Kara Swisher

Recent Posts by Kara Swisher

Apparently Yahoo's Bartz Didn't Get the Memo About Avoiding Land Wars in Asia

How can BoomTown put this as delicately as Yahoo CEO Carol Bartz would?

How about this: Her actions in regard to the Internet giant’s Asian relationships are about as bad as it gets these days.

After losing Yahoo Japan’s search and online advertising business to Google (GOOG) last month, followed by the loss of a major South Korean site’s search business, Yahoo is poised for a third strike with its partner in China, the Alibaba Group.

Sources close to the company said it is likely Alibaba will either partner with another search technology for sites that are now powered by Yahoo (YHOO) or build it internally.

That inevitability became crystal clear after Bartz gave an interview to Reuters that was posted yesterday.

In it, she claimed that the Alibaba Group “constantly” was asking Yahoo about repurchasing its 40 percent stake in the company and she was always putting its execs off with a big, fat no.

Alibaba, which has been in several word wars with Yahoo since Bartz took over, begged to differ, noting there was only one legitimate offer and that Yahoo engaged in discussions over it.

So, not exactly a no.

Said an Alibaba PR spokesman in a statement:

“We made an offer that included a partial sale and a specific plan to maximize the value of their remaining stake. That offer was rejected, and they countered with a very different proposal, which we found unjustifiable, and we terminated the discussions.”

Bartz then stuck the knife in deeper in an interview in The Wall Street Journal, published today, noting, “I personally think what is happening is [Alibaba CEO] Jack Ma would like to go public and like some of his stock back.”

That’s probably true, given that the eventual IPO of Alibaba’s Taobao online retail unit will boost value of Yahoo’s stake.

Still, Bartz’s words were as impolitic as a public company CEO could make, especially after a series of gaffes related to its ally in China.

Alibaba has made no bones about wanting it and Yahoo to go their own separate ways, with one exec saying in an interview last week, “Why do we need a financial investor with no business synergy or technology?”

While such noise has all the signs of a negotiating tactic, the growing tensions between Yahoo and Alibaba are quite real, and born from a series of uncomfortable encounters between Bartz and Ma.

Remember, this is the same exec who sold off a piece of Alibaba to former Yahoo co-founder and CEO Jerry Yang, and with whom he had, and continues to have, a cordial relationship.

Yang is on the board of Alibaba, which is about to become another point of conflict after Bartz also said in the Journal interview that she “probably” would join it.

Said an Alibaba spokesman about that:

“Regarding reports of Carol Bartz seeking a board seat, we have no notice of that and also no notice of whether she intends to replace Jerry or seek an additional board seat.”

Now, that’s a nice welcome!

While sources said Alibaba is loath to have Bartz as a director, Yahoo does have the right to another seat on the four-person board, which also includes Masayoshi Son, the powerful Asian investor who was apparently behind the ending of Yahoo Japan’s search technology partnership with Yahoo.

It was Son himself, one of Yahoo’s earliest investors, several sources said, who jump-started the deal with Google CEO Eric Schmidt.

Why? According to numerous sources, the SoftBank founder had also soured on Yahoo management and its ability to monetize the very successful Yahoo Japan site.

While it might seem unusual that Yahoo Japan will be using Google’s search, it is not actually owned by Yahoo, which holds a 35 percent stake in the publicly traded company. SoftBank, the giant Japan-based Internet service provider and cell phone provider, has a stake of around 40 percent in Yahoo Japan.

As for NHN, which is South Korea’s largest Internet search engine, with a 65 percent share, it said in late August it would dump Yahoo technology and use its own after its deal ends later this year.

“We desperately need an advertising platform that’s more flexible and effective, with closer ties to the local market to respond to advertisers’ expectations promptly,” said NHN CEO Kim Sang Hun about ending its Yahoo relationship.

While each of these Asian situations are different, as Bartz will surely point out, it all adds up to trouble, given Yahoo has signed a deal with Microsoft (MSFT) to take over its search technology going forward globally.

Sources at Microsoft said management is exasperated at the turn of events, especially in Japan, which seemed a certainty for Yahoo to maintain as a partner.

The software giant has been trying to see if there are any ways to block the Google-Yahoo Japan deal via regulators there, which is a very long shot.

“Not ideal,” said one source close to the situation. “That would be an understatement.”

In this noisy war in Asia, perhaps understatement might be a good strategy going forward for Yahoo.

Until all the tension clears up, though, have a laugh at at this classic battle-of-wits scene from the movie “The Princess Bride,” which has the single best use of the classic land-war-in-Asia line:


Latest Video

View all videos »

Search »

There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google