13th
Yahoo and Microsoft
I’m a big fan of Fred Wilson’s blog A VC, but I can’t agree with his latest post, where he says about the announcement that any Microsoft-Yahoo acquisition possibilities are finally and totally dead:
Now Yahoo! will do what it needs to do. Clean house, get lean, get out of businesses it shouldn’t be in. Focus on what it’s good at. And start making money and growing again.
They may need new leadership to do that. But selling this asset to Microsoft just because they had the wrong leadership and probably still have the wrong leadership is a mistake.
Imagine what the right CEO could do with Yahoo!
I think I understand Fred’s mindset: that Yahoo’s been drifting, that it’s demonstrated poor (pick any or all) strategy/organization/execution, and that if they could just get their act together, under the right leader, they could fix their problems.
The problem? According to the market, it’s just not likely to happen. Maybe they won’t be able to find “the right CEO”; maybe the organizational problems or execution difficulties are simply too large; maybe the turnaround will take too long. Fred’s saying that Yahoo has great assets and strong potential, and that may be true; but likelihood of reaching one’s potential is as important as that potential itself, and right now the market doesn’t have a lot of faith in Yahoo’s ability to maximize its assets.
To torture a metaphor: I could draw up a complicated play for a basketball team that, if executed perfectly, always results in a dunk. If the team mis-executes the play and turns the ball over 70% of the time, though, it’s a crappy play for that team.
The market doesn’t care what Yahoo’s assets are worth in theory; they care about what’s likely to happen in practice. … and right now, they’re saying that Yahoo’s expected standalone value - including any turnaround strategies, changes in leadership, or other likely near-term changes - is worth a lot less to shareholders than MSFT’s former bid was.