A few years ago, Yahoo had an opportunity to buy Google for less than one percent of its present value and passed. After that, the company went from being poorly managed by Terry Semel to being poorly managed by Jerry Yang. Its shares went down to $19. At that point, Steve Ballmer and the Microsoft management team saw an opportunity to buy Yahoo for a reasonable price and gave it a try.
At the same time, Yang and the board members thought they could take advantage of a “rich buyer” and achieve through tough negotiations what they could not achieve via able managing, namely a high share price. They not only rejected the offer of $31, but asked for $37 or nearly twice as much as the share price was worth before Microsoft had first mentioned the word Yahoo.
Ballmer´s reply was simple “we may be rich, but we ain´t stupid” and ditched them. Those shareholders that had bought shares thinking the sale was a done deal were left holding the bag.
Icahn, an expert in takeover battles in the 80’s, threw himself into the battle without having experience with the Internet and started buying cheap shares with the objective of having Microsoft buy Yahoo! at $31 per share and go back home with $1 billion.
The rules of the board of Yahoo were favorable for Icahn. While most of the companies elect their directors and board members at different times, Yahoo elected them all at once and this makes it extremely vulnerable for a takeover. Icahn saw this opportunity to chose an alternative slate of directors and sent an aggressive letter to the board that is well commented by Kara Swisher, one of the best technology journalists so I link to her for this part of the blog post.
The guys at Yahoo replied with this letter saying that they did not want to give Yahoo away to Microsoft and other weak arguments, as it is hard to explain to shareholders why $25 is higher than $31.
Now Yahoo shareholders have only bad choices left. They can vote for a management team who had a chance to buy Google and passed, who had a chance to sell to Microsoft and passed and who had a chance to dominate the internet a la Google and failed. Or alternatively they have the opportunity to vote for a corporate raider who knows nothing about the internet and who´s only strategy is to sell to Microsoft. Will there be another unexpected buyer such as large global telco in the meantime? Will Yahoo find a way to divest of its Japanese and Chinese properties and raise $20bn + in cash? Will the current Yahoo board bring a stellar CEO and win the election? All these are possibilities that do not escape Icahn, who is convinced that one way or another he will make money with his Yahoo shares.
Yahoo is an amazing company, with tremendous products and enormous potential. But Yahoo has been poorly managed for years first by Terry Semel, an alien to the internet, and by Jerry Yang, who is a remarkable individual in many ways but as a returning CEO he is no Steve Jobs. Still Yahoo has half a billion unique users per month and outstanding products and services: Yahoo mail has more mail users than Gmail, Yahoo Messenger has more members than Google Talk, My Yahoo is the number one start up page in the world, Flickr is the best photo service and Yahoo has wonderful products in many niches. In my view, what Yahoo really needs is an amazing CEO who can change the perception that many people have of this great company. Here´s two people I know who I think could pull this off. One is Chad Hurley of Youtube and the other Niklas Zennstrom of Skype. If Yahoo managed to attract either one to run the company, I am convinced that they would in turn put together a remarkable management team around them and turn Yahoo around. Both have worked very well with partners in the past (Niklas and Janus, Chad and Steve) and these partnership seem to perform superbly on the internet, with Larry and Sergey being the leading one.
I would like to clarify that neither Chad nor Niklas have told me they would be interested in running Yahoo and they are both very busy and happy with their own projects. But I wanted to use them as an example of what Yahoo could try to do. A committed board could at least try to recruit them or the very few people of their caliber that exist in the world and built a new and great management team to run the company.
Because American education stimulates creativity and self reliance.
Because Americans have a huge homogenous home market in which to test their product.
Because American culture is the only global culture.
I’m beefing up FON’s board and decided to ask former Jazztel and Ya.com colleagues to jump on the FON bandwagon. And I’m thrilled they’ve accepted. On the Ya.com side, we have Alvaro Ibanez (a.k.a Alvy), who’s very well known here in Spain with Microsiervos and Internality, and Jon Berrojalbiz, who started the very successful TradingMotion . On the Jazztel side, I’m joined by former managing director Antonio Fuentes, who has partnered with me on Sybilla and who is its CEO.
Sometimes, we have parties and get-togethers with all those who worked at Jazztel and Ya.com in the early days. For me, they’re like Christmas parties in the office, with a strong feelings of déjà-vu mixed with memories of intense work.
How many entered these companies as employees and left as entrepreneurs? What about Miguel Salis, ex CFO of Jazztel, who is now building wind farms across Spain valued at over 200 million euros.
And Axel Serena, other one who really made it and who, I’ve heard, is about to lift off pretty soon.
What do I want from people who work for me? Well, basically I’d like to see my employees enjoy their last stint as an “employee” with me!
Jon, for example, had the the entrepreneurial spirit in his early 20s. I met him in 1999 when he was still a student but had already registered the domain favoritos.com, which I liked very much. When I saw that he owned it, I asked him if he wanted to sell it to me. Jon simply answered : “I know who you are and if you interview me,I will give it to you”. From there, we started working together, him, first as an employee, then as a partner and now as business buddies. Ya.com and Jazztel were, more than anything, made up of people who dreamed of creating something. For those who are nostaligic, here is an old powerpoint that tells the Ya.com story from the very beginning.
Last Saturday I started FON. It´s been the craziest 6 days of my business life. And my business life is not short. I started Viatel, Jazztel and Ya.com. But in those three cases the launch itself was not an event. I don´t remember the actual first week of Viatel. I had the idea in 1990, a sort of virus that reverted the calling patterns of international telecom networks and gave foreigners US dial tone. It was a big idea, but it took me maybe a year of hard labor to get to the level of global awareness that I have achieved in 6 days with FON through my blog. And it took 10 years and a great team effort for the company to be worth over $1bn.