If so, Microsoft may have gotten Yahoo's search business on the cheap. Our tipster writes:

Today is the end for Yahoo Search. Sean Suchter just left for Microsoft. Everyone in the office is shocked. I've been on the Yahoo Search team for a while and he is the one key executive that it all depends on. If Microsoft has convinced him to leave and join them, they won't need to buy Yahoo Search. We will just all join Microsoft anyway. I am definitely going to send him my resume.

Rumor has it that Yahoo already lost a search executive, Qi Lu, to Microsoft; but Suchter commanded the loyalty of many within Yahoo's search group. These names may not mean much to anyone outside engineering circles in Silicon Valley, but they amount to this: If Microsoft has recruited Suchter, it has gotten the heart of Yahoo's search technology without the fuss of actually buying it.

That will please many on Wall Street who want Yahoo to get out of search; the company could save billions of dollars a year in expenses by dropping the business altogether, and serving up search results from Microsoft or Google's index of the Web instead, as sites like Facebook and AOL.com do today. Yang had an expansive vision of Yahoo as a one-stop shop for advertisers where they could buy both search and banner ads. But he dealt the image of Yahoo's search a blow when he tried to do a deal with Google to have the search giant sell some of the ads that appear on Yahoo's search results. Regulators in D.C. blocked the deal, but the damage was done.

Engineers like to be on a winning team — or at least one that's fighting the good fight. Microsoft may be an underdog in Web search, with a pitiable market share which keeps shrinking, but its top executives are obsessed with beating Google — and they seem more secure in their offices than Yang. Microsoft still has an unsavory image in Silicon Valley, but for coders who have been dealt a drubbing for years by Google, it's an adequate revenge vehicle.

Here's the memo on Suchter's departure:

From: Tuoc Luong
Date: 11/18/08 3:43 PM
To: Yahoo Search Team

Hi Everyone,

Unfortunately, I have to give some bad news to you. Sean Suchter has resigned. Sean’s last day will be December 19th.

Some of you will find this news shocking given that Sean has been a Gibraltar rock at Yahoo and in particular for the Search team. . I understand this.

I will point out that we’re on a good trajectory. We’ve released some good products and capabilities and the industry is beginning to take notice. We’ve closed the gap in Algo relevance and making great strides in building the next generation differentiated search experience and step function in relevance – not to mention infrastructure overhaul that prepares us for the future.

I came here to take on Google because I believe Yahoo above all is best positioned to take the battle to Google. I think we’re on the right path to changing the tide and would love to see everyone make the journey but I respect Sean’s personal decision. I’m committed to continue the battle against Google as long as Yahoo positions Search to be competitive (and I believe we are). I hope each and all of you feel the same way and stand with me to battle Google.

I’ve asked Arnab to step up and take over Sean’s role as head of YST. Just as Sean has been a strong arm for me, Arnab has been a strong arm for Sean. Although Sean casts a large shadow, I believe Arnab will step up to fill the hole with your support. Arnab will cast his own shadow as the new leader of YST and it’s the same YST team that has deliver great products like Search Assist, Secure Scan, SearchMonkey, BOSS, numerous MLR and QRW release to close the GAP in core relevance.

Sean and Arnab have been communicating to the YST leaders about the changes. Arnab has been thinking and discussing the new organization with people. He will send out an e-mail describing his organizational thoughts and plan for YST soon. I believe with the support of other leaders (myself, Bharat, Yongdong, Nam, ..etc), Arnab will fill the void and continue the battle with Google. I urge everyone to support Arnab in his new endeavor.

Tomorrow, I’ll be holding an all managers meeting to discuss the changes and Q&As.

Please wish Sean the best in his future endeavor and congratulate Arnab in his new role.

Thanks

Tuoc

(Image via donquijote.cc)

Apple, where cofounder Steve Jobs returned to power in 1998, is up 600 percent since the beginning of 2002. Amazon.com, where Jeff Bezos has reigned as CEO more or less uninterruptedly since the online retailer's founding, tripled its worth. Google, where cofounders Larry Page and Sergey Brin form a troika with hired-hand CEO Eric Schmidt, has also tripled in value since its inital public offering in 2004. These gains remain despite the stock market's punishing fall.

What about Yahoo, eBay, and Microsoft, where founders handed over the company to professional managers? They are all back where they started almost seven years ago. Under former CEO Terry Semel, Yahoo had a brief golden age in 2004, where it outperformed all the other big Internet companies; it ended just as Google began its relentless rise. Meg Whitman overstayed her welcome at eBay, presiding over its stagnation before handing over the CEO job to John Donahoe — like Whitman, also a management consultant by training. Microsoft CEO Steve Ballmer has proven that he's no Bill Gates; the stock has flatlined under his leadership.

Under Yang, the stock has gone down, down, down, interrupted only by the hope that Microsoft might buy the company and in so doing, give its employees the leadership and sense of purpose they so desperately crave. Does that disprove the value of founders? No. Rather, it suggests that by abandoning his company when it was merely a toddler to be reared by strangers, that he was never much of a father figure to begin with.

interesting analysis but i would also argue though that much of this is simply that members of internet's "C" team (AKA the people who have been running MSN) are jumping to opportunities created by the departure from Yahoo of the internet's "B" team (AKA Yahoo employees circa late 2008). left on the sidelines in dulles: the internet "D" team.

Joanne Bradford, a longtime sales chief at MSN who later headed up Microsoft's content operations, now runs U.S. sales. Jeff Dossett, after a protracted job dance with both Microsoft and Yahoo, just took over Yahoo's "audience" group, which oversees its media websites. And Eric Hadley, another longtime Microsoftie, has just gotten a job running marketing.

The three all know each other well from MSN and form a tight-knit cabal. And one thing drove them from Microsoft to Yahoo: Microsoft's senseless obsession with Google.

MSN has always been an oddball operation at Microsoft. Is it not, at its heart, a media company. That Google figured out a way to turn attracting an online audience and selling advertising into an algorithm infuriated Microsoft's leadership — but the thought that the Web might be a software business after all held a deep attraction to them.

Google's strength is in search advertising. And search advertising is bought, while display advertising is sold. Keyword ads practically sell themselves, while banner ads require the careful cultivation of human links between Web publishers and advertisers.

In their display-ads sales, Microsoft and Yahoo both took their eye off the ball, distracted by Google. Microsoft will remain distracted, possibly for all time. But Yahoo is beginning to rebuild an ad-sales operation badly wounded by Yahoo president Sue Decker's mishandling of sales chief Wenda Harris Millard.

That's what Bradford, Dossett, and Hadley have figured out. If there's still a role for humans in the packaging of audiences for advertisers, it's going to be filled at Yahoo, not Microsoft. It is a chancy, contrarian bet; running up against both Google and Microsoft takes guts. But it's no coincidence that so many Microsoft executives are now at Yahoo.

NEIL MCDONALD: So advertising and all that business model change that certainly has to be the driving force for why you were very interested in acquiring a company called Yahoo, whose stock we noticed has continued to drop. So we have to ask you if the acquisition made sense eight months ago, why wouldn’t it make even more sense now, now that the price would presumably be a lot lower?

STEVE BALLMER: Well, I don’t know if the price would be lower. We offered $33 not too long ago, and it’s $11-1/2 today, and so I don’t know what price might have really gotten the job done. It’s clear that Yahoo did not want to sell the company. It didn’t want to sell when we offered $33. You’ve got to believe they don’t want to–if they thought the company was worth more than $33 six months ago, they probably still think it’s worth at least $33 today. And so I think what we learned through that is, look, they want to remain independent. Perhaps there will continue to be opportunities to partner around search. We’re not in any discussions with them, but that was an offer we made after the acquisition had fallen through. We’ll see. I still think it would make sense economically for their shareholders and ours.

Microsoft spokesperson Frank Shaw just emailed me, asking me to attribute this to a Microsoft spokesperson: "Our position hasn’t changed. Microsoft has no interest in acquiring Yahoo; there are no discussions between the companies." Says a Microsoft spokesperson. So Microsoft's CEO thinks a Yahoo deal is a good idea — he's just not interested in it. There you have it: Microsoft is officially uninterested in good ideas. We always suspected as much, but it's nice to get it on the record.

Here's our theory: Some executives at Time Warner bent Marshall's ear in an effort to drive up AOL's price. Or rather, prop it up. Recent reports suggest Yahoo wants to pay $5 billion for all of AOL, only months after deal chatter put the price more in the $10 billion range. When Google bought its 5 percent stake in AOL in 2005, it valued the company at $20 billion.

Gates sold $350 million worth of shares in August and $2.54 billion worth in 2007, but even at that rate the 52-year old will sell his last Microsoft share right shortly after he's eligible for Social Security, the New York Post reports. Microsoft began a $30 billion stock buyback program in 2004, eventually increasing that round of repurchases to $40 billion.

Sarah Palin's contact list:
Beth Leschper (Beth Leschper SOA) [Edit]
[redacted]@alaska.gov
Blanche Kallstrom (Blanche) [Edit]
[redacted]@starband.net
Bristol Palin (Bristol) [Edit]
[redacted]@hotmail.com
Chuck Heath (Chuck) [Edit]
[redacted]@yahoo.com
[redacted]@yahoo.com (Todd) [Edit]
[redacted]@yahoo.com (Frank) [Edit]
Heather Bruce (Heather) [Edit]
[redacted]@gci.net
[redacted]@alaska.gov (Ivy SOA) [Edit]
[redacted]@yahoo.com (Ivy Personal) [Edit]
Judy Patrick (Judy Patrick) [Edit]
[redacted]@mtaonline.net
[redacted]@alaska.gov (Kris Perry SOA) [Edit]
[redacted]@yahoo.com (Kris Personal) [Edit]
[redacted]@yahoo.com (Molly) [Edit]
Roseanne Hughes (Roseanne Hughes SOA) [Edit]
[redacted]@alaska.gov
Sally Heath (Mom) [Edit]
[redacted]@mtaonline.net
Sean Parnell (Sean Personal) [Edit]
[redacted]@alaska.com
Sharon Leighow (Sharon SOA) [Edit]
[redacted]@alaska.gov
[redacted]@aol.com (Sharon Leighow Personal) [Edit]
Track Palin (Track) [Edit]
[redacted]@hotmail.com

Yes, Microsoft. The software house is desperate to catch up with Google, and Lu was one of Yahoo's few standout talents. Nevertheless, Lu's rumored choice of employer is surprising. Kara Swisher spotted Lu dining with David Sze, a partner at Facebook investor Greylock Capital. At the time, she speculated that Lu might take a cushy entrepreneur-in-residence gig at Greylock — or fill the empty CTO spot at Facebook.

The fact that Facebook has yet to name a new CTO suggests they were holding out hope of landing Lu. For Lu to pass on the job would be telling. A year ago, Facebook could hire anyone it wanted, and they wouldn't have spent months dithering. if Lu takes Microsoft's job offer, it will show that Mark Zuckerberg's engineers-first culture at Facebook is fading fast.

Agencies and advertisers are bit players in this. Microsoft has been lobbying reporters to write about this stuff. They have a huge lobbying apparatus in place from the antitrust battles of the '90s. Some very high up people at [media] holding companies don't even think it's worth their time to get involved because it's a lobbying battle. And for agencies, they know they're being used, but they think Google need to get its snout hit.

(Photo by AP/Sarbach)

An ad agency source told us the deal could raise the cost of buying Yahoo search advertising by as much as 25 percent. The "deal is, on balance, a negative" says ANA CEO Bob Liodice. Besides that, corners of Madison Avenue are plain sick of what they see as unjustified arrogance from Google. The kind that, for example, led a Google spokesperson to claim he knows better than the ANA what advertisers want:

Advertisers care far more about getting a good return on their advertising dollar than they do about buying cheap ads that don't bring in customers, and this deal will clearly help advertisers reach Yahoo users more efficiently.

Kellogg's chief marketing officer Mark Baynes told a conference yesterday, "It's still relatively early in our learning, but analysis of the Special K initiative of the last 18 months showed digital media exceeding that of broadcast's return on investment."

A large part of Kellogg's Special K success is a deal with Yahoo combining brand ads with search. Perform a search on Yahoo for "Special K," and you won't just find a simple sponsored text link to Kellogg's website, but a yellow box, a bit of text and a video ad. A brand ad, in other words — but one sold and placed like a search ad.

Our Madison Avenue sources were skeptical about the notion of jointly selling brand and search ads, since advertisers often split those assignments between different agencies. Why pass up Microsoft's sweet deal for an opportunity that didn't exist? But Baynes, in dense CMO-speak, supports the idea that mixing search and brand advertising can pay off: "For the right opportunity, the [online] space offers fresh ways to commercialize new and existing brands, target specific audiences on needs more cost effectively." Telling, though, that an advertiser makes this argument more clearly and cogently than Yahoo's own executive team.

The language appears to cover Yahoo-owned properties, and also Yahoo partners, though it provides for some tussling back and forth over which partners Google will allow its ads to appear on. Selling ads on Yahoo's partners, including its unwieldy but far-ranging newspaper consortium, means that Google will greatly extend its reach on the Web.

What does this mean for the deal's chance of approval? It's at once good and bad, depending on how it's spun on Capitol Hill. A broader deal would seem more likely to be ruled anticompetitive. But Google's share of the total online-advertising market is much smaller than its share of the search-ads market, making a monopoly argument tougher for opponents of the deal — chiefly Microsoft — to make.

The expanded deal also hints at Yahoo's desperation. In a mess of legalese, it has given away the store to Google. The search engine's executives quietly groused that a search deal would help Yahoo learn Google's tricks and catch up in profiting from users' search queries. With this broader deal, Google can do the same to Yahoo, learning about how best to place banners on Yahoo's network of content websites. It's a deal that is more likely to pass regulatory muster. But it utterly fails the smell test.

But Microsoft and Yahoo, both looking ofr more heft, are still in talks to buy AOL. Once the separation — mostly "a bookkeeping exercise," reports the Wall Street Journal — is complete, selling off the advertising business should prove easier. Discussions with Yahoo are "the more advanced of the two," says a source who describes the deal as one that would combine AOL and Yahoo and give Time Warner a $10 billion stake in the company. It's a proposal AOL and Yahoo began discussing in April. Whether or not a deal is consummated, the fact that Yahoo CEO Jerry Yang is still considering it just shows how much pressure he's under from shareholders, even after last week's subdued shareholder meeting.

(Photos by Stewart Butterfield, maguisso, doctorow, oreilly, dsifry, heather)

It all comes down to Windows — and Windows Live, Microsoft's attempt to extend its monopoly operating system online. The basic strategy of combining the Windows operating system with Microsoft's online-media division, which created Johnson's job, was flawed. The skills involved in coding an operating system and creating websites and selling ads are fundamentally different; mastering them all would be beyond any executive's reach. Johnson was a talented executive, most agree, and his departure is a loss to Microsoft. But succeeding at his job would require focus, and a smaller ambit to his assignments. He needed to have a bigger job; and Microsoft needed someone with a smaller job.

The reorganization following his departure leaves things in a muddle. Windows will still be tied with some online services, under the "Windows Live" rubric; other online operations will be in a separate division. But what goes where? Hotmail, for example, was recently rebranded as a Windows Live product; but it's hard to see Microsoft's online operation giving up such a reliable traffic generator to the Windows group.

In Johnson's wake, expect more infighting, more reorganizations, more mass rebranding campaigns — everything, that is, except the kind of purposeful progress Microsoft desperately needs to compete with Google.

Attending the Olympics as Yahoo's CEO is just one of many prideful reasons Yang could be holding onto his corner office. Now that Icahn has folded, it's unlikely he'll be voted off the board by shareholders at an upcoming annual meeting on August 1, held a week before the Olympics open. But the now-ended proxy battle explains Yang's hedging. Would he attend the events as a has-been who was beaten by Microsoft and Carl Icahn? He may be indecisive, but that choice is pretty clear.

(Photoillustration by Lou Beach/Wall Street Journal)

Today's news became a foregone conclusion when Legg Mason portfolio manager Bill Miller announced he would side with Yahoo against Icahn last week. Some were even expecting today's result as soon as Yahoo rejected Microsoft and Icahn's joint offer a earlier this month. That offer — which if accepted would have sold Yahoo's search to Microsoft and given the rest of the company to Icahn — was Icahn's fatal overreach.

Still, it's disappointing. Not because any of us hoped Icahn would walk away with control of Yahoo's board. But after six months of this saga, we all deserved a riotous, raucous Yahoo shareholders meeting. Maybe we'll still get one — but we'll miss Icahn's technological malaprops. (Illustration by Jackson West/Photo by AP/Lennihan)

Yang deserves to celebrate his victory over Icahn, but he should be more cautious. Wall Street didn't like it much when the New York Times reported he started a round of high-fives after Microsoft first withdrew its last $33 dollar per share offer to buy the entire company, and if tie-wearing, side-part-combing Silicon Alley Insider editor Henry Blodget is a fair stand-in, Wall Street wants Yang to act his age, not his ZIP code. Blodget's response to Yang's memo: "Hi, guys?' That's the address to 10,000-plus global Yahoos? Man, Silicon Valley really IS a different universe." The full transcript, below.

Hi guys.

In addition to the recent emails you’ve been getting from me, I wanted to update you on everything that we’ve been doing to fight this proxy battle on multiple fronts.

The Board, the senior leadership team, and I have been visiting with stockholders and financial industry analysts to articulate the continuing efforts to maximize the value of Yahoo!.

You’ve also probably seen the letters we’ve sent to our stockholders outlining why we believe our current Board can best represent the interests of all stockholders, and that the Icahn/Microsoft agenda threatens to destroy stockholder value.

We’ve also increasingly seen stories in the media that reflect an understanding of our position.

Today, I’m excited to tell you that we’re launching an advertising campaign online on our homepage as a way to continue to make our case to stockholders.

With one of the largest audiences on the Internet, we’re taking full advantage of the power of our network to remind our stockholders why voting for Carl Icahn’s board of directors is a bad choice.

I hope you’ll take a minute to check it out.

With all of this is going on, I know all of you have been working very hard to support our strategic objectives.

I’m incredibly proud of the unwavering focus that I’ve witnessed from so many of you in the face of the onslaught of opinions directed at our company.

In this and many other ways, I’m inspired by Yahoo! on a daily basis as you look for ways to make the experience for our users, advertisers, partners, and developers even better.

We’ll continue to keep you updated. And I look forward to talking with all of you next Wednesday at our All-Hands Meeting.

Thanks for all you’re doing for Yahoo!.

• Yahoo will sell if Microsoft makes a $33 offer.
• Yahoo will sell just its search if Microsoft makes an off ther that "provides real value to our stockholders and resolves the substantial execution and operational risks associated with the separation of our search and display businesses."
• "Mr. Icahn can’t make up his mind about what he thinks will work for Yahoo!" Mostly because he's just in this for a quick buck.
• "Vote your WHITE Proxy Card"

Dear Fellow Stockholder:

The recently-formed Carl Icahn-Microsoft alliance continues to make misleading statements about their plans for Yahoo!. Your Board of Directors believes strongly that the Icahn-Microsoft agenda — as presented to us jointly last week — will destroy stockholder value at Yahoo!, serving only their very narrow special interests, clearly not your interests.

Your Board continues to work to maximize value for you and is taking the following steps to do so:

• Moving forward with our strategic plan and strategies to lead in online advertising — with both search and display;
• Preparing to implement our recently signed commercial agreement with Google that will increase cash flow;
• Continuing to explore other ways to unlock value and return value to you such as unlocking the value of our Asia assets; and
• Remaining open to negotiating a value creating transaction (including with Microsoft) that provides real and certain value — not just the possibility of value.

In contrast, let’s review Carl Icahn’s brief involvement with the Company to date.
Carl Icahn bought his stock two months ago for an estimated average cost of less than $25 per share. He is well-known as a corporate agitator with a short-term approach to his investments . His short-term approach gives Mr. Icahn a strong incentive to strike any deal with Microsoft that enables him to recover his investment and get back his money quickly, even a deal that does not provide full and fair value to you. Is that in the interests of all stockholders? Clearly, it is not.
Mr. Icahn has severely handicapped himself in his ability to negotiate a favorable transaction with Microsoft . Why?

• Mr. Icahn has made it clear that his only objective is to sell part or all of Yahoo! to Microsoft. That fact, combined with his lack of an operating plan going forward, means that he will have no leverage to negotiate a fair deal with Microsoft. He has set himself up for failure.
• Second, Mr. Icahn and his slate lack the working knowledge of Yahoo! and its Internet business needed to do two things that are required to successfully deliver a value-enhancing transaction for Yahoo! stockholders. First, they do not have the detailed knowledge to negotiate a complex restructuring of a large, innovative high technology company in a rapidly changing environment. Second, they do not have the hands-on experience to manage and lead Yahoo! during the approximately one year period estimated to be required to gain regulatory approval for a deal or to manage and lead the remainder of the Company (non-search) after a transaction is completed. Don’t take our word for that. Mr. Icahn will be calling the shots if his slate wins and yet Mr. Icahn himself told the Wall Street Journal last fall: “Technology hasn’t really been one of the things I’ve focused on too much before” and “It’s hard to understand these technology companies.” That’s why you need a knowledgeable, experienced and independent board to represent your interests vis-a-vis Microsoft.

Mr. Icahn can’t make up his mind about what he thinks will work for Yahoo! . He bought his position believing that he could bring Microsoft back to buy all of Yahoo!, at one point suggesting we publicly offer to sell Yahoo! to Microsoft for $34.375. But he didn’t do enough due diligence to determine what your Board already knew: that it was Microsoft’s decision to walk away and that it had rebuffed repeated efforts by your independent directors to get a whole company acquisition back on the table. Recognizing that a sale to Microsoft might not be an option, Mr. Icahn said as an alternative that we should enter into an agreement with Google (which we were already negotiating and subsequently signed), and that we should walk away from Microsoft’s search-only proposal (which we did after careful evaluation of that proposal). Then, in an extraordinary flip flop, Mr. Icahn teamed up with Microsoft and embraced their latest joint search-only proposal — even though it involved significant execution and operational risks and was fraught with flaws that made the “headline value” asserted by Microsoft and Mr. Icahn more illusion than reality.

How can Yahoo! stockholders trust Mr. Icahn to deliver what he claims he can deliver when his actions have been so contradictory —and when all he has delivered so far is a risky proposal of questionable value from his new friends at Microsoft? Yes, the Microsoft/Icahn proposal is somewhat of an improvement over Microsoft’s last search-only proposal, but no one should confuse a modestly improved offer with a good offer. The Icahn/Microsoft proposal was more “smoke and mirrors” than objective reality.
Now let’s turn to the recent marriage of convenience between Microsoft and Mr. Icahn.

This “odd couple” collaboration — between two parties with keenly different agendas — is indeed perplexing. Why does Mr. Icahn believe he can count on Microsoft to complete a transaction? Certainly Microsoft is a well-respected and successful company and we have been clear that we are fully prepared to do a deal with them. But Microsoft’s flip flops and inconsistencies over the past five months are so stupefying that one can only conclude that Microsoft was never fully committed to acquiring Yahoo! either because:

• Microsoft can’t decide what is and isn’t strategically important to its online business;
  or
• Microsoft is more interested in destabilizing a key competitor so that it can either enhance its competitive position or buy our highly valuable search business — and the enormously desirable intellectual property associated with it — at a bargain basement price.

Microsoft desperately needs to improve the performance of its online services business (consisting of its search and display assets) which, cumulatively since 2003, has lost money despite billions of dollars of investment. And yet Mr. Icahn would ignore this track record and its implications for his fellow Yahoo! stockholders, swallowing a deal that leaves Yahoo!’s future dependent, in part, on Microsoft’s ability to monetize search. And, as Mr. Icahn has himself pointed out , it would eliminate any opportunity we may have to sell the entire Company for an attractive premium.

In contrast to the conflicting and confusing statements emanating from the Icahn-Microsoft alliance, your Board and management have been crystal clear about our position.

First, we will sell the entire Company to Microsoft for $33 per share or more if Microsoft will negotiate a transaction that delivers certainty of value and certainty of closing . This is the simplest, most straightforward way to maximize value for you.

Second, we remain open to selling only search to Microsoft as long as it provides real value to our stockholders and resolves the substantial execution and operational risks associated with the separation of our search and display businesses .

Third, your Board takes seriously its obligation to examine all value-creating steps it could take and continues to actively examine many of these now, including a potential spin-off of our Asia assets and a return of cash to stockholders . These are steps Yahoo! could take, if we determine they are feasible and in our stockholders’ best interests, without any “help” from Microsoft or Mr. Icahn. But they are complex steps that require care and prudence. These should not be adopted simply because Mr. Icahn and Microsoft are trying to dress up Microsoft’s inadequate search-only proposal.

While your Board continues to evaluate the foregoing avenues, your current Board and management continue to execute on our strategy to grow the value of our unique collection of assets . That strategy is working and we believe it can result in substantial double digit growth in operating cash flow as we move forward. Our recently executed search advertising agreement with Google reflects our commitment to achieving our strategic goals, while preserving flexibility to pursue a sale of the Company or even, on the right terms, a sale of our search business.

Please compare and contrast the straightforward, responsible actions and positions of your Board of Directors with the behavior of Mr. Icahn and Microsoft.
There you have the situation, as we see it, put as simply and clearly as we can. We believe the Icahn slate and agenda present significant risk to your investment in Yahoo!. We believe you

cannot count on Microsoft to bail out Mr. Icahn’s misguided agenda, at least not on terms that are in the best interests of Yahoo! stockholders.

In contrast, your Board remains fully prepared to represent your interests aggressively and conscientiously in the effort to maximize value — whether that takes the form of negotiating a transaction that provides full and fair value, with certainty; finding other ways to unlock and return value to you; or moving forward with our accelerated strategies to lead in online advertising.

Your Board of Directors remains committed to maximizing stockholder value. It is — and will remain — our number one priority. Do not be fooled into thinking otherwise by Carl Icahn.

We strongly urge you to vote your WHITE Proxy Card today for your current Board of Directors.
Thank you for your support.

Roy Bostock
Jerry Yang

They clearly had a commitment to get the deal done. That commitment was not there on the part of Microsoft. I made it clear to board and management, and Jerry made it clear to troops that it was a very high probability this deal was going to get done because they have all the money in the world and can make it happen. Had Microsoft managed it differently, the outcome would have been the InBev and Anheuser-Busch outcome, without question.

Aside from keeping it out of Yahoo's hands, we remain confused as to why Microsoft would want AOL. Yes, Time Warner's online division has an impressive advertising reach across the Internet, thanks to its Advertising.com network. But it doesn't actually own most of the websites which carry the ads it sells. And of those it does own, how much of their traffic is from people who haven't figured out how to change their homepage? (Photo by AP/Paul Sakuma)

(Yang) said 'If we do this deal with Google, Yahoo will become part of Google's pole and Microsoft,' he said, 'would not be strong enough in this market to remain a pole of its own.

Yahoo general counsel Michael Callahan disputed Smith's retelling of the meeting. Google's top lawyer, David Drummond, told lawmakers that "Google and Yahoo will remain fierce competitors. This agreement will not remove a competitor from the field."

Advertisers disagree with Drummond. Ad buyers have told us that the Yahoo-Google deal will likely drive the prices they pay for search ads up by 25 percent. Yesterday, Matthew Crowley, the chief marketing officer of AT&T subsidiary Yellowpages.com, echoed the sentiment.

If [the Google Yahoo search deal] is allowed to happen, it seems obvious that some advertisers will have a diminishing ability to play Google and Yahoo against one another in a competitive marketplace. The result would be less choice and higher prices for advertisers — especially smaller-scale advertisers that do not have the heft or resources to ensure the best deal possible. The agreement poses a significant danger not only to competition for internet search advertising and to the broader internet economy, but to Yahoo's continued viability as a strong independent competitor.

BoomTown's Kara Swisher caught up with each company's legal man in D.C. in the video embedded up top. Our favorite part: Googler David Drummond's slick-as-Vaseline false modesty over Google's prospects in the brand advertising market, around the 1:30 mark.