6(b)(ii) above; and (B) if the Change in Control has not occurred prior to termination, the payment, benefits and treatment under Sections 6(a) and 6(b)(i) above upon termination of employment, and, if the related Change in Control contemplated by the CIC Agreement is consummated prior to termination of the obligations to close under the related CIC Agreement, you shall, in addition, receive the payment, benefits and treatment pursuant to Section 6(b)(ii) above, less the payment, benefits and treatment, as the case may be, under Section 6(b)(i) upon such Change in Control.

(iv) Other than with regard to the Inducement Option and the Make-Up Equity Grant, if the standard grants generally made to other senior executives issued at the same time and of the same type as grants made to you during the Term contain terms that are more favorable to you, you will also have the benefit of any such more favorable terms for the related grant.

(v) The right to exercise any vested options granted during the Term, including the Inducement Option, during the applicable Exercise Period.

(c) Termination for Cause or Without Good Reason.

(i) Accrued Amounts.

(ii) Post-Employment Health Coverage.

(d) Termination of Employment At or After Expiration Other Than By the Company for Cause.

(i) Accrued Amounts.

(ii) For any equity grants made during the Term (other than the Inducement Option and the Make-Up Equity Grant), vesting as provided in the applicable grant but at a minimum, pro rata vesting (based on the relative number of months you were employed by the Company during the vesting measurement period to the number of months in the vesting measurement period) of all equity awards, with any applicable performance-based vesting criteria for any open periods being established in the equity grant by the Compensation Committee as either remaining open until actual results are determined or paid at target, provided that with regard to the 2009 annual grant, you shall be treated as having an additional twelve (12) months of employment in calculating the pro rata amount. Other than with regard to the Inducement Option and the Make-Up Equity Grant, if the standard grants generally made to other senior executives issued at the same time and of the same type as grants made to you during the Term contain terms that are more favorable to you, you will also have the benefit of any such more favorable terms for the related grant. If an award generally requires employment through a period to be received, the vesting measurement period shall be that employment period even if all or a portion of the award is measured over a shorter performance period,

(iii) The right to exercise any vested options granted during the Term, including the Inducement Option, during the applicable Exercise Period.

(iv) Post-Employment Health Coverage.

(v) If Section 6(b)(ii) or (iii) applies, you shall receive any amounts due thereunder.

(e) Change in Control.

(i) If a Change in Control occurs during the Term or thereafter and the Company’s outstanding equity awards granted during the Term are continued, assumed or substituted, such grants shall be treated as provided in the applicable grant, but at a minimum, (A) performance targets that have not expired will continue (subject to adjustment of exercise prices and share numbers in accordance with the applicable plan and grant adjustment provisions consistent with Sections 2 and 3 hereof); and (B) equity awards granted during the Term (other than the Inducement Option and the Make-Up Equity Grant), will be treated in the same manner as other grants under the applicable plan generally made to other senior executives issued at the same time and in the same form, including, in such case, any better treatment under the Company’s Change in Control Employee Severance Plan or similar plan (to the extent such a plan exists and applies) applicable at the time of the Change in Control with regard to such grants, provided that for clarity, in no event shall the vesting of the Inducement Option be accelerated even if other grants are so treated or so covered under the Change in Control Employee Severance Plan or similar plan, and provided further that such treatment shall not provide for any treatment that would prevent the equity provisions set forth in Section 6(b)(ii)(B) above from applying if your employment was immediately terminated thereafter by the Company without Cause or by you for Good Reason.

(ii) If a Change in Control occurs during the Term or thereafter and (i) above is not applicable, then (A) the Inducement Option will vest or be forfeited, as the case may be, at the time of the Change in Control, to the extent not previously or thereupon vested, based on whether the Change In Control Price is at or in excess of the applicable Vesting Level; (B) the Make-Up Equity Grant and Make-Up Cash shall fully vest and cease to be subject to clawback and the Make-Up Cash shall be paid, to the extent not previously vested and paid, on the first business day after the effectiveness of a Release; and (C) equity awards granted during the Term (other than the Inducement Option and the Make-Up Equity Grant) will be treated in the same manner as other grants under the applicable plan generally made to other senior executives issued at the same time and in the same form, including in such case, any better treatment under the Company’s Change in Control Employee Severance Plan or similar plan (to the extent such a plan exists and applies) applicable at the time of the Change in Control with regard to such grants, provided that 2009 annual grants shall fully vest (based on actual performance vesting for closed periods and at target for open periods).

7. Parachute Payments. In the event that the payments and benefits provided to you herein or otherwise by the Company constitute “parachute payments” within the meaning of Code Section 280G and would, but for this provision, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then your payments and benefits shall be either (i) delivered in full or (ii) delivered as to such lesser extent, as you may elect, as would result in no portion of such amounts being subject to the Excise Tax, whichever of the foregoing results in the receipt by you on an after-tax basis of the greatest amount, notwithstanding that all of some

of the amounts may be taxable under Section 4999 of the Code. If a reduction is to occur pursuant to the prior sentence, unless an alternative election is permitted by, and does not result in taxation under, Section 409A and timely elected by you, the payments and benefits shall be cutback in the following order: any cash severance you are entitled to (starting with the last payment due), then other cash amounts that are parachute payments (starting with the last payment due), then any stock options that have exercise prices higher than the then fair market value price of the stock (based on the latest vesting tranches), then restricted stock and restricted stock units based on the last ones scheduled to be distributed and then other stock options based on the latest vesting tranches.

8. Proprietary Agreement. As an employee of the Company, it is likely that you will become knowledgeable about confidential and/or proprietary information related to the operations, products and services of the Company and its clients. To protect the interests of both the Company and its clients, all employees are required to read and sign an Employee Confidentiality and Assignment of Inventions Agreement (“Proprietary Agreement”) prior to beginning employment. A copy of this agreement is attached hereto as Exhibit B and is deemed to be part of this Agreement. An additional copy of the Proprietary Agreement is also enclosed with this Agreement. Upon signing this Agreement, you shall be deemed to sign such Proprietary Agreement. For our records, please also sign the copy attached hereto and return it along with your signed copy of this Agreement.

9. Proprietary Information Obligations Checklist. Similarly, you may have confidential or proprietary information from a prior employer that should not be used or disclosed to anyone at the Company. Therefore, the Company requests that you read, complete, and bring with you on your first day of employment, the enclosed Proprietary Information Obligations Checklist to this effect. In addition, the Company requests that you comply with any existing and/or continuing contractual obligations that you may have with your former employers. You represent to the Company that you are not subject to any agreement or other limitation that you would be in violation of by executing this Agreement, commencing work with the Company or performing your duties with the Company (recognizing that you are subject to confidentiality obligations with regard to your prior employer and the various boards you serve on).

10. Obligations.

(a) During your employment, you shall devote your full business efforts and time to the Company. The Company and you recognize that you are currently on several boards of directors of publicly traded companies and you agree that you shall reduce the number of boards of publicly traded companies on which you serve to one (1) board other than the Company, as soon as feasible in your good faith judgment and with recognition of your fiduciary duties to the Company and such companies. You shall not be precluded from engaging in appropriate civic, charitable or religious activities, from serving on the board of directors of other companies that are not competitors to the Company and that are approved by the Board, subject to Section 11 below, or from managing your and your family’s personal passive investments, as long as, in each case, the activities do not materially interfere or conflict with your responsibilities to, or your ability to perform your duties of employment by, the Company. Any outside activities must be in compliance with the Company’s Code of Ethics, including approval procedures.

(b) In the event of a restatement of financial results, the Compensation Committee will review all incentive awards for performance periods during the restated period (whether in cash or equity), and all equity grants vesting or paid based on achievement of performance goals or stock price related in whole or part to the restated financial period. If any such award would have been lower had the level of achievement of applicable financial goals been calculated based on such restated financial results or a grant not have vested or not been paid in the sole discretion of the Compensation Committee, the Compensation Committee may, if it determines appropriate in its sole discretion, to the extent permitted by applicable law, require the reimbursement by you of the incremental portion of the bonus in excess of that which would have been paid to you based on the restated financial results, unvest equity grants and require repayment of profits on equity that was vested or paid on such results and realized upon by you. You shall promptly comply with any such request of the Compensation Committee. This provision is in addition to, and not in lieu of, any requirements under the Sarbanes-Oxley Act or any plan or grant and shall apply notwithstanding anything to the contrary in the Plan, any applicable award agreement or any other provision of this Agreement.

11. Noncompetition During Employment. You agree that, during your employment with the Company you will not engage in, or have any direct or indirect interest in any person, firm, corporation or business (whether as an employee, officer, director, agent, security holder, creditor, consultant, partner or otherwise) that is competitive with the business of the Company, including, without limitation, any then-current activities relating to providing Internet navigational products or services and any then-current activities providing search, advertising services, e-mail, chat, e-commerce, instant messaging, content (e.g., music, video), ISP (e.g., connectivity, bandwidth or storage) or other Internet-based delivery or functionality. Notwithstanding the preceding sentence: (i) you may own not more than 1% of the securities of any company whose securities are publicly traded; and (ii) you shall not be prohibited from serving on the Board of Directors of Cisco Systems, Inc., subject to the above limits regarding the number of public board memberships, except in the event that Cisco Systems, Inc. is a direct competitor of the Company or otherwise a material fiduciary issue involving a fiduciary duty occurs; the parties acknowledging and agreeing that as of the date hereof, Cisco Systems, Inc. is not a direct competitor of the Company.

12. Cooperation. During the Term and thereafter, whether or not then employed by the Company, you agree to reasonably cooperate with and make yourself available on a continuing basis to the Company and its representatives and legal advisors in connection with any matters in which you are or were involved or any existing or future claims, investigations, administrative proceedings, lawsuits and other legal and business matters, as reasonably requested by the Company. You also agree that within five (5) business days of receipt (or more promptly if reasonably required by the circumstances) you shall send the Company copies of all correspondence (for example, but not limited to, subpoenas) received by you in connection with any legal proceedings involving or relating to the Company, unless you are expressly prohibited by law from so doing. You agree that you will not voluntarily cooperate with any third party in any actual or threatened claim, charge, or cause of action of any nature whatsoever against the Company and/or any of the Company’s subsidiaries and/or affiliates. You understand that nothing in this Agreement prevents you from cooperating with any government investigation.

13. Employment At-Will. Please understand that this Agreement does not constitute a contract of employment for any specific period of time, but will create an employment at-will relationship that may be terminated at any time by you or the Company, with or without Cause and with or without advance notice, provided that you shall give the Company at least thirty (30) days’ written notice of any voluntary resignation. The at-will nature of the employment relationship may not be modified or amended except by written agreement by the Board Chairman and you.

14. Code of Conduct and The Company Policies. The Company is committed to creating a positive work environment and conducting business ethically. As an employee of the Company, you will be expected to abide by the Company’s policies and procedures including, but not limited to, the Company’s Guide2Working@Yahoo! and the Company’s Code of Ethics. The Company requests that you review, sign and bring with you on your Employment Start Date, the enclosed Code of Ethics@Yahoo! and At Will Employment, Guide2Working@Yahoo! and Privacy Policy Acknowledgment Forms. For purposes of the Inducement Grant, the Make-Up Equity Grant and the annual grants made during the Term, the term “stock dividend” under Section 16 of the Plan shall include dividends or other distributions of the stock of the subsidiaries of the Company.

15. Indemnification. The Company and you shall enter into the Company’s standard form of indemnification agreement for executive officers. You shall be provided with director’s and officer’s liability insurance coverage to the same extent as other executive officers and as provided in such policies for executive officers serving as directors. Such coverage shall continue after your service with the Company ceases while you have continuing liability with regard to your actions or inactions on behalf of the Company on the same basis as coverage for other former officers and directors.

16. Non-Disparagement. You agree, other than with regard to employees in the good faith performance of your duties with the Company while employed by the Company, both during and for five (5) years after your employment with the Company terminates, not to knowingly disparage the Company or its officers, directors, employees or agents in any manner likely to be harmful to it or them or its or their business, business reputation or personal reputation. The Company will direct its Chairman, the Chief Yahoos and the named executive officers of the Company, other than in the good faith performance of their duties to the Company or in connection with their fiduciary duties to the Company and applicable law, both during and for five (5) years after your employment with the Company terminates, not to knowingly disparage you in any manner likely to be harmful to you or your business reputation or personal reputation. The foregoing shall not be violated by statements which are truthful, complete and made in good faith in response to any question, inquiry or request for information required by legal process or governmental inquiry.

17. Entire Agreement; Notice.

(a) This Agreement, including the exhibits hereto, constitute the entire agreement between you and the Company with respect to the subject matter hereof and supersede any and all prior or contemporaneous oral or written representations, understandings, agreements or communications between you and the Company concerning those subject matters. It may not be

terminated or modified orally but only by a writing executed by you and an authorized representative of the Board. This Agreement shall be interpreted under, and governed by, the laws of California without regard to its conflict of law provisions.

(b) Notices shall be delivered in writing either personally or by overnight delivery service and shall be deemed given on the date delivered if delivered personally or the day after the day sent if sent by overnight delivery service. Notices shall be delivered as follows (or such other address as the party shall notify the other by notice sent as aforesaid): (a) if to the Company, at the Company’s executive offices (attn: Chairman) with a copy to the General Counsel; and (b) if to you, at the last home address on file with the Company (with a copy to Gordon Davidson, Esq., Fenwick & West LLP, 801 California Street, Mountain View, California 94041).

18. General 409A Compliance; Income Tax Withholding.

(a) The intent of the parties is that payments and benefits under this Agreement comply with or be exempt from Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. If you notify the Company (with specificity as to the reason therefor) that you believe that any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause you to incur any additional tax or interest under Section 409A and the Company concurs with such belief or the Company (without any obligation whatsoever to do so) independently makes such determination, the Company shall, after consulting with you, to the extent legally permitted and to the extent it is possible to timely reform the provision to avoid taxation under Section 409A, reform such provision to try to comply with Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Section 409A. To the extent that any provision hereof is modified in order to comply with or be exempt from Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to you and the Company of the applicable provision without violating the provisions of Section 409A. The Company shall have no liability to you with regard to any additional tax, penalties or interest you are required to pay pursuant to Section 409A.

(b) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits which is nonqualified deferred compensation under Section 409A upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.” If you are deemed on the date of termination to be a “specified employee” within the meaning of that term under Section 409A(a)(2)(B), then with regard to any payment that is considered deferred compensation under Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided at the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of you, and (ii) the date of your death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this section (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be

paid or reimbursed to you in a lump sum without interest, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

(c) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible for reimbursement, of in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated without regard to expenses reimbursed under any arrangement covered by Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect and (iii) such payments shall be made on or before the last day of your taxable year following the taxable year in which the expense occurred. Tax gross-up payments, if any, shall be made in any event no later than the end of the calendar year immediately following the calendar year in which you remit the related taxes, and reimbursement of expenses, if any, incurred due to a tax audit or litigation shall be made no later than the end of the calendar year immediately following the calendar year in which the taxes that are the subject of the audit or litigation are remitted to the taxing authority, or, if no taxes are to be remitted, the end of the calendar year following the calendar year in which the audit or litigation is completed.

(d) For purposes of Section 409A, your right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

(e) All payments hereunder shall be subject to applicable federal, state and local income tax withholding; provided that all equity grants shall provide for net share withholding at this minimum applicable statutory withholding rates upon exercise or settlement, as the case may be, unless otherwise agreed in writing by the parties.

19. Eligibility to Work in the United States. In order for the Company to comply with United States law, we ask that on your Employment Start Date you bring to the Company appropriate documentation to verify your authorization to work in the United States. The Company may not employ anyone who cannot provide documentation showing that they are legally authorized to work in the United States.

20. Accepting this Offer. This offer is contingent on you starting employment at the Company on or before the Employment Start Date specified above. To accept this offer, please sign this letter in the space provided below and return it, the signed Proprietary Agreement, and the signed Proprietary Information Obligations Checklist to the Executive Vice President, General Counsel and Secretary of the Company.

We look forward to your joining us and hope that you find your employment with the Company enjoyable and professionally rewarding.

Very truly yours,

/s/ Roy Bostock

Roy Bostock

Chairman of the Board

I accept this offer of employment with the Company and agree to the terms and conditions outlined in this Agreement.

/s/ Carol Bartz

Signature

January 13, 2009

Date

Enclosures:
Employee Confidentiality And Assignment Of Inventions Agreement
Proprietary Information Obligations Checklist
Code of Ethics Acknowledgement
At-Will Employment, Guide2Working@Yahoo! and Privacy Policy Acknowledgment Form

APPENDIX A

DEFINITIONS

(1) “Accrued Amounts” shall mean: (i) any accrued but unpaid Base Salary through date of termination paid in accordance with normal payroll practices, unreimbursed business expenses incurred prior to the date of termination paid in accordance with Company policies and accrued but unused vacation time through the date of termination due in accordance with Company plan and policies paid within sixty (60) days following termination, unless earlier as required by law, (ii) other than a termination for Cause during the Term or resignation without Good Reason (except if otherwise provided in a Company plan), any unpaid Prior Year Bonus, and (iii) any other amounts and benefits you are entitled to receive under any employee benefit plan and programs paid in accordance with the terms and provisions of such plans and programs (the “Accrued Amounts”).

(2) “Cause” shall mean (i) repeated failure to attempt in good faith to perform your material duties and responsibilities after written notice of such failure; (ii) willful misconduct of a material nature (without regard to the size of the Company) with respect to the Company or in the performance of your duties; (iii) willful and material violation of the Company’s written policies regarding harassment or discrimination, or of any other material provision of the Company’s Code of Ethics or other similar policy; (iv) a willful and material breach of any restrictive covenant provision contained in any agreement between the Company and you; (v) indictment, conviction or plea of nolo contendere or guilty to a felony or crime of serious moral turpitude; or (vi) willful misconduct having or likely to have, in the good faith opinion of the Board, a material adverse impact on the Company, either economically or by reputation.

(3) “Change in Control” shall be deemed to have occurred if:

	(a)		any person or group of persons (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) together with its affiliates, but excluding (i) the Company or any of its subsidiaries, (ii) any employee benefit plans of the Company or (iii) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company (individually a “Person” and collectively, “Persons”), is or becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing forty percent (40%) or more of the combined voting power of the Company’s then outstanding securities;

	(b)		the consummation of a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation or entity regardless of which entity is the survivor, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined voting power of the voting securities of the Company,

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			such surviving entity or any parent thereof outstanding immediately after such merger or consolidation; or

	(c)		consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets, provided, however, that a sale of the Company’s search business shall not constitute a Change in Control.

(4) “CIC Agreement” shall mean an agreement that would result in a Change in Control if such agreement were consummated.

(5) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(6) “Disability” shall mean the inability of you to have performed your material duties to the Company due to a physical or mental injury, infirmity or incapacity for either a continuous period of ninety (90) days or one hundred eighty (180) days (including weekends and holidays) in any 365-day period. Notwithstanding the foregoing, in the event that as a result of earlier absence because of mental or physical incapacity you incur a “separation from service” within the meaning of such term under Section 409A, you shall on such date automatically be terminated from employment as a Disability termination.

(7) “Exercise Period” shall mean one (1) year after termination of employment or, with respect to any option vesting within ninety (90) days prior to the end of such one (1) year period, ninety (90) days from the applicable vesting date, but in no event beyond the end of the regular term of an award or termination of the grant’s exercisability as a result of an event other than termination of employment.

(8) “Extended Expiration Date” shall mean if a Limited Automatic Extension existed on Expiration, the earliest of (i) termination of your employment with the Company; (ii) if a Change in Control occurs prior to Expiration, two (2) years after the date thereof; or (iii) if an Open In Contemplation Event exists on Expiration, the earlier of the two (2) year period after the related Change in Control or termination of the obligations to close under the CIC Agreement creating the Open In Contemplation Event.

(9) “Good Reason” shall mean: (i) any material breach by the Company of the Agreement or the exhibits hereto; (ii) any material reduction of your authority, duties or responsibilities, provided that not being elected to the Board by the shareholders shall not be a Good Reason event so long as the Board nominates you for the Board if such nomination is permitted by applicable law; (iii) a material reduction by the Company in your Base Salary or Target Bonus target percentage; (iv) the relocation of the principal executive offices of the Company to a location more than fifty (50) miles from its location immediately prior to such relocation and such relocation increases the distance from your residence at the time of relocation to the executive office by a material amount; (v) a change of your position to something other than Chief Executive Officer of the Company (or its ultimate parent operating company in the event of a Change in Control); or (vi) a requirement that you report to a corporate officer or an employee instead of reporting directly to the Board (or its ultimate parent operating company board in the event of a Change in Control); provided, that the foregoing events shall not be deemed to constitute Good Reason unless you shall have notified the Board (or the ultimate

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board, as the case may be) in writing of the occurrence of such event(s) within sixty (60) days of such occurrence (or if on or following a Change in Control, within ninety (90) days) and the Board (or the ultimate board, as the case may be) shall have failed to have cured or remedied such event(s) within thirty (30) business days of its receipt of such written notice and termination occurs within one hundred (100) days of the event (or if on or following a Change in Control, within one hundred and eighty (180) days).

(10) “Limited Automatic Extension” shall mean that either (i) a Change in Control has occurred on or after January 1, 2011 or (ii) an Open In Contemplation Event exists on December 31, 2012.

(11) “Open In Contemplation Event” shall mean a CIC Agreement has been entered into but neither the related Change in Control event has occurred nor the obligations to close the Change in Control under the CIC Agreement have been terminated.

(12) “Post-Employment Health Coverage” shall mean you (including on behalf of your current spouse and any current children that would be eligible dependents if you were an active employee) are entitled to continue to participate in the Company’s health plans for your life following a termination of your employment, subject to the following terms and conditions:

	(a)		you pay the “full cost” of coverage for you and any eligible dependents, which is expected to be the COBRA premium (as adjusted for secondary status to Medicare after you attain age sixty-five (65));

	(b)		you shall no longer be eligible for the coverage hereunder if you commence employment with another employer that has a medical plan for which you are eligible under the general terms of the plan;

	(c)		upon your attainment of age sixty-five (65), this coverage shall only be available if you are unable to obtain a Medicare Gap policy (or to the extent necessary to cover your current spouse while you are married to him and he is unable to obtain a Medicare Gap policy and your current children who would be eligible for coverage under the plan if you were an active employee if they do not have other coverage); and

	(d)		upon your death, either prior to or after your coverage under this arrangement commences, your current spouse if you are married to him at the time of your death (if he does not then have other coverage or the ability to obtain a Medicare Gap policy) and your children who are eligible dependents at the time of your death (if they do not then have other coverage) shall have the right to this coverage respectively, for life in the case of your spouse and while they are eligible dependents in the case of your children, subject to the same conditions as above, but no coverage shall be provided for any future spouse or children of your spouse or any children or spouse of your children.

(13) “Pro Rata Treatment of the Inducement Option” shall mean vesting of a portion of the Inducement Option based on the actual stock prices in the period through December 31, 2012,

with each tranche not vested as of the date of termination of employment multiplied by a fraction, the numerator of which is the sum of the number of full months of employment under this Agreement (with January 2009 considered a full month) plus twelve (12), but in no event greater than forty-eight (48), and the denominator of which is forty-eight (48) months. Each vested tranche (whether vested before or after termination) shall remain exercisable during the applicable Exercise Period.

(14) “Pro Rata Bonus” shall mean your annual bonus for the year of termination, if any, awarded by the Compensation Committee based on such year’s performance and the applicable criteria, if any, multiplied by a fraction, the numerator of which is the number of days you were employed during the year and the denominator of which is 365. The Pro Rata Bonus will be paid in the following calendar year when you would have received it if you had continued employment (subject to any bonus or other plan adopted by the Compensation Committee).

(15) “Prior Year Bonus” shall mean your actual bonus for the year prior to the year of termination, if any, awarded by the Compensation Committee based on such year’s performance and the applicable criteria, if any. Notwithstanding the foregoing, if your employment is terminated on December 31 of any year, such year shall be deemed completed and to be the year prior to the year of termination for purposes of this definition. The Prior Year Bonus will be paid in the calendar year of termination when you would have received it if you had continued employment (subject to any bonus or other plan adopted by the Compensation Committee).

(16) “Section 409A” shall mean Section 409A of the Code and the regulations and guidance promulgated thereunder.

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Yahoo Will Get New CEO – Carol Bartz – Good Choice – Lets See Some Bold Moves

Yahoo Inc. is expected to announce that Carol Bartz, former chief executive of software company Autodesk Inc., has accepted an offer to become the Internet company’s next CEO, according to people familiar with the situation. Boomtown’s Kara Swisher was the first to break this and now it looks like Kara had her ear to the ground in the right spots.

Hiring an operational Silicon Valley insider is a good move for Yahoo. What Carol needs to do is filter the signal from the noise internally at Yahoo. I’m sure everyone there is jockying for position. Carol needs to hire from the outside and bring in some ‘mavericks’ to get Yahoo relevant again in both the product side and the corporate side. She has a big job ahead of her. I think the thing that no one is talking about is that she makes a great partner to Jerry Yang who obviously has the desire to make Yahoo great again.

From WSJ today. Ms. Bartz, 60 years old, will face a number of challenges as she tries to turn around Yahoo’s flagging performance and stock price. Some investors have been lobbying for a break-up of the Internet giant, for instance. Yahoo faces tough competition from Internet rivals such as Google Inc.

Ms. Bartz still serves as executive chairman of Autodesk, of San Rafael, Calif., which she ran as chief executive from 1992 to 2006. Autodesk is around half the size of Yahoo, with approximately 7,000 employees world-wide.

Ms. Bartz was also an executive at Sun Microsystems Inc. and she sits on the board of Cisco Systems Inc., with Mr Yang. She is also a member of the Intel Corp. board with Yahoo President Susan Decker, who was also interviewing for the CEO job.

In afternoon trading, Yahoo’s stock fell 2% to $11.96 on the Nasdaq Stock Market. The stock remains well below its 52-week high of $30.25.

Ms. Bartz’s appointment will likely reopen questions of Yahoo’s strategic direction, potentially clearing the path for the company to restart negotiations with Microsoft over a sale of its search business. Microsoft CEO Steve Ballmer, who tried and failed to buy Yahoo last year, has publicly said in the past few weeks that a search deal with Yahoo should be made when there is a management transition at both companies. Microsoft late last year hired a Yahoo search executive Qi Lu to lead its Internet business.

Ms. Bartz and Yahoo’s board will also have to turn to other ways to right the business, which is being hurt further by the down economy. That could include striking a deal with another partner like Time Warner Inc.’s AOL or divesting of smaller business units.

With these major strategic questions in mind, Yahoo’s board focused its CEO search on experienced executives with deal and operating experience, according to people familiar with the search. Yahoo Chairman Roy Bostock led an informal committee of directors in the search; the group also included Frank Biondi, the former chief executive of Viacom Inc. Directors quickly zeroed in on a short-list of external candidates, such as former Vodafone Group PLC Chief Executive Arun Sarin, among others.

Yahoo Keyword: Arbitrage – A Yahoo BiD Coming From Investment Group ? It’s About Damn Time

Mike Arrington has a report that a group of investors are circling Microsoft for money to take over Yahoo. Finally, someone is making a run at Yahoo. The wounded beast is begging for a takeover and what a bargain that would be. I would love to have the cash to take over Yahoo. Yahoo has amazing assets.

This is the easiest arbitrage and the best investment if the group can get the company at the right price. Also a huge win for Microsoft. I am happy to see some life in the technology financial markets. This would be a fun deal to work. Can’t wait to see the debate – obviously I have an opinion with a ‘capital O”.

A group of well known Silicon Valley executives and top investment bankers are putting together a Yahoo takeover deal that would be financed largely from debt supplied by Microsoft, we’ve learned from sources with knowledge of the proposed transaction.

Under the terms of the proposed deal, the investment group would make a takeover bid for Yahoo at a relatively low premium of around 20% to its current price of around $13 per share, valuing the company at just over $20 billion.

Simultaneous to the transaction Yahoo’s search and search marketing business would be sold to Microsoft. Following the transaction the new executive team would take over the top ranks of Yahoo. A key goal of the new team would be to attempt to attract back much of the executive talent that has fled Yahoo in the last year.

Fixing Yahoo What’s The Big Debate – It’s So Easy – Yahoo Turnaround Plan

The what to do with Yahoo debate is raging, but this isn’t rocket science. Fixing Yahoo is so easy and clear.

Gets someone with “testicular fortitude” to pivot quickly. Yahoo is huge in numbers and they have a gigantic platform.

Step 1: reshuffle the cards in the management ranks
Step 2; operate efficiently – get lean and mean emphasis on mean
Step 3: nail 3 great new freaking products in the next 12 months
Step 4: server the users by providing better navigation on and off site
Step 5: get advertising yields up both to advertisers and publishers
Step 6: compete, compete, compete
Step 6: promote anyone internally that drives the above steps
Step 7: fire anyone who gets in the way
Step 8: Go to Step 1

Remember the old saying – anyone who isn’t part of the solution is part of the problem.

Culture issue: get a leader who has guts, understanding of internet infrastructure and advertising, and platforms.

All Yahoo employees starting at the top all the way down to the bottom need to get an attitude and COMPETE !!!

I say don’t sell to Microsoft and turn that ship around (Kara Swisher has a good post on what Microsoft is trolling for). Forget the trickled layoffs. Move fast and compete.

This isn’t rocket science folks – It’s easy – a layup.

Yang Is Forced Out At Yahoo – No Question About It

Update: Om Malik has a post on what Jerry Yang should do next.

Mike Arrington has the post up with a release from Yahoo. I think that founder should stay and be supported. Me being the arbiter of all things scoops in tech has to give a shout out goes to Kara Swisher first broke the story here. Then pulls out the magic again by getting the internal memo (see below).

There is no question in my mind that Jerry Yang was forced out of town on a “rail”. I hate to see this, but the mob got him. All that value flushed down the market toilet. Personally, I was cheering for Jerry and hoped he could put it together. Hopefully this could give him some cover. Maybe the search will take a long time.

Remember that Steve Jobs was supposed to be the interim APPLE CEO.

Here is the release from Yahoo

The press release:

Yahoo! Conducting Search for New CEO
Co-Founder Jerry Yang to Step Down Following Appointment of New CEO
and Return to Former Role as Chief Yahoo! and Board Member

SUNNYVALE, Calif., Nov 17, 2008 (BUSINESS WIRE) –

Yahoo! Inc. (Nasdaq:YHOO) today announced that its Board of Directors has initiated a search for a new Chief Executive Officer. Jerry Yang, co-Founder of Yahoo!, has decided to return to his former role as Chief Yahoo! upon the appointment of his successor as CEO, and he will also continue to serve on the Board. Yang, 40, assumed the CEO role at the Board’s request in June 2007, and he has led Yahoo! through a strategic repositioning and transformation of its platform.

Chairman Roy Bostock, working with the independent directors and in consultation with Jerry Yang, is leading the process of assessing potential candidates and determining finalists for consideration. The search will encompass both internal and external candidates, and the Board has retained Heidrick & Struggles, a leading international executive search firm, to assist in the process.

“Over the past year and a half, despite extraordinary challenges and distractions, Jerry Yang has led the repositioning of Yahoo! on an open platform model as well as the improved alignment of costs and revenues,” said Roy Bostock. “Jerry and the Board have had an ongoing dialogue about succession timing, and we all agree that now is the right time to make the transition to a new CEO who can take the company to the next level. We are deeply grateful to Jerry for his many contributions as CEO over the past 18 months, and we are pleased that he plans to stay actively involved at Yahoo! as a key executive and member of the Board.”

“From founding this company to guiding its growth into a trusted global brand that is indispensible to millions of people, I have always sought to do what is best for our franchise,” said Jerry Yang. “When the Board asked me to become CEO and lead the transformation of the Company, I did so because it was important to re-envision the business for a different era to drive more effective growth. Having set Yahoo! on a new, more open path, the time is right for me to transition the CEO role and our global talent to a new leader. I will continue to focus on global strategy and to do everything I can to help Yahoo! realize its full potential and enhance its leading culture of technology and product excellence and innovation.”

Internal Memo from Jerry Yang to all employees

Kara Swisher has the internal memo from Jerry Yang to fellow Yahooers… This is pretty epic and so sad. I can’t believe that Yahoo can’t get their shit together to support their founder.

o: all yahoos
Fr: Jerry
Subject: update

yahoos –

i wanted to address all of you on the news we’ve just announced. the board of directors and I have agreed to initiate a succession process for the ceo role of yahoo!. roy bostock, our chairman of the board, is leading the effort to identify and assess potential candidates for consideration by the full board. the board will be evaluating and considering both internal and external candidates and has retained heidrick and struggles to help in this effort.

i will be participating in the search for my successor, and i will continue as ceo until the board selects a new ceo. once a successor is named, i will return to my previous role as chief yahoo and continue to serve as a director on the board.

last june, i accepted the board’s request that i assume the ceo role to restructure and reposition the company as a whole in order to more effectively meet the fast-changing needs of both users and partners. since taking on the ceo role, i have had an ongoing dialogue with the board about succession timing. thanks in large measure to your tireless efforts, we have created a more open, competitive yahoo! and we believe the time is now right to transition to a new ceo who can take the company to the next level.

despite the external environment we face, the fact remains that yahoo! is now a significantly different company that is stronger in many ways than it was just 18 months ago. this only makes it all the more essential that we manage this opportunity to leverage the progress up to this point as effectively as possible. i strongly believe that having transformed our platform and better aligned costs and revenues, we have a unique window for the right ceo to take ownership over the next wave of mission-critical decisions facing the company.

all of you know that I have always, and will always bleed purple. i will always do what I think is right for this great company. while this step will be an adjustment for all of us, i know it’s the right one. i look forward to updating you on this process as soon as the board has developments to share, and will continue to do everything i can to make yahoo! fulfill its full potential.

thank you,
jerry

Jerry: I am available to take over as CEO. Let me know when the interviews start. Time to clean house.

Is Yahoo Being Served Silicon Valley Divorce Papers ? It Needs Big Game Changing Product

I’ve been thinking about the Jerry Yang conversation yesterday with John Batelle and it hit me – Yahoo has for years being the outsider in Silicon Valley. The recent blog and press coverage of Jerry’s comments yesterday make it clear that the core culture in Silicon Valley is frustrated with Yahoo and by default Jerry Yang.

Two posts stand out in my mind that got me thinking about this. Mike Arrington’s post and Om Malik’s post (other coverage is basically saying the same thing) speak to the core feelings about Yahoo. I know both Mike and Om love Yahoo for it’s storied history, but like they and others (me included) are frustrated by the bungled execution.

What’s really going on here? Yahoo losted a ton of great people in the years that it milked it’s dominant portal status. That is compounded by a misdirection in strategy one that during the Semel years (the media focus) saw Yahoo lose many of their top product and engineering mavericks. Innovation is the culture of Silicon Valley and Yahoo lost that years ago. The recent pile on going down is just built up frustration by Silicon Valley on Yahoo and Jerry Yang is taking all the heat.

I’m pulling for Jerry Yang because I respect the ‘guts’ that it takes for the founder to come back. It’s very noble of Jerry, but trying to transform his company into a platform player will take years. It will take new leadership underneath Jerry. Fact is they just don’t have the ‘chops’ on the product and engineering side. Silicon Valley wants nothing to do with a ‘false’ prophet. Jerry needs to move faster or the ‘mob’ will take them down (as Mike Arrington suggests).

Turning the Yahoo battleship will take time. All Yahoo needs is one game changing new product. This reminds me of the old minicomputer days. Yahoo is the Digital Equipment Corp (DEC) of Web 2.0. They’ve been on this portal and media thing why to long (similar to DEC on the minicomputer) – it might be too late. Some minicomputer companies like HP got new relevant products (hello LaserJet) that fueled a reinvention.

If Yahoo doesn’t get the new product and engineering mojo back Silicon Valley and others will completely turn on Yahoo.

It’s doable for Yahoo due to their ‘huge’ installed base of users, but the window is closing. They need a new product that is relevant – a new flagship.

Run Jerry Run! Get it done.

I would love to see the founder take back his company and make the turn around. The question is “do they have the people to do it”? Silicon Valley doesn’t thinks so.

I’m not convinced yet of Yahoo’s demise and will wait to judge Yahoo. I think that they can. I vote for the founder to stay – Jerry should stay, but he needs a new management team that will follow the founder in his vision. I blame Semel not Jerry.

What do you think that they need to do?

Yahoo Going Open at the Yahoo Press Open House

Kara Swisher is at the Yahoo event back in the trenches live blogging the Yahoo even.t Thanks Kara. Love the title of her post – Liveblogging From Yahoo’s “Open House”: Open Ads, Open Mobile, Open Open!

Guest what the theme is for the Yahoo makeover? A) Open, B) Open, C) Open, or D) All of the Above?

I wrote in January that Yahoo just go open. Glad Jerry and team have been working hard to followup from that post. Bout time guys and gals.

If Yahoo is so open why is this such a closed event?

Love the line Yahoo was open before it was cool.

Intel Yahoo Announce Platform for Web TV

Intel and Yahoo announced a partnership (also with Comcast) that they will be providing the embedded technology for set top boxes to provide widget for a TV environment. I’m here at IDF and had a chance to talk to a few Intel super geeks and basically it’s all vapor at the moment. It’s mainly a developer oriented showcase so it’s not meant to be a shipping product. The demo they are showing is very sexy but it’s vapor – at least for now.

The demo really shows the benefit of the user experience. The notion of having prefabricated widgets coming from Yahoo will make for a compelling experience. What’s more interesting is the idea that users or families will be able to create their own widgets. I can see this really working well for parents putting together microcontent widgets for their kids – a kinda set top box playlist concept.

So as of today it’s concept and this offering should attract developers with the open architecture. The Intel guy said that developers can integrate any clients side innovation directly into the stack. This makes sense for emerging areas that need innovation – like video acceleration and other problem areas like managing the storage issues. Today big video content providers have to to store multiple file formats like Flash, Windows, and Silverlight. This is a big problem and generates a ton of costs. At least the CDNs can make more money.

I love this concept with the Intel set top box and think that this is where Yahoo needs to be successful. By pushing out content from their system to the edge the users are happy. Yahoo goes to where the users are instead of today where Yahoo makes the users come to them.

The question in my mind is what is the video user experience like when there are so many problems in delivering video over the Internet (speed, cost, concurrency).

Yahoo is Falling Apart – Please Clean House Before You Slip Away

As Yahoo twists in the “corporate governance” wind (Kara Swisher has all the latest details at ATD), the company is falling apart. Yahoo is a sad story these days – it’s slipping away. People are leaving left and right. However the real problems are two fold: 1) the wrong people are leaving and 2) public brand perception is plummeting.

On the people side it’s not the executives leaving that a problem – hell half the execs need to go. The issue at hand is good ‘workers’ and “teams” of talent are leaving. Why? It’s easier to take a team out and start a new company or work for another company. All the stars are continuing to leave. A source from inside Yahoo recently told me that the only work getting done is powerpoint slides. In fact my source said “the way to survive and get promoted at Yahoo is to master the “powerpoint” presentation. ”

On the user and marketplace side the fact is it’s not cool to use Yahoo anymore. I guess that Yahoo will own the market or franchise on the 60-something user market market – the people who have been locked into all Yahoo’s Web 1.0 stickiness tactics. Yahoo needs to do things differently.

I am a big fan of Yahoo and what it has meant to the progress of the Web, but it’s time to clean house. I mean really clean house. Get “mavericks” who can look beyond powerpoints and deliver product value.

Yahoo is slipping away.

HP Delivers on March Announcement – Nice Job – How Can I Leverage This?

HP speed and execution has often been compared to an aircraft carrier, but not in this case. HP moves fast with the announcement of the gobal cloud research initiative. Last March I was predicting that HP Labs would move in this direction. Well they did and fast.

This shows me that HP can move fast on their promises and with some sizzle and steak. The partnerships of Intel and Yahoo show some real meat on the bone. I’m not expecting any massive products soon out of this initiative but certainly some innovation.

The test bed will initially consist of six “centers of excellence” at IDA facilities, the University of Illinois at Urbana-Champaign, the Steinbuch Centre for Computing of the Karlsruhe Institute of Technology, HP Labs, Intel Research and Yahoo!. Each location will host a cloud computing infrastructure, largely based on HP hardware and Intel processors, and will have 1,000 to 4,000 processor cores capable of supporting the data-intensive research associated with cloud computing. The test bed locations are expected to be fully operational and made accessible to researchers worldwide through a selection process later this year.

The test bed will leverage Yahoo!’s technical leadership in open source projects by running Apache Hadoop — an open source, distributed computing project of the Apache Software Foundation — and other open source, distributed computing software such as Pig, the parallel programming language developed by Yahoo! Research.

With this test bed, not only can researchers test applications at Internet scale, they will also have access to the underlying computing systems to advance understanding of how systems software and hardware function in a cloud environment.

Researchers at HP Labs, the central research arm of HP, will use the test bed to conduct advanced research in the areas of intelligent infrastructure and dynamic cloud services.

This has a kind of DARPA feel to it. I have many questions. How will it be organized? What will prevent it from becoming ‘vendorland’ of hidden agendas? How can I as an entrepreneur use it? What is the requirement to participate?

Final question: Where is Google and Microsoft on this?

Movin On – Thank God It’s Over – Lame Duck Ichan Yields to Yang and Yahoo

Cofounder of Yahoo Jerry Yang can now get down to business. The Carl Icahn takeover saga is finally over. Icahn joins Yahoo’s board. I guess Carl has a lot of shares but his ‘lame duck’ board seat is a consolation prize for technologies version of “The Price is Right”. He lost. Last week we saw a final knock out blow to Icahn had him down for the count. Now we have peace.

“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,” Mr. Icahn said in the statement. “I believe this is a good outcome and that we will have a strong working relationship going forward.”

Finally Yahoo can get down to business and get the legal bull from Wall Street off their back. Expect a fast resolution to a Microsoft deal or other transaction (hmm AOL..). Yahoo has to move on now and get back to competing.

The market is in the toilet and Yahoo’s cofounder Jerry Yang is in charge again. Lets hope cofounder Jerry has some magic left.

Microsoft Yahoo then Facebook? Rejected – Microsoft Did Bunker Down in Palo Alto

Silicon Alley Insider has an interesting tidbit that confirms my story on June 19th that Microsoft was bunkered down in Palo Alto. It was that weekend that had Microsoft and Yahoo folks all over Palo Alto.

Henry Blodget writes on his blog today the details of what transpired on the weekend prior to June 19 as reported here on Furrier.org. Microsoft was in town to consummate the deal in Palo Alto as well as make a run at Facebook. It’s clear now they did make a run at Facebook but was rejected. Now Microsoft is trying to get support from the other players to stitch together a search plan. With Powerset now in the stable. Microsoft is moving to what looks like an orchestrated maneuver to get a search and online story fast.

He writes “Today’s Wall Street Journal, however, echoes reports that Yahoo left out at least one embarrassing detail from its “Microsoft timeline”–one that confirms that the excuse it used to reject the deal for months was nonsense:”

[On Saturday, May 17, in Palo Alto, Calif., two weeks after Microsoft walked], Yahoo CEO Jerry Yang, director Ron Burkle and chairman Mr. Bostock met with Microsoft’s Mr. Ballmer. Messrs. Bostock and Burkle told Mr. Ballmer they were prepared to sell Yahoo for $33 to $34 a share, the price range Microsoft had offered before talks broke down, according to people familiar with the meeting. That would have valued the deal at about $47 billion, or $6 billion less than Yahoo’s previous asking price of $37 a share

Microsoft was moving to get Yahoo search and had the messaging ready then was off to put the ‘checkbook’ in front of Facebook. They were pushed aside. Microsoft isn’t getting both of them but will mount a campaign to get equivalent “pieces” to compete against the ‘tide’ that is search 2.0 and social networks.

Yahoo ReOrging and On The Move – Strategy Hole?

Kara Swisher reported last night that Yahoo would announce the big reorg. Well she was correct. Yahoo announced the ReOrg today. Not much to say other than what is already being reported.

Here is the detail as of today (thanks Kara Swisher) .. the structure will pivot on several key execs, reporting to President Sue Decker.

EVP of Yahoo’s Platforms and Infrastructure division Ash Patel as head of a new Audience Products group (its name was changed from Global Products); Global Partner Solutions EVP Hilary Schneider as the head of a new U.S unit; various folks running around the rest of the globe.

There will also be another strategy team group with a new head, who has not yet been chosen.

And Yahoo will name Scott Dietzen (pictured, right) to take over the job of SVP Brad Garlinghouse, running all communications and community properties and products under Patel.

What All This Means?
To me the big area that is critical for Yahoo is corporate *and* competitive strategy. These variables are not mutually exclusive. Yahoo has some big weapons but under their current condition they have limited energy, time, and people resource (know-how) to execute. Therefore, it’s a chess game not a frontal brute force battle. Yahoo has to be smart and execute with precision. Every move needs to be calculated in context to their corporate and competitive plan. Yahoo has been winging it for years – relying on their massive pageviews and audience subscribers.

Yahoo needs to be “all in” and compete. I am in the camp of pro-Yahoo (always have been). I’m cheering for them to pour it on AND compete.

Defensive Strategy: Yahoo Sends CYA Letter to Shareholders

Today Yahoo sent a letter to their shareholders talking about the latest developments (wow what an understatment). I originally blogged that the Google deal was a ‘white knight’ deal for Yahoo. It forced Microsoft to run out on the deal. It was a godfather deal that allowed Yahoo to cover their ass against lawsuits (I’m sure they are coming).

Here is the letter that Yahoo sent out. I’m sure Kara Swisher will decode this for us. Mike Arrington says it’s a ‘buy the entire cow deal – the search milk isn’t for sale’.

My take: Yahoo will keep Jerry Yang and put a new team together. I’d love to fly that ship for a day. I think that Yahoo has some big guns it could bring out. They need guts and a maverick management team.

Dear Fellow Stockholders:

We are writing to update you on the latest developments here at Yahoo!, including our recently announced commercial agreement with Google and the outcome of our discussions with Microsoft regarding a potential transaction.

On June 12, we announced a non-exclusive agreement with Google that we expect will generate approximately $250 to $450 million in incremental operating cash flow for Yahoo! in the first twelve months following implementation. This cash flow will enhance our profitability as well as help support achievement of our key strategic objectives. Combined with continuing advances in our own search capability, the agreement is an important step in our efforts to capitalize on the high-growth online advertising opportunities where we are best positioned to compete successfully and create more value.

Let us explain why we find this new agreement so exciting.

The Yahoo!-Google Agreement is Financially Attractive and Strikes the Right Strategic Balance.

Under the agreement with Google, Yahoo! will continue to provide algorithmic and sponsored search results, but now will also have the ability to run sponsored search ads supplied by Google alongside Yahoo!’s search results. Advertisers will pay Google directly for each click on Google paid search results appearing on Yahoo!. Google will then pay us a fee (in industry jargon, traffic acquisition cost) based on revenue realized from click-throughs on ads supplied to Yahoo! by Google.

This carefully structured agreement strikes the right strategic balance, enhancing our financial results while advancing our strategic objectives of being the “starting point” for the most users on the Internet and offering such compelling value that advertisers will see us as the “must buy” in online advertising.

One of our key strategies for achieving these objectives is to capitalize on the increasing convergence of search and display advertising, where we are especially well positioned to compete and succeed. We have already accelerated our efforts to strengthen our presence in display through a variety of initiatives and acquisitions in recent months. Our new commercial agreement with Google enhances our ability to pursue this strategy.

Another key strategy is to open our platform to other developers to optimize monetization for our advertisers and publishers and provide the best experience for our users. We see this agreement as a natural extension of the efforts we have already made toward an open marketplace.

The Google agreement is non-exclusive and provides strategic and operational flexibility for Yahoo!. It allows Yahoo! to use Google’s services in those areas where Google monetizes our inventory more effectively but also permits us to continue to use our own search technology in areas where we believe we are most competitive. The net result is that the agreement helps us accelerate one of our strategic aims–closing the monetization gap. At the same time, it allows Yahoo! to continue to compete aggressively in search and display advertising.

Importantly, the agreement does not prevent Yahoo! from pursuing other alternatives that could increase stockholder value. Because the agreement can be terminated by either party upon a change in control, it would not preclude a transaction with Microsoft or any other potential acquiror in the future.

The Yahoo!-Google Agreement Does More for Stockholder Value than Microsoft’s Search-Only Hybrid Proposal.

We also want to update you on the conclusion to our discussions with Microsoft regarding a potential transaction. As we explained in our last letter, our board and management held numerous meetings and conversations with Microsoft about its proposal to acquire Yahoo!, both before and after Microsoft withdrew that proposal on May 3. On June 8, our Chairman, Roy Bostock, other independent board members, and members of Yahoo!’s management team again met in person with Microsoft representatives. At that meeting, Microsoft stated unequivocally that it has no interest in acquiring all of Yahoo!, even at the price range Microsoft had previously suggested.

Microsoft did propose an alternative transaction. Rather than acquire our whole company as it had been proposing for months, Microsoft now proposed to acquire only our search business for $1 billion and a share of future search advertising revenue. This proposal also included an $8 billion investment in Yahoo! but required Yahoo! to commit to a 10-year exclusive arrangement that would have made us dependent on Microsoft for all of our search business. It would also have given Microsoft veto rights on certain future Yahoo! actions, including a sale of Yahoo!. Our board of directors and management made a great effort–and conducted in depth negotiations–to elicit a feasible proposal from Microsoft that made strategic and financial sense for Yahoo!, but without success.

While Microsoft’s search-only hybrid proposal may have been helpful to Microsoft, our board and management concluded it would have had a significant adverse impact on Yahoo! strategically, leaving the Company without the operational control of search assets and technology we view as critical to our objective of becoming a leader in the converging search and display advertising business. The board and its advisers also carefully studied the financial impact of Microsoft’s proposal and concluded that it would have provided no meaningful improvement to our operating cash flow. In short, this proposal would have generated substantially less value for Yahoo! stockholders than Microsoft has suggested.

Based on all the key factors–strengthening our competitiveness, protecting our strategic position, generating attractive financial returns–the Google agreement is far better than Microsoft’s search-only hybrid proposal. That’s why we moved forward with it.

Your Current Board of Directors Has the Knowledge, Experience and Commitment to Best Represent Your Interests and Maximize Stockholder Value.

The events of recent weeks underscore the fact that your board of directors is far better qualified to represent your interests in the effort to maximize stockholder value than the slate put forward by Carl Icahn.

Based on Mr. Icahn’s narrow agenda, it seems highly unlikely that either he or his slate would bring added value to Yahoo!. Consider the following:

– Mr. Icahn put forward his slate so as to sell Yahoo! to Microsoft, even though he had no knowledge of the sustained efforts made by your current board and management to determine whether Microsoft was willing to engage in a transaction that would provide appropriate value and certainty of achieving that value. On June 8, Microsoft once again made it perfectly clear that it is not currently interested in acquiring Yahoo!.
— Mr. Icahn publicly opposed any alternative form of transaction with Microsoft. Your board and management, after thorough and deliberate negotiations and evaluation, separately concluded on its own that the alternative hybrid deal proposed by Microsoft was, indeed, not in the best interests of the Company or its stockholders.
— Mr. Icahn urged, as an alternative to a Microsoft transaction, that Yahoo! find a way to partner with Google that would not preclude a transaction with Microsoft in the future. We have done exactly that through the commercial agreement with Google we announced on June 12.

Simply put, you can choose to vote for a slate of nominees with no articulated plan for the future of Yahoo!–and who now have essentially no alternative agenda to offer you–or you can choose to vote for your existing board of directors which has the independence, experience, knowledge and commitment to navigate the Company through the rapidly-changing Internet environment, execute on our strategic objectives and deliver value for Yahoo! and its stockholders.

It is time for Yahoo! to turn its undivided attention to implementing its key strategies, and we therefore urge you to reject Mr. Icahn’s slate and his ill-defined agenda.

We strongly urge you to vote your WHITE Proxy Card today for your current board of directors.

We look forward to sharing our progress with you as we move forward and we thank you for your support.

Sincerely,

Roy Bostock Jerry Yang
Chairman of the Board Chief Executive Officer

Yahoo’s New CEO Mark Cuban ? It Would Work – He’s a Maverick

Kara Swisher has a post on the short list of CEO candidates for Yahoo. She is assuming that Jerry won’t make it. I think that he’ll last even though everyone wants his head.

That being said Kara brings up a great candidate that isn’t a wildcard in my mind – Mark Cuban. I’ve had the chance to get to know Mark over the past few years – we even did a podcast together way back when. He has the attitude to move Yahoo fast in a good direction. Translation: he isn’t afraid to say what is needed to say, do what is needed to do, and recruit the right team to dominate a market.

Forget his enterpreneurship background and his aggressive in your face personality (which I don’t mind at all), he has done something pretty amazing lately. He bought and turned around a NBA franchise in the Dallas Mavericks – and he did it fast.

What relevance does that have? Well pro athletes have huge egos, get paid big bucks, and are high maintence – but their good (hence called pros). The business deals in big swings and big money. All of this sound like Yahoo?

Plus what sweetness it would be for Mark to come back to Yahoo after his stint there post broadcast.com.

Mark: The question for you is… would you take it?

Microsoft Has To Be Pissed – Google the White Knight

Kara Swisher has a detailed report of the Microsoft offer to Yahoo. Microsoft has to be pissed.

What we have hear is a failure to communicate (name the movie). Yahoo did the ‘godfather’ deal with Google. Google is Yahoo’s white knight – period.

It’s a smokey back room deal that saves Yahoo from clutches of Wall Street and an escape from the frontal assault from Microsoft.

Microsoft’s only move? Burn the village and buy up the market. I expect Microsoft to go on a rampage and buy up everything that moves. They have to retreat and regroup.

Microsoft’s move: change the game. Google won this battle.

SAI has a great writeup on the details and implications on the Yahoo pass on Microsoft.

It’s the Silicon Valley poison pill.

Silicon Valley Rumor: Microsoft to Buy Yahoo Search and Then Facebook

My sources say that the Yahoo and Microsoft teams are bunkered down in a Palo Alto hotel hammering out the final stages of a transaction that will have Microsoft picking up the Yahoo search business. Word is that this deal will be done this week. While this is not surprising, it does bring to question the motives and plans of Microsoft.

Techmeme is buzzing about the latest Microsoft Yahoo talks that has Microsoft buying the Yahoo Search business only. Here is Microsoft’s and Yahoo official statements.

Why would such a complicated transaction (just Yahoo search with all the headaches and all) be in the cards for Microsoft? After the failed bid for $40 plus billion for all of Yahoo, Microsoft’s intentions are clear. Buy the search business from Yahoo and take that team and go spend at least 20 billion for Facebook. Integrating the search team at Yahoo with Facebook puts a formidable army to take on Google.

What a move this makes. Yahoo gets everyone off their back, Microsoft gets a credible position in search, and buys Facebook to compete with Google. The price about $45 billion.

This is going to be good.

Update: here is a post from Kara Swisher – Microsoft’s Kevin Johnson’s “We Can Compete” memo – Microsoft needs Facebook and Facebook needs Microsoft.

Update 2: Robert Scoble (my former employee 🙂 ) is taking my report of Microsoft buying Facebook conversation to the next level. This will be developing further but in the meantime the jockeying is going on. This explains the recent moves at many levels… take the employees of Google leaving to join Facebook.. Facebooks posture toward Google, and the general platform behavior lately of Facebook. Maybe they knew that they were pulling a Netscape last week – knowing that Microsoft guns for hostages were coming into town.

Update 3: This is why I love this guy Umair.. Leading minds see the strategy…good post Umair.