Yahoo boss says Microsoft bid is undervalued

By Giselle Abramovich

February 15, 2008

Jerry Yang is CEO of Yahoo

Jerry Yang, the most ardent supporter of mobile out of all Internet leaders, has made it clear that the Microsoft proposal is not in Yahoo Inc. shareholders’ best interests.

In a letter representing the Yahoo board of directors’ views, Mr. Yang claims that Microsoft’s $44.6 billion bid significantly undervalues Yahoo. The letter also claims that Yahoo is not as troubled as everyone thinks and that it is actually much better off than it was a few months ago.

"Today, Yahoo is a faster-moving, better-organized, more nimble company than it was just a few months ago,” Mr. Yang said in the letter. “We have redeployed our resources to drive Yahoo's key strategic priorities – taking important steps to streamline our organization and close down or scale back businesses that don't support these critical growth initiatives.

“We are well on our way to transforming the experiences of Yahoo's users, advertisers, publishers and developers – an important shift that is at the heart of our plan to create stockholder value," he said.

Microsoft made its unsolicited proposal to acquire Yahoo on Feb. 1. Had the deal gone through it would have changed the face of online dvertising, especially the dynamic between Microsoft and Google, the undisputed leader in online search (see story).

Microsoft’s acquisition of Yahoo would have created a large display inventory that would be available to advertisers through one point of contact. It will also help counteract Google’s dominance in display advertising with the recent purchase of online display and ad serving firm DoubleClick.

In his letter, Mr. Yang advises Yahoo shareholder not to worry about Yahoo’s future.

“Yahoo is one of the most recognizable and admired brands in the world,” he said. “We have over 500 million users – nearly one out of every two Internet users worldwide. In the U.S., we are No. 1 in many of the most used online services including personalized homepages, mail, news, music, shopping and travel.”

Yahoo has paid serious attention to the mobile channel in the last couple of months and has entrenched itself within the mobile ecosystem as a key player in search, for example.

“We are particularly excited about our growth prospects in mobile, the biggest emerging starting point in the world,” Mr. Yang said. “Globally, there are twice as many users of mobile devices as users of personal computers, and mobile advertising is projected to grow substantially in the coming years.

“We have an important competitive edge as the No. 1 mobile destination in the U.S. and we are building a superior mobile experience for Yahoo users globally so we can further capitalize on this opportunity,” he said.

Additionally, the letter claims that Yahoo is No. 1 in online display advertising, which represents 90 percent of the advertising inventory on the Web.

He also said that Yahoo’s cash balance is healthy. It exceeded $2 billion as of Dec. 31.

"[Yahoo's] adoption of new, more open technology platforms that will encourage the development of new applications and the involvement of third-party developers – and help enrich the user experience,” Mr. Yang said.

“We have accomplished a great deal in a very short time – and we are focused on building this momentum,” he said.