As AllThingsD reported several days ago they would, Yahoo and Alibaba Group have finally reached an agreement for the Silicon Valley Internet giant to sell back half its stake in the Chinese Web company in a $7 billion deal.

The taxable shares sale agreement, which is now being approved by both boards, is part of a larger and more complex arrangement, which will also include a multibillion-dollar stock buyback by Yahoo and an eventual IPO of Alibaba.

And, perhaps most importantly, it will bring to an end what could be the longest running global cat fight in Internet history, in which the long-time partners have bickered over the terms of their relationship for years now.

It has mostly been over how they could get to the transaction they should be announcing later tonight (or morning in Hong Kong, which it is there now). While it could fall apart at the last minute, that is highly unlikely at this point.

(Update: The Yahoo board has approved the deal unanimously, said sources, so it is done done.)

(Update 2: Yahoo and Alibaba both confirmed the deal in a joint press release, which is below.)

Thus, after many failed attempts to strike a tax-free deal — also involving Yahoo’s Japanese partner, SoftBank — collapsed, the pair have finally settled on a taxable deal, which could net Yahoo upwards of $4 billion.

The transaction values Alibaba at $35 billion and is subject to a number of funding issues that could change the value of the deal.

But here is the overall situation, as I previously reported:

Yahoo is set to sell half of its roughly 40 percent stake in Alibaba, in a taxable deal. The transaction is likely to value that portion of Yahoo’s holdings at about $7 billion — or 20 percent of Alibaba’s $35 billion enterprise valuation. Alibaba is in the midst of raising capital to fund the sale.

After taxes of upward of 35 percent are paid on the long-term gains — remember that Yahoo bought the now-lucrative Alibaba stake for just $1 billion in 2005 — the company will use the funds to buy back its own shares. That stock has been caught in the mid-teens doldrums for quite a while, so this could help boost shares significantly.

A shareholder dividend is also being considered by the Yahoo board, but it is unlikely. It’s also not clear if some of the cash will be held back for acquisitions by Yahoo, sources added, but it is also unlikely.

As part of the deal, sources said, medium-term incentives have been put in place for Alibaba to move forward with a public offering, which sources stressed is without contractual obligation or a time frame. Alibaba execs have already been publicly indicating such a direction recently, but this will put them more firmly on that path.

Although there are no plans to go public as yet, the IPO incentive revolves around several terms, including the right to buy back half the remaining stake, which expires in December of 2015. As I previously reported, Yahoo will be required to sell back half of the 20 percent remaining stake upon IPO and the other half after that if Alibaba goes public in the time frame agreed to.

Lastly, the Alibaba voting rights for both Yahoo and SoftBank are much diminished in the new deal, according to sources, to under 50 percent.

Translation: Alibaba CEO Jack Ma is now in the driver’s seat completely.

Once close, the pair have been wrangling over the large Yahoo ownership, which Ma has been trying to dislodge in a variety of nice and not-so-nice ways. It has resulted in a number of very public disagreements.

That included a nasty back-and-forth over its Alipay unit with now-fired CEO Carol Bartz, threats of takeover of Yahoo with private equity firms and, more recently, making friendly with its just-ousted CEO, Scott Thompson.

Those talks with him in recent weeks, which included a visit to China by Thompson, led to the new deal, which was negotiated primarily between Yahoo’s CFO Tim Morse and legal head Mike Callahan and Ma and Alibaba’s Joe Tsai.

The talks continued even as Thompson was suddenly engulfed in a controversy over a fake computer science degree on his resume that quickly led to his departure from Yahoo.

Ironically, the error was first discovered by activist shareholder Daniel Loeb, who is now voting on the deal as a newly named director of Yahoo, after successfully helping to oust Thompson.

He owns almost 6 percent of Yahoo.

The final decision to approve the deal was in the hands of a very new board of Yahoo, which has been drastically reshaped in recent weeks. It met to decide on the deal this weekend.

While the deal with Alibaba is finally nearing an end, Yahoo’s talks to sell its 33 percent stake in Yahoo! Japan is not part of this agreement. That’s due to what Thompson had called a “valuation gap,” which sources said is still an outstanding issue.

New interim CEO Ross Levinsohn has not been involved in the Alibaba deal in any significant way. But he certainly will benefit from its halo effect, if approved, especially given that it will likely boost Yahoo shares.

It also puts Yahoo in a unique situation, in which it must sink or swim more largely based on the value of its troubled core business.

That could mean a lot of things, including the eventual sale of the company, whose most lucrative asset recently — its Alibaba holding — will matter much less.

As soon as I get the press release, I will post it here, but no one is commenting, despite the inevitable happy ending to this long-running story.

And here’s the press release, finally:

Yahoo! and Alibaba Reach Agreement on Comprehensive Plan for Alibaba Stake Agreement Realizes Significant Value, Immediate Liquidity and Path to Future Monetization

Yahoo! Board Increases Share Repurchase Plan by US$5 Billion

May 20, 2012 — Sunnyvale, California and Hangzhou, China – Yahoo! Inc. (NASDAQ: YHOO) and Alibaba Group Holding Limited today announced they have entered into a definitive agreement for a staged and comprehensive value realization plan for Yahoo!’s stake in Alibaba.

The first step is the repurchase by Alibaba of up to one-half of Yahoo!’s stake, or approximately 20% of Alibaba’s fully-diluted shares. The purchase price will be based on a valuation of Alibaba to be established through equity financings that Alibaba intends to undertake to finance the transaction, subject to a floor valuation of approximately US$35 billion. The agreement includes substantial financial incentives for Alibaba to raise the additional equity at a valuation higher than US$35 billion. At the minimum price and assuming the initial repurchase of the full 20% stake, Yahoo! would receive from Alibaba consideration of approximately US$7.1 billion, composed of at least US$6.3 billion in cash proceeds and up to US$800 million in newly-issued Alibaba preferred stock.

The agreement also establishes a framework for Yahoo! to monetize its remaining interest in Alibaba in stages. First, at the time of an initial public offering (IPO) of Alibaba in the future, Alibaba will be required either to repurchase one-quarter of Yahoo!’s current stake at the IPO price or allow Yahoo! to sell those shares in the IPO. Second, following such an IPO, Yahoo! has registration rights and rights to marketing support from Alibaba to enable Yahoo! to dispose of its remaining shares, at times of Yahoo!’s choosing following a customary lock-up period.

This agreement is a result of extensive discussions between the two parties and a comprehensive review of both taxable and tax-efficient alternatives. Yahoo! and Alibaba believe this agreement to be the best path to align incentives and maximize value for shareholders of both companies and it paves the way for Alibaba to achieve future public market liquidity for all of Alibaba’s shareholders. For Yahoo!, the agreement provides for a staged exit over time, balancing near-term liquidity and return of cash to shareholders with the opportunity to participate in future value appreciation of Alibaba.

“Today’s agreement provides clarity for our shareholders on a substantial component of Yahoo!’s value and reaffirms the significance of our relationship with Alibaba,” said Ross Levinsohn, Interim CEO of Yahoo!. “We look forward to continued collaboration with the Alibaba team on business initiatives as we explore joint opportunities for growth and benefit from Alibaba’s future. I want to thank Jack Ma, Joe Tsai and the Alibaba team, as well as Tim Morse, Michael Callahan and our Yahoo! team for their dedication in achieving this successful outcome.”

“This transaction opens a new chapter in our relationship with Yahoo!,” said Jack Ma, Chairman and Chief Executive Officer of Alibaba Group. “I look forward to working with Ross Levinsohn and the Yahoo! team as Alibaba builds China’s leading e-commerce company. Yahoo!’s global audience reach will provide attractive partnership opportunities for Alibaba to explore markets outside of China. The transaction will establish a balanced ownership structure that enables Alibaba to take our business to the next level as a public company in the future.”

“We look forward to delivering the proceeds of the near-term transaction to our shareholders, and to the further enhancement of value and the additional monetization in the future that this agreement enables,” said Timothy R. Morse, Executive Vice President and Chief Financial Officer of Yahoo!.

In addition to the share repurchase, the companies have also agreed to amend their existing technology and intellectual property licensing agreement. Among other things, this amendment will result in Yahoo! granting Alibaba a transitional license to continue to operate Yahoo! China under the Yahoo! brand for up to four years, while restrictions on Yahoo!’s ability to make other investments in China will be terminated. Alibaba will make an upfront lump sum royalty payment of US$550 million to Yahoo! and continuing royalty payments for up to four years. In addition, Alibaba will license certain patents to Yahoo!. Upon closing of the repurchase transaction, the Alibaba shareholders’ agreement will be amended so that the parties’ respective rights will be commensurate with the parties’ post-closing level of ownership in Alibaba. Yahoo! will continue to be represented on Alibaba’s board of directors with the right to appoint one of four existing directors.

Yahoo! intends to return substantially all of the after-tax cash proceeds to shareholders following the closing of the transaction. While the form of the return of capital to shareholders has not yet been finalized, Yahoo!’s board has increased Yahoo!’s share buyback authorization by US $5 billion concurrently with this transaction.

The transaction is subject to customary closing conditions. Alibaba will be required to close the repurchase with respect to at least one-quarter of Yahoo!’s current stake in Alibaba regardless of the amount of financing raised, and up to one-half of Yahoo!’s current stake if it obtains the requisite financing. Alibaba intends to finance the repurchase through a combination of its own cash resources, debt, equity and equity-linked financing. The transaction is expected to close within approximately six months.

UBS Investment Bank acted as lead financial advisor to Yahoo! and Allen & Company LLC and Goldman Sachs & Co. also served as financial advisors. Skadden, Arps, Slate, Meagher & Flom LLP acted as lead legal counsel to Yahoo! and Weil, Gotshal & Manges LLP also acted as legal counsel. Munger, Tolles, & Olson LLP acted as legal counsel to the Yahoo! Board of Directors. Credit Suisse acted as lead financial advisor to Alibaba and Wachtell, Lipton, Rosen & Katz acted as lead legal counsel to Alibaba. Freshfields Bruckhaus Deringer LLP acted as counsel to Alibaba on certain financing and Hong Kong legal matters and Fenwick & West LLP acted as counsel to Alibaba on intellectual property matters.

Yahoo is in the final stages of selling a large chunk of its stake in the Alibaba Group back to the company — in a complex deal that is set to include a multibillion-dollar share buyback to investors of the Silicon Valley Internet giant and an eventual IPO of the Chinese company — according to multiple sources close to the situation.

The deal has yet to be officially approved by the boards of both companies, but sources said it is likely to be, and could be announced as early as Monday.

This all could change, of course, since negotiations between Alibaba and Yahoo have taken place in a variety of ways in recent years, without success and with much acrimony. Talks over a tax-free deal — also involving Yahoo’s Japanese partner, SoftBank — collapsed in February, for example.

But the 324th time is apparently the charm — so here are the details of what looks to be a nearly complete agreement that I have ferreted out thus far from lots of relieved sources familiar with the situation:

Yahoo will sell half of its roughly 40 percent stake in Alibaba, in a taxable deal. The transaction is likely to value that portion of Yahoo’s holdings at about $7 billion — or 20 percent of Alibaba’s $35 billion enterprise valuation. Alibaba is in the midst of raising capital to fund the sale.

After taxes of upward of 35 percent are paid on the long-term gains — remember that Yahoo bought the now-lucrative Alibaba stake for a fraction of that, many years ago — the company will likely use the funds to buy back its own shares. That stock has been caught in the mid-teens doldrums for quite a while.

A shareholder dividend is also being considered. It’s not clear if some of the cash will be held back for acquisitions by Yahoo, sources added, but it is unlikely.

As part of the deal, sources said, incentives have been put in place for Alibaba to move forward with a public offering, which sources stressed is without the contractual obligation or a time frame. Alibaba execs have already been publicly indicating such a direction recently, but this will put them more firmly on that path.

In return, Yahoo has agreed to sell the remaining quarter of its current holdings when that IPO does occur. It would then have an only 10 percent stake of Alibaba, which it could sell at any time after the IPO.

If finally struck, the transaction will finally bring to an end one of the more protracted and disputed relationships in the Internet world.

Once close, the pair have been wrangling over the large Yahoo ownership, which Alibaba CEO Jack Ma has been trying to dislodge in a variety of nice and not-so-nice ways. It has resulted in a number of very public disagreements.

That included a nasty back-and-forth over its Alipay unit with now-fired CEO Carol Bartz, threats of takeover of Yahoo with private equity firms and, more recently, making friendly with its just-ousted CEO, Scott Thompson.

Those talks with him in recent weeks, which included a visit to China by Thompson, led to the new deal, which was negotiated primarily between Yahoo’s CFO Tim Morse and legal head Mike Callahan and Ma and Alibaba’s Joe Tsai.

The talks continued even as Thompson was suddenly engulfed in a controversy over a fake computer science degree on his resume that quickly led to his departure from Yahoo on Sunday.

Ironically, the error was first discovered by activist shareholder Daniel Loeb, who will now vote on the deal as a newly named director of Yahoo, after successfully helping to oust Thompson.

He owns almost 6 percent of Yahoo, and is expected to approve the transaction.

But the final decision to approve the deal will be in the hands of a very new board of Yahoo, which has been drastically reshaped in recent weeks. It is meeting tomorrow and perhaps over the weekend to vote on it.

While the deal with Alibaba looks to be nearing an end, Yahoo’s talks to sell its 33 percent stake in Yahoo Japan is not part of this agreement. That’s due to what Thompson had called a “valuation gap,” which sources said is still an outstanding issue.

New interim CEO Ross Levinsohn has not been involved in the Alibaba deal in any significant way. But he certainly will benefit from its halo effect, if approved, especially given that it will likely boost Yahoo shares.

Next up for Levinsohn, who has just rejiggered Yahoo management again, other sources said, is an effort to settle the patent-infringement lawsuit with Facebook, and also to renegotiate its search deal with Microsoft.

And, oh yes, fix Yahoo’s rocky core-advertising business, which is still in distress and needs a major overhaul to push it back to growth.

But that, as they say, is yet another episode of Yahoo’s ongoing reality show.

As I reported earlier today, former Yahoo Scott Thompson left the Silicon Valley Internet giant with no severance.

The reason for the agreement was that the company was claiming “cause” for the parting, due to a fake computer science degree on his resume, as well as other issues that were raised from the controversy.

Yahoo said in filing today:

“Yahoo! and Mr. Thompson agreed to terminate all other agreements between them, including Mr. Thompson’s offer letter, all outstanding but not fully vested equity awards and Yahoo!’s other plans and arrangements for the benefit of employees, with no severance compensation.”

The former president of eBay’s PayPal payments unit will get “Make-Whole” cash bonus and already vested restricted stock units related to him leaving that job in January to become the CEO of Yahoo.

That totals about $7 million.

Here is the pertinent part of its just-filed document:

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(a) Resignation of Chief Executive Officer

Effective May 12, 2012, Scott Thompson resigned as Yahoo!’s Chief Executive Officer and President, as a member of the Board, and from all other positions with Yahoo!. Yahoo! entered into a separation agreement, dated May 12, 2012 (the “Separation Agreement”), with Mr. Thompson to memorialize the parties’ mutual desire to separate employment. The Separation Agreement provides, among other things:

• Mr. Thompson resigned from his position as Yahoo!’s Chief Executive Officer and all other positions he had with Yahoo!’s subsidiaries and affiliates, including as a director of Yahoo!.

• Yahoo! and Mr. Thompson agreed to terminate all other agreements between them, including Mr. Thompson’s offer letter, all outstanding but not fully vested equity awards and Yahoo!’s other plans and arrangements for the benefit of employees, with no severance compensation. However, in accordance with the terms of his offer letter, Mr. Thompson retained the make-whole cash bonus previously paid to him under his offer letter and the make-whole restricted stock units that had been granted to him pursuant to his offer letter and that had already vested.

• The parties reiterated their obligations with regard to disparagement under Mr. Thompson’s offer letter, providing that Mr. Thompson not knowingly disparage Yahoo! or its officers, directors, employees or agents in any manner likely to be harmful to their respective business, business reputation or personal reputation, and that Yahoo! instruct its Chairman, certain employees and executive officers not to knowingly disparage Mr. Thompson in any manner likely to be harmful to his business, business reputation or personal reputation other than in the good-faith performance of their duties to Yahoo! or in connection with their fiduciary duties to Yahoo! and applicable law.

• Yahoo! and Mr. Thompson agreed to a mutual release of claims related to Mr. Thompson’s employment and other relationships with, and the termination of Mr. Thompson’s employment and other relationships with, Yahoo! and Yahoo!’s affiliates, provided, that such release by Yahoo! does not apply to any liability arising out of any intentional and wrongful act by Mr. Thompson.

• Certain of Mr. Thompson’s obligations, such as those in relation to intellectual property and confidentiality, remained in effect.

The foregoing summary of the Separation Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Separation Agreement, which is attached as Exhibit 99.02 and incorporated herein by reference.

And here is the full separation agreement:

SEPARATION AGREEMENT

This Separation Agreement (this “Agreement”) memorializes the parties’ mutual desire to separate, leading to the termination of employment with Yahoo! Inc. (“Yahoo!” or the “Company”).

1. Separation. Your last day of work with the Company and your employment termination date was May 12, 2012 (the “Separation Date”). To the extent you have not previously done so as of the Separation Date, you hereby resign from your position as the Chief Executive Officer of the Company and from any and all offices you have with the Company’s subsidiaries and/or affiliates, including the Company’s Board of Directors or any fiduciary or other committee with respect to any benefit plan of the Company or any of the Company’s subsidiaries and/or affiliates. You shall execute such additional documents as requested by the Company to evidence the foregoing. After the Separation Date, you shall not represent yourself as being an officer, director or employee of the Company or a fiduciary of any such benefit plan for any purpose.

2. Accrued Amounts. Yahoo! will pay you all Accrued Amounts (as defined below), subject to payroll deductions and required withholdings. You are entitled to these payments regardless of whether or not you sign this Agreement. Accrued Amounts means any accrued but unpaid base salary through date of termination paid in accordance with normal payroll practices, unreimbursed business expenses incurred prior to the date of termination paid in accordance with Company policies, and accrued but unused vacation time through the date of termination due in accordance with Company plans and policies. With respect to reimbursement for business expenses incurred prior to termination of your employment, you agree that, within thirty (30) days following the Separation Date, you will submit your final expense reimbursement statement and required documentation reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. For a copy of the Yahoo! expense form, please email payroll-perations@yahoo-inc.com. You should submit completed expense reports and receipts to the Expense Report Department at Yahoo!, 701 First Avenue, Sunnyvale, California 94089.

3. Consideration for this Agreement. Except as provided in Section 9 below, you and Yahoo! mutually agree to terminate any and all other contracts or agreements, including but not limited to the Offer Letter, and rights under all pension, welfare, equity and fringe plans, programs, awards, arrangements, and payroll practices; provided, however, that nothing in the Agreement requires you to repay or return to Yahoo! the Make-Whole Cash Bonus previously paid to you and the Make-Whole Restricted Stock Units that already have vested. Therefore, except as provided in this Agreement, this Separation Agreement supersedes and supplants any and all rights, claims, benefits and defenses you or the Company would otherwise enjoy or be entitled to assert pursuant to your Offer Letter or any other document previously executed relating to your employment with the Company.

4. Tax Matters.

a. Withholding. Yahoo! will withhold required federal, state and local taxes from any and all payments of the Accrued Amounts and make all tax reporting it determines it should make based on this Agreement.

b. Responsibility for Taxes. Other than Yahoo!’s obligation and right to withhold federal, state and local taxes and to pay the employer portion of FICA and FUTA, you will be responsible for any and all taxes, interest, and penalties that may be imposed with respect to the payments previously made or contemplated by this Agreement (including, but not limited to, those imposed under Internal Revenue
Code Section 409A).

5. Health Care Coverage. Nothing in this Agreement affects your right to timely elect and purchase at your own expense healthcare coverage under COBRA as provided by law.

6. Invention and Assignment to Yahoo!. You agree to perform promptly, all acts deemed necessary or desirable by Yahoo! to permit and assist it, at its expense, in obtaining and enforcing the full benefits, enjoyment, rights and title throughout the world in all intellectual property assigned to Yahoo! pursuant to your Employee Confidentiality and Assignment of Inventions Agreement(s) or similar agreement(s) including, but not limited to, disclosing information, executing documents and providing reasonable assistance or cooperation in legal proceedings.

7. Return of Company Property. Promptly after the Separation Date, you agree to return to Yahoo! all hard copy and electronic documents (and all copies thereof) and other property belonging to Yahoo!, its subsidiaries and/or affiliates that you have had in your possession at any time, including, but not limited to, files, notes, notebooks, correspondence, memoranda, agreements, drawings, records, business plans, forecasts, financial information, specifications, computer-recorded information, tangible property (including, but not limited to, computers, PDAs, pagers, telephones, credit cards, entry cards, identification badges and keys), and any materials of any kind that contain or embody any proprietary or confidential information of the Company, its subsidiaries or affiliates (and all reproductions thereof in whole or in part). If you discover after the Separation Date that you have retained any proprietary or confidential information (including, but not limited to, proprietary or confidential information contained in any electronic documents or e-mail systems in your possession or control), you agree immediately upon discovery to send an email to IPQuestionsSeparations@yahoo-inc.com and inform Yahoo! of the nature and location of the proprietary or confidential information that you have retained so that Yahoo! may arrange to remove, recover, and/or collect such information.

8. Ongoing Obligations.

a. Intellectual Property and Proprietary Information. You acknowledge your continuing obligations under your Employee Confidentiality and Assignment of Inventions Agreement(s), the Offer Letter or any other agreement(s) signed thereafter containing restrictive covenants (collectively “NDAs”), including your obligation not to use or disclose any confidential or proprietary information of the Company, its subsidiaries or affiliated entities, not to solicit Yahoo! employees and, to the extent permitted by applicable law, not to solicit customers and not to compete with the Company, its subsidiaries or affiliated entities while you are employed, as specified in your NDAs. If you would like a copy of your signed NDAs, please contact David Windley at (408) 349-8449.

b. Nondisparagement. You agree, for five years after your employment with the Company terminates, not to knowingly disparage the Company or its officers, directors, employees or agents in any manner likely to be harmful to it or them or its or their business, business reputation or personal reputation. The foregoing shall not be violated by statements that are truthful, complete and made in good faith in required responses to legal process or governmental inquiry. You agree that any breach of this nondisparagement provision shall be a material breach of this Agreement. The Company will instruct its Chairman, the chief Yahoos, and the named executive officers of the Company, other than in the good-faith performance of their duties to the Company or in connection with their fiduciary duties to the Company and applicable law, for a period of five years following your employment has terminated, not to knowingly disparage you in any manner likely to be harmful to you or your business reputation or personal reputation. The foregoing shall not be violated by statements which are truthful, complete, and made in good faith in required response to legal process or governmental inquiry.

9. Release of Claims. In consideration for, and as a condition of the payments and benefits provided to you pursuant to this Agreement, you hereby generally and completely release the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns (collectively “Released Party”) from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date you sign this Agreement and which arise out of or are in any way related to your employment or other relationship, or termination of such employment or other relationship, with the Company or any of the Company’s subsidiaries and/or affiliates, including but not limited to: (1) all claims related to your compensation or benefits from the Company, including wages, salary, bonuses, commissions, vacation pay, expense reimbursements (to the extent permitted by applicable law), severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company; (2) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (3) all tort claims, including without limitation claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (4) all federal, state, and local statutory claims, including without limitation claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), the federal Worker Adjustment and Retraining Notification Act (as amended) and similar laws in other jurisdictions, the Employee Retirement Income Security Act of 1974 (as amended), the Family and Medical Leave Act of 1993, and the California Fair Employment and Housing Act (as amended) and similar laws in other jurisdictions; provided, however, that nothing herein shall (i) release the Company from any claims arising from or by reason of any breach by the Company of this Agreement; or (ii) interfere with your rights, if any, to indemnification or director’s and officer’s liability insurance coverage provided to you by any agreement with the Company or any provision or any By-Law of the Company or application of law. To the maximum extent permitted by law, you also promise never directly or indirectly to bring or participate in an action against any Released Party under California Business & Professions Code Section 17200 or under any other unfair competition law of any jurisdiction. If, notwithstanding the above, you are awarded any money or other relief under such a claim, you hereby assign the money or other relief to the Company. Your waiver and release specified in this paragraph do not apply to any rights or claims that may arise after the date you sign this Agreement.

This Agreement includes a release of claims of discrimination or retaliation on the basis of workers’ compensation status, but does not include workers’ compensation claims. Excluded from this Agreement are any claims which by law cannot be waived in a private agreement between employer and employee. You have the right to file a charge with or participate in an investigation conducted by the Equal Employment Opportunity Commission (“EEOC”) or any state or local fair employment practices agency, however, you waive any right to any monetary recovery or other relief should the EEOC or any other agency pursue a claim on your behalf. The Company releases you from all claims to the same extent that you release it, and nothing in this Agreement shall be deemed to apply to any liability arising out of any intentional and wrongful act by you.

10. Representations.

a. You acknowledge and agree that you have not been denied any rights including, but not limited to, rights to a leave or reinstatement from a leave under the Family and Medical Leave Act of 1993, the Uniformed Services Employment and Reemployment Rights Act of 1994, or any similar law of any jurisdiction. You represent that your age was not the basis for any Company decision or action affecting you, and acknowledge that the Company relied on that representation in entering into this Agreement.

b. You acknowledge and agree that the benefits provided under this Agreement are in full discharge of any and all liabilities and obligations of the Company and/or any of the Company’s subsidiaries and/or affiliates to you, monetarily or otherwise, including but not limited to any and all obligations arising under the Offer Letter and any other alleged written or oral employment or consulting agreement, policy, plan or procedure of the Company and/or any alleged understanding or arrangement between you and the Company and/or any of the Company’s subsidiaries and/or affiliates.

c. You acknowledge and agree that by virtue of the foregoing Release, you have waived any relief available to you (including without limitation, monetary damages, equitable relief and reinstatement) under any of the claims and/or causes of action waived in this Agreement. Therefore, you agree that you will not accept any award or settlement from any source or proceeding (including but not limited to any proceeding brought by any other person or by any government agency) with respect to any claim or right waived in this Agreement.

11. Release of Unknown Claims. You and the Company acknowledge having read and understanding Section 1542 of the California Civil Code: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” You and the Company hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to the release of any unknown or unsuspected claims.

12. Miscellaneous. This Agreement constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to this subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of Yahoo!. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified by the court so as to be rendered enforceable. This Agreement will be deemed to have been entered into and will be construed and enforced in accordance with the laws of California without regard to the principles of conflicts of law.

13. No Admission; Rules of Construction.

a. This Agreement is not intended, and shall not be construed, as an admission that any Released Party has violated any federal, state or local law (statutory or decisional), ordinance or regulation, breached any contract or committed any wrong whatsoever against you.

b. Should any provision of this Agreement require interpretation or construction, it is agreed by the parties that the entity interpreting or construing this Agreement shall not apply a presumption against one party by reason of the rule of construction that a document is to be construed more strictly against the party who prepared the document.

14. Counterparts: This Agreement may be signed in counterparts, each of which shall be an original with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of copies of an executed document shall be deemed a valid delivery of an executed Agreement.

If this Agreement is acceptable to you, please sign below on or after the Separation Date and return the original to David Windley at 701 First Avenue, Sunnyvale, California 94089.

I wish you good luck in your future endeavors.

Sincerely,

YAHOO ! INC .
By: /s/ Michael J. Callahan
Michael J. Callahan
Executive Vice President, General Counsel and
Secretary

AGREED AND VOLUNTARILY EXECUTED:
/s/ Scott Thompson
5/12/2012
Date
cc: Personnel File

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• As Yahoo CEO Reaches Out to Top Staff, Board Meets to Weigh “Options” (I.E., Deciding Who Gets to Take the Borked Bio Blame)
• Yahoo Should Expect Incoming Lawsuit Lobbed by Loeb Tomorrow on CEO Hiring
• They Shoot Yahoo CEOs, Don’t They? But Not Without a Really Smoking Gun and a Much Stronger Board.
• Yahoo’s Thompson Asks Employees to “Stay Focused” — Except Not on Him
• In 2009 Interview, Yahoo CEO Does Not Deny He Has a CS Degree, and Calls Himself an “Engineer” (Audio)
• Yahoo’s Board Will “Review” Resume Discrepancy of CEO
• How Did a Phantom CS Degree Get on CEO’s Bio in SEC Filings? Yahoo’s Not Saying.
• Yahoo’s Response on CEO’s Computer Science ResumeGate: “Inadvertent Error”
• Dan Loeb Alleges “Discrepancies” on Yahoo CEO Scott Thompson’s Resume Related to Computer Science Degree

According to numerous sources, Yahoo is claiming “cause” in its parting with former CEO Scott Thompson, related to the fake computer science degree on his resume.

Such a determination will mean the company is not obligated to pay him the large severance that would have been due to him otherwise.

In his offer letter on January 3, Yahoo spelled out the terms of the employment agreement, noting what would happen if he left the company under more positive “without cause” terms.

“If Mr. Thompson’s employment is terminated by the Company without cause or by Mr. Thompson for good reason, the Company will offer him severance benefits similar to the benefits it provides to other senior executives of the Company at the time of his termination,” reads the document, which was filed with the Securities and Exchange Commission. “In addition, if Mr. Thompson’s employment is terminated by the Company without cause, by Mr. Thompson for good reason, or due to Mr. Thompson’s death or disability, the Make-Whole RSUs that are then outstanding and unvested will fully vest upon his termination.”

The “Make-Whole” RSUs — or restricted stock units, related to his time as president of eBay’s PayPal payments division — were valued at $6.5 million in Yahoo’s SEC filings.

But sources said Yahoo has relied on another clause in Thompson’s offer letter, titled “Code of Ethics and Yahoo! Policies,” to make the case that it would not have to pay out such a large sum to him.

Reads the clause:

“Yahoo! is committed to creating a positive work environment and conducting business ethically. As an employee of Yahoo!, you will be expected to abide by the Company’s policies and procedures including, but not limited to, Yahoo!’s Guide2Working@Y!, Yahoo!’s Code of Ethics and Yahoo!’s Corporate Governance Guidelines,” reads the letter. “Yahoo! requests that you review, sign and bring with you on your Employment Start Date, the enclosed Code of Ethics Acknowledgment Form.”

Under the Silicon Valley Internet giant’s ethical terms, the borked bio and how it got that way — which was still under investigation when Thompson stepped down — was the major issue in his ouster, since he was responsible for making sure it was accurate when submitted for regulatory filings.

In addition, while Thompson publicly blamed a headhunting firm for making the error back in the mid-2000 timeframe, that company — Heidrick & Struggles — hit back, saying his claims were “verifiably not true.” According to sources, Heidrick apparently possesses an inaccurate resume submitted to them by Thompson.

Heidrick, which placed Thompson at eBay many years ago, was not involved in his hiring at Yahoo. It had to recuse itself from his vetting as part of its search for a new Yahoo CEO, because it had placed him previously.

In fact, Thompson had nominated himself for the job via cold emails with Yahoo board members and was examined and hired quickly.

Perhaps too quickly, given the poor background check that was discovered by activist shareholder Daniel Loeb of Third Point.

Sources close to the board said that investor pressure relate to these credibility lapses grew too loud, along with employee rancor at Thompson’s actions — forcing the issue this weekend.

What was definitely not a reason for Thompson’s departure from Yahoo — although it was unfortunate timing — was an unspecified “illness” I referenced in my initial story on the subject.

(Note to readers: I found out this weekend that illness was thyroid cancer. But I declined to name it specifically, since I felt it was Thompson’s right to publicly reveal such a personal health issue and not mine. While I recently suffered a stroke and the experience perhaps influenced this editorial decision, the cancer was only a side issue to the resume drama at Yahoo and not naming it specifically seemed, well, more responsible to me. Argue amongst yourselves about it, but that’s my take. And also, I wish Thompson a successful treatment and speedy recovery)

That said, The Wall Street Journal did an entire piece about the cancer today today, noting that “the decision to step down from Yahoo was in part influenced by Mr. Thompson’s cancer diagnosis.”

That might have been true for Thompson — a source close to him characterized the parting as “mutually agreed” — and perhaps his illness accelerated the resume controversy.

But all that aside, he was given no choice in the matter by the Yahoo board, numerous sources said. The parting was almost entirely due to the mess about the botched bio and all its implications.

In fact, in all its public communications about his leaving, Yahoo and its execs offered no token thanks and barely even mentioned Thompson, such as in its official statement yesterday.

It read, referring to newly chosen interim CEO Ross Levinsohn: “Mr. Levinsohn replaces Scott Thompson, former Chief Executive Officer, who has left the Company.”

And left it he has, without a choice and with what will be a much smaller settlement, sources said. It is not clear when Yahoo has to unveil those terms in public documents.

RELATED POSTS:

• Yahoo’s Parting With Thompson Will Be for “Cause” (a.k.a. CSLie)
• Ross Levinsohn’s Yahoo Plan: Back to the Future
• Here’s New Yahoo CEO’s First Note to Troops! (The Leaking-Internal-Memos-to-ATD Policy Remains in Effect As Usual)
• Yahoo Officially Confirms ATD Report on CEO Changes and Proxy Settlement
• Meet the Man I Call “The Hair”: The Video Stylings of Yahoo’s Newest CEO Ross Levinsohn
• Will Thompson’s Ouster Mean a Yahoo-Facebook Patent Settlement Too?
• Exclusive: Yahoo’s Thompson Out; Levinsohn In; Board Settlement With Loeb Nears Completion
• Heidrick & Struggles Slaps Back at Thompson’s Yahoo in Blame Game Over ResuMess
• Is He In or Is He Out? Crunchtime for Scott Thompson at Yahoo.
• Not So Scott Free? Yahoo’s Other Big Shareholder — Cap Re — Leaning Toward Supporting Loeb Over Thompson ResuMess.
• Tech Nation’s Gunn Says She and Yahoo CEO Discussed Their CS Degrees Before 2009 Show (Video and Audio)
• Loeb Calls Again for Thompson Firing From Yahoo, as Former eBay Boss Supports Him
• Place Your Bets: Will Loeb Drop Another Bomb on Yahoo at Vegas Confab Later Today?
• Exclusive: Yahoo Director in Charge of Botched CEO Vetting to Step Down From Board
• CEO Says Sorry to Yahoos for Borked Bio “Distraction” — But Will Mea Culpa Work Without an Apology for Error? (Memo)
• Buffett Comments on Trust Issue in Yahoo CEO BioGate: “You’ve Got a Problem”
• Loeb Lobs Lawsuit, as Expected, at Yahoo’s Borked Bio Mess
• As Yahoo CEO Reaches Out to Top Staff, Board Meets to Weigh “Options” (I.E., Deciding Who Gets to Take the Borked Bio Blame)
• Yahoo Should Expect Incoming Lawsuit Lobbed by Loeb Tomorrow on CEO Hiring
• They Shoot Yahoo CEOs, Don’t They? But Not Without a Really Smoking Gun and a Much Stronger Board.
• Yahoo’s Thompson Asks Employees to “Stay Focused” — Except Not on Him
• In 2009 Interview, Yahoo CEO Does Not Deny He Has a CS Degree, and Calls Himself an “Engineer” (Audio)
• Yahoo’s Board Will “Review” Resume Discrepancy of CEO
• How Did a Phantom CS Degree Get on CEO’s Bio in SEC Filings? Yahoo’s Not Saying.
• Yahoo’s Response on CEO’s Computer Science ResumeGate: “Inadvertent Error”
• Dan Loeb Alleges “Discrepancies” on Yahoo CEO Scott Thompson’s Resume Related to Computer Science Degree

According to sources close to the situation, Demand Media was deep into discussions with a private equity firm to complete a deal that would have taken the online content company private, nearing a price that was double its current value.

But Demand abandoned the effort this past week — which was born from an aggressive attempt by Boston-based Thomas H. Lee Partners to purchase the company for a price of up to $1.2 billion. That was due to a number of challenges, including complications related to its financing and the ability to retain executives in its aftermath.

The move on Demand by private investors is perhaps no surprise, and is part of a wider trend related to some Internet companies whose stocks have a depressed value relative to the worth of their assets.

Among companies having been and also being evaluated by private equity firms, whose business it is to turned the undervalued into a goldmine: Yahoo and AOL.

And also Demand, which is now worth only $605 million, a market cap that is off 65 percent since it went public in February 2011. Shares now trade at $7.25 each.

That depressed share price has been due to a number of issues, most especially changes to Google’s search algorithm to improve results. Called Panda, the changes at the search giant — a critical partner of Demand’s — has cut traffic to its major content sites and also called into question its ability to monetize its scaled editorial efforts.

Such a situation is nearly irresistible to PE firms — in this case, Lee, which approached Demand.

Several sources said that the board threw out a hefty number that it assumed would shut down any interest and the pair began talking with an initial offer to take the company private at $11.28 a share.

That equals close to $1 billion for Demand, which also has more than $100 million in cash. But sources said Lee and Demand also discussed the addition of a large loan as part of the ongoing discussions, for possible acquisitions related to a content roll-up strategy it had, which would bring the total up to $1.2 billion.

One source underscored that the board of the Santa Monica, Calif., company had no interest or intention to sell the business, but that the premium was large enough that it engaged.

The deal from Lee, which also included a strategy of splitting up the content arm from Demand’s lucrative domain-registar business.

There were also large cash-out provisions for major shareholders, as well as for CEO and co-founder Richard Rosenblatt.

Thus, the two sides engaged intensely in the last several weeks in crafting an agreement, although the devil would prove to be in the details.

One big issue is that taking Demand private was still a big financial commitment for Lee — which tried to engage some of its limited partners in the transaction — as well as other investors, including Silicon Valley’s Marc Andreessen.

That proved harder than Lee thought, said sources, with some balking at the firm’s ability to make a big enough score on the possible turnaround.

“It was hoped it would be a Skype situation, but there were worries,” said one source, referring to the blockbuster sale of the Internet telephony company by private investors to Microsoft for $8.5 billion last year. That deal was widely considered a PE home run, given the excessive premium paid for it.

Demand’s challenges increasingly worried the firm as it moved forward, sources said, causing it to reevaluate its earlier bid several times.

Also a worry: Retaining major talent, including Rosenblatt and others, after they sold large chunks of their equity.

After Lee asked for more time to complete the financing, Demand ended the talks last week.

Another source, as is typical in these endings, said it was the Lee that walked away (who knows and, really, who cares — both sides were engaged seriously).

One thing was true: “Demand was definitely at the altar, but it did not get to the vows,” said one source.

Another source noted that the board also determined that Demand’s situation was improving, and that new trends are showing that the bottom might be been reached. The company reports its first-quarter earnings on May 8, which is expected to show some traction related to its many challenges.

“There is nothing Lee could do that Demand could not do for itself,” said one person. “So throwing in the towel seemed premature for now.”

Lee declined to comment, as did Demand.

With the deal, the Seattle-based company is on track to collect sales taxes in 12 states, which make up about 40% of the U.S. population, by 2016. Amazon currently collects taxes in five states. Since 2011, it has reached agreements with seven other states, including Texas, to begin tax collection over the next four years.

Read the rest of this post on the original site »

Have you never heard of Starboard Value?

Me, either!

But the New York activist fund is readying to make a splash as soon as today, several sources said, if it follows through on the expected naming of an alternate board to challenge AOL.

Saturday is the official deadline to nominate directors to the board of AOL, also based in New York, which will have all eight up for reelection.

Sources said Starboard has talked to several Internet types, but that it has plans to put up a slate made up more of Wall Streeters to present at the company’s annual meeting later in the year.

In a filing last week, Starboard said it had been in discussions with AOL management about its concerns, so it is certainly possible the investor and the company could come to some agreement over board seats and strategic direction before it gets Yahoo-ugly.

That would make it a kind of an East Coast proxy battle version of what’s been going on over at Yahoo and its tussle with Third Point’s Daniel Loeb. He recently followed through on long-expressed unhappiness with the Silicon Valley Internet giant, and named a slate of directors — including well-known media exec Jeff Zucker — to replace current ones there.

The same kind of thing has been in the works at Starboard, which sent a letter in late December to AOL CEO Tim Armstrong, saying his much-touted strategy around content was not a good one for investors.

Like Loeb at Yahoo, Starboard is one of AOL’s largest shareholders, with a stake of just over five percent.

The letter signaled an increasing impatience with the pace of Armstrong’s turnaround efforts, which are still in turnaround. Meanwhile, AOL’s stock has rebounded from last summer’s lows of near $10 a share.

The stock is up more than 22 percent this year, to $18.44. But that’s still down almost 20 percent from when AOL spun off from Time Warner and went public in late 2009.

The grumpy (and opportunistic) Starboard entered the picture late last year.

According to The Wall Street Journal:

“Starboard, which focuses mainly on small-cap companies, was spun off from Cowen Group Inc.’s Ramius Capital LLC in March. In October, the fund successfully waged a proxy fight against hair-salon chain owner Regis Corp. when three of its director nominees were elected to Regis’s board. AOL, which was spun off from Time Warner Inc. in 2009 after a failed merger, is its most high-profile target yet.”

One of the investment fund’s bugaboos is Patch, the local news network that AOL has sunk a lot of dough into. Also under fire is Armstrong’s content efforts and the pace of its display advertising sales, including the high-profile acquisition of the Huffington Post and TechCrunch.

I have emails into all the bigs at AOL and Starboard, so we’ll see who calls back first, if at all.

According to sources close to the situation, the discussions between Yahoo and its Asian partners have hit a potentially deal-breaking impasse over the efficacy of the centerpiece of the complex negotiations — a cash-rich split-off — and several other issues.

Sources said talks have halted for now over an arrangement with China’s Alibaba Group and Japan’s SoftBank, designed to save the Silicon Valley Internet giant over $4 billion in U.S. taxes. The deal values Yahoo’s lucrative stakes in Alibaba and Yahoo Japan at around $17 billion.

Of course, such volatility is part of any complicated negotiation. This one is a doozy, and on a global scale.

Thus, progress could resume at any time and could manifest itself in a different manner, such as a taxable transaction.

Teams from all sides were just in Hong Kong this week in the latest round of discussions, which seems to have spurred the new issues, which include over-valuation.

“Getting to the promised land has been very hard,” said one person close to the situation, noting that there have been several increasingly challenging parts of the deal.

That includes all the frantic machinations around the talks, which have — to be fair — broken down significantly before, including around the holidays.

Those have gotten back on track, but sources on all sides noted there has been a toll as the agreements have gotten more advanced.

“The cumulative effect of all the disagreements of a deal already on the edge has not helped matters,” said one person.

In addition, as I have previously noted, time is brain, and circumstances at Yahoo and in Asian have shifted a great deal since the talks began in the Fall. Yahoo has a new CEO, Scott Thompson, and has just had an important board shake-up, even as the value of its Asian stake has increased.

It is also not clear if the problems are limited to just the part of the deal with Alibaba, or with both partners. But several sources on the Asian side said that Alibaba and SoftBank are aligned closely on completing a joint deal, for which Alibaba has been negotiating loans to complete.

Now, those sources are characterizing the talks as completely stopped, blaming Yahoo negotiators for suddenly shifting course on what they want from the arrangement.

“The cash-rich deal seems dead now,” said one source.

For its part, sources close to Yahoo said that it has not walked away from discussions, noting this might be a ploy on the part of its Asian partners, although they did acknowledge that there have been increasing difficulties coming to an agreement.

Still, they stressed that Yahoo was committed to trying to do some sort of deal, and the latest problems might only signal a temporary retrenchment. Yahoo is likely to make some sort of statement on the issue soon.

The collapse of talks is still sudden, since negotiations had been moving forward, if glacially, with definitive agreements in draft and contemplation of possible properties to include in the deal. That’s because the cash-rich split-off requires part of the agreement be made up of operating assets.

As you can see here, in a Wall Street Journal chart, it’s a pretty complicated deal:

And, in his goodbye letter upon announcing his pending departure as chairman of Yahoo, while publicly acknowledging them, Roy Bostock did note the possibility of the talks not working out because of that.

“We are also in active discussions with our partners in Asia regarding the possibility of restructuring our holdings in Alibaba Group and Yahoo! Japan. The complexity and unique nature of these transactions is significant. While we continue to devote significant resources to these discussions, we are not in a position at this time to provide further detail or to provide assurance that any transaction will be achieved.”

That will likely be a disappointment to investors, who have bid up shares in anticipation of such a deal occurring. Yahoo’s stock is now trading in the $16 range, well up from earlier this year.

(Update: Yahoo shares dropped significantly since my report, down more than 5 percent now, with Wall Street giving any end to the talks a thumbs-down.)

The situation could now land on the already heavy plate of Yahoo’s new leader, Thompson, who has been dealing with a number of pressing issues at the company since he arrived last month.

Welcome to the dollhouse, Scott!

More to come, of course.

And, for the record, no comments all around. (But I tried!)

Let’s be clear on the much-awaited Asian deal that Yahoo and its Asian partners have been working on: While it is certainly still moving forward, once signed, it will not actually officially close until next year.

Yes, that’s right — 2013!

Still, what everyone and his investor is waiting for is the splashy announcement of the agreement, which involves the Silicon Valley Internet giant, China’s Alibaba Group and SoftBank, a large shareholder in Yahoo Japan.

Yahoo leadership has been hoping that could happen before Feb. 24, an important date after which activist shareholder Daniel Loeb could begin to mount a proxy fight against the current board.

And while the definitive agreement — involving the sale of Yahoo’s 33 percent stake in Alibaba and 35 percent stake in Yahoo Japan — has been moving back and forth among the dealmakers, one source said its completion might take a little longer than that, perhaps even into mid-March.

“It is one of the most complicated cross-border transactions in a long time,” said one person close to the situation. “It’s three different languages, three time zones and three companies that have not always seen eye to eye.”

It’s not that the companies don’t have the top talent on the effort. For Yahoo, it is CFO Tim Morse (who most recently also warmed the CEO seat, until Scott Thompson’s recent appointment); for Alibaba, it’s CEO Jack Ma and CFO Joe Tsai; and, for SoftBank, it is top man Masa Son and his top man Ron Fisher.

To make things even more complex, at the same time as the negotiating is going on, the trio also has to pay mind to how the Internal Revenue Service in the U.S. is going to view the whole deal.

As you can see here from a Wall Street Journal chart, it’s a pretty complicated “cash-rich split-off” to avoid taxes.

While the IRS cannot take an application for a “private letter ruling” until it has an actual agreement in hand, and will not issue one on a hypothetical transaction, the agreement still must be crafted so it is most likely to pass muster.

And only then can anyone move on to the many billions of dollars that Yahoo will instruct Alibaba and SoftBank to pay or contribute in kind for the asset part of the arrangement.

As the Journal noted, in more clarity than I ever could: “A key part of satisfying tax-code requirements is that the company shedding its shares get assets, not just cash, in exchange for them. Cash can’t account for more than two-thirds of the transferred value, tax rules say. This restriction was adopted in 2005 to limit misuse of the provision.”

While Yahoo’s execs have met about the various possibilities, it is more considering now than anything else.

And although a lot of names have been bandied about — Weather Channel, WebMD, as well as Glam Media and even Digg — the more likely direction Yahoo will go in will be different, according to many sources.

First, said sources, the key criteria for the purchase will be to diversify revenue streams, a theme Thompson sounded in his first earnings report recently. That could mean more online commerce, perhaps, rather than advertising or media assets.

Second, said sources, international properties might be more valuable to Yahoo than owning more U.S.-based ones, which opens up a range of interesting possibilities.

This could even include some already held by Alibaba, for example, such as garnering a big stake in its publicly-traded Alibaba.com. That property has become a prime candidate for the deal, said several sources, for a number of reasons.

Technically, via Alibaba, Yahoo already owns some of the e-commerce giant, but not directly. Another possibility is to get back the Yahoo China business, also now owned by Alibaba.

Third, U.S. companies that Yahoo might look at could be unusual and even bold. Two names brought up in recent internal meetings, for example, were Netflix (before its stock revived) and Yelp (which is prepping for an IPO, and which Yahoo once tried to buy already).

And if things were not already needlessly complex in fixing its Asia problem, expect a change in the Yahoo board composition, too, as early as this week.

As I previously reported, at least four directors are expected to move on. More to the point, there will also be replacements announced at the same time.

To stave off Loeb and even give him a perceptible win, sources said the company is considering announcing the changes sooner than later, with the hope that fresh new members will placate other shareholders.

Lastly, with Thompson starting to take the reins after a month there, I would also expect he’ll weigh in on some significant restructuring (his word, not mine!) at Yahoo soon enough, too.

Complicated? Sure is! Perplexing even? And how! But until Asian and board resolutions, the real work of fixing Yahoo can’t really begin.

Yahoo shareholders felt a little giddier earlier this week, when it seemed as if the company had finally decided to make a deal with its Asian partners.

But the happiest crew might end up being the Silicon Valley Internet giant’s outside counsel, Skadden Arps — and especially Leif King, the fantastically named legal eagle who has been advising Yahoo on the deal.

That’s because today the Yahoo board approved continuing the negotiations to come to a final agreement over the stake, sources said, which should take six to eight weeks.

It’ll surely be happy holidays for billable hours!

As costly as the legal bills will be, if it all goes well, an Asian solution will mean one major problem solved, with a possible pile of cash and new assets coming in to Yahoo.

To get there, the company signed a term sheet earlier this week with Japan’s SoftBank to sell back all its holdings there, and with China’s Alibaba Group to sell off more than half its stake (moving from a 40 percent stake to a 15 percent one).

The deal values Yahoo’s total shares in both companies at about $17 billion.

While it gets a pretty accounting name — “cash-rich split “– the vehicle to unwind it all is essentially a complex tax dodge finally cooked up by the trio, in which cash, new assets and stock will be moved around until everyone gets what they want (except the U.S. government).

I would explain it — but I am on vacation, and would rather drink eggnog and sleep — so here is The Wall Street Journal’s version, which I like because it sounds like Alibaba and SoftBank are giving Yahoo a hugely loaded Starbucks card for Christmas:

“As envisioned in the scenario, Alibaba would create a subsidiary into which it would put several billion dollars of cash, plus an operating asset that Yahoo wants to buy using additional cash from Alibaba, almost like giving Yahoo a prepaid card for an asset of its choice, the people said.”

Everyone is hoping there will not be any hiccups in the deal, which has been spearheaded by Yahoo board member and Intuit CEO Brad Smith, and Jerry Yang, who is also the company’s co-founder and a major shareholder.

Alibaba CEO Jack Ma and CFO Joe Tsai, both co-founders of that company, were the point men for the Chinese company. And for SoftBank, it was its founder and CEO Masa Son and his main U.S. exec, Ron Fisher.

Now, said sources, Yahoo’s board is hoping to still keep the bids from a pair of private equity firms — Silver Lake and TPG Capital — alive.

While initially the focus on the action, the PE bidding for partial Yahoo stakes has recently been sidelined by the Asian deal.

Now, sources said, Yahoo is hoping the new infusion of cash and assets will allow it fend off shareholder unrest — stock buybacks and dividends, anyone — to solicit higher prices from the firms to make strategic investments.

Yahoo had considered the initial bids too low, as did some very pissed-off activist shareholders.

Still, it’s not clear if those firms will jack their offers now, although sources said Silver Lake is still interested in some sort of deal that would give it influence over remaking Yahoo.

Silver Lake and others think the long-troubled company could be revived with some effort, and become a much more lucrative Web property.

But those negotiations might run into roadblocks over who gets to pick leadership for the company. Yahoo has accelerated its efforts to hire a new CEO, after firing Carol Bartz in September.

The PE firms, who would buy a large stake in Yahoo, also have wanted some level of control, including CEO and board approval, in order to be able to make massive changes at the company to turn it around.

Wall Street seems to like the Asian part of the deal, at least, since it shows some sort of forward momentum at Yahoo, and from its often-lugubrious board.

Shares are up almost 7 percent in the last few days, although they are not popping as they might be, given that new valuations based on a successful Asian deal put the stock at a much higher price.

In other words, investors like what they see, but are watching and waiting for more.

Mozilla is set to announce that it has signed a new three-year agreement for Google to be the default search option in its Firefox browser.

It’s a critical renewal for the Silicon Valley software maker, since its earlier deal with the search giant has been a major source of revenue to date.

The companies said the specific terms of the commercial agreement are not being released. But, in 2010, Google contributed 84 percent of Mozilla’s $123 million in revenue.

A previous version of the arrangement had expired at the end of November. Mozilla said at the time that it was in “active negotiations” with Google.

The relationship has not been without some tension of late. Since the first search royalty deal was signed in 2008, Google’s own Chrome browser has become a significant competitor. Just last month, Chrome overtook Firefox in global usage for the first time, according to StatCounter. Both browsers — software which is used to navigate the Internet — have about 25 percent market share.

Mozilla also has partnerships with other search providers, including Microsoft’s Bing, Yahoo, Yandex, Amazon and eBay.

Here’s the full announcement Mozilla will soon put out:

Mozilla and Google Sign New Agreement for Default Search in Firefox

We’re pleased to announce that we have negotiated a significant and mutually beneficial revenue agreement with Google. This new agreement extends our long term search relationship with Google for at least three additional years.

“Under this multi-year agreement, Google Search will continue to be the default search provider for hundreds of millions of Firefox users around the world,” said Gary Kovacs, CEO, Mozilla.

“Mozilla has been a valuable partner to Google over the years and we look forward to continuing this great partnership in the years to come,” said Alan Eustace, Senior Vice President of Search, Google.

The specific terms of the commercial agreement are confidential and are not being released.

“Let’s go. Yes, let’s go.” [They do not move.]

– Samuel Beckett, “Waiting for Godot”

In Internet terms, the removal of Yahoo CEO Carol Bartz happened a dog’s age ago.

In fact, it was September 6.

Since then, it has felt like a slow slog, especially contrasting the situation with that of another troubled Silicon Valley giant, Hewlett-Packard, which fired its CEO Léo Apotheker and appointed a new one, Meg Whitman on September 22.

Since then, in comparison, the former eBay CEO has been like the Energizer Bunny, making a series of major and often difficult decisions, including: Holding onto its PC unit; reaffirming its controversial deal to buy Autonomy; promising a decision on the fate of its webOS unit within the next two weeks; appointing new execs; and even buying a company.

To be fair, Yahoo did acquire advertising start-up Interclick.

Otherwise, still no sale or investment deal. No new CEO. No Asia resolution. And, perhaps most importantly, no clearly articulated strategy going forward.

It’s not that Yahoo’s leadership isn’t working at it.

Some fervently insist to me that there is a “plan,” as if there is some clever game of Internet Stratego going on that I cannot possibly grok.

Mebbe — but of this I have no doubt: The Yahoo board has indeed been huffing and puffing away, weighing and measuring, considering and debating.

A lot.

Maybe I’m just too impatient. I am (ask my kids).

Or maybe Yahoo’s beleaguered employees are, one of whom just wrote me plaintively, “unreal how they can drag this out,” in what has become a common refrain up and down the ranks.

Or maybe it’s the Asian partners, Alibaba Group and SoftBank, who are antsy and have considered a variety of nuclear options in order to get back stakes Yahoo holds in them. Said one: “The strategy seems to be to frustrate and exhaust us into submission.”

Or, finally, maybe it’s the newly frustrated recent bidders for a partial stake in Yahoo, Silver Lake and TPG Capital. Declared one to me after I warned that Yahoo might, in fact, drag the proceedings out longer than you might expect: “I thought you were kidding.”

Nope, welcome to the Yahoo waiting game, PE guys!

So, to help us all get through it, here’s a quick update primer on what’s what on the various fronts:

Who’s in Charge Here?

Technically, it is the Yahoo board, which is aided by interim CEO Tim Morse.

First, a word about Morse: By all accounts, he is doing a very good job as temporary head honcho — calming the troubled company, making swift decisions about daily operating issues and being a generally nice dude to deal with.

“He’s Yahoo’s no-drama Obama, in comparison to what was happening before,” said one exec, in reference to the more volatile regime under Bartz.

Still, despite his very pleasant all-hands meetings, such as one earlier this week, Morse had previously been Yahoo’s CFO and not an Internet-savvy visionary to give the company inspiration. No insult intended, but he’s the accountant guy.

To be fair, he is not meant to be the visionary, but many at the company are yearning for exactly that.

A role that is now being taken up again by co-founder, former CEO and director Jerry Yang, who dozens of employees tell me is unusually involved in operational details these days for a board member.

I get reports of sightings of him all the livelong day: Jerry in demand-side advertising confab! Jerry chitchatting with entrepreneurs from a possible start-up acquisition! Jerry weighing in on a variety of products. Look, over in the cubicle, it’s Jerry!

This is seen by Yahoo employees as a good thing and also a bad thing, since it’s hard to be running your little divisional show at Yahoo with the dude who invented it all looking over your shoulder, even if he means well. People naturally defer to Yang, the 800-pound Web icon in the room.

But, given the overwhelming state of stasis at Yahoo now — “No one can do anything until we find out how the story ends,” said one staffer — and employees eying the exits, no power at Yahoo really matters but the board.

You know, the board that has gotten the company to this moment of crisis and profound ennui, which is its own particularly ironic irony.

To better understand the power dynamics on the board, above is a little chart for you to peruse to give you an idea of which independent board member is running what key committee.

The only truly important one is the Transactions and Strategic Planning committee, which is headed by Intuit President and CEO Brad Smith and includes former Akamai President (and former Yahoo CEO candidate) David Kenny, top HP exec Vyomesh Joshi and other guy Gary Wilson.

And, in completely visible shadow form, Yang. Multiple sources close to the situation said he has been a key force in the strategery around a possible sale or investment.

This has caused not more than a little tension among board members, but everyone seems to like the much described nicest-man-in-the-room, Smith, and hopes his cool head will prevail.

Another important part of the board is the Nominating and Corporate Governance committee run by Patti Hart, who is energetically and simultaneously — if pointlessly — in search of a capable new Yahoo CEO.

Or, as I like to call this mythical person: The Unicorn.

The Deal

As I and many others have previously reported, there are bids on the table for partial investments in Yahoo by two very powerful private equity firms, Silver Lake and TPG Capital.

It’s a PE rumble, with a side of Microsoft financial backing! (I think Silver Lake’s Egon Durban makes a very nice Riff, while Microsoft’s Steve Ballmer is the perfect Officer Krupke.)

My fervent wishes for some figurative and dance-accompanied knife-play aside, the bids are essentially the same in general and different in particular. Silver Lake is offering about $16.50 a share, while TPG is dangling a tiny bit more. Silver Lake has power entrepreneur and VC Marc Andreessen on its side, while TPG is trying to get Silicon Valley fave investor and start-up whisperer Reid Hoffman of Greylock Partners and LinkedIn on its team. Both have ideas on CEOs, strategy and what to do about the Asian assets.

This type of deal could happen suddenly and you’ll hear about it quick, since the losing side will immediately trash it to the media.

As you might expect, each director has their favorite PE firm, with some not liking Andreessen, some thinking the TPG bid is a little light, some for a whole-company deal and some wanting Yahoo to hire its own CEO and run the place itself.

Of course, the last one shows a disturbing level of denial and should be a nonstarter, given the board’s abysmal record on CEO choice and its riding of Yahoo to this sad point in its storied history.

Here’s what to expect on the PE front: A lot of wrangling behind the scenes with frequent leaks to the media about what each side wants and will not yield on.

CEO choice or no CEO choice, that is the question!

Also a big factor are Yahoo’s major shareholders, few of whom like the partial investment deal, which is known as a PIPE (Private Investment in Public Equity), because of the insiderness of it all and because they prefer a whole-company sale at a higher price.

There is also pressure from activist shareholders like Daniel Loeb of Third Point, who has attacked Yang and others on the board and is ready to pounce with a proxy fight if Yahoo tries to override shareholders too egregiously. And, of course, the inevitable lawsuits over any arrangement that seems to block a whole-company bid.

That said, such a mega-deal seems unlikely, since it is too pricey and despite a lot of noise that Yahoo’s Asian partners were ready to strike with a takeover in order to get back Yahoo’s big stakes in their companies.

That’s kind of like buying a store to get back the cool pair of shoes you sold, but bankers love to scheme up this stuff. While it certainly could happen, it would be a bear of a deal.

Perhaps more like Yogi Bear, hopelessly angling for a tasty pic-a-nik basket — but grrrr anyway.

But perhaps the biggest factor in all of this mishegas is time. There is none on a lot of levels, most especially the increasing level of brain drain and drift at Yahoo. After the New Year dawns, this is going to spin right out of control and amount to the biggest internal challenge Yahoo faces.

An Asian Solution

As I and others have reported, Yahoo is entertaining yet another proposal to sell all or part of its Asian assets back to the companies, which make up a bulk of its market valuation.

The relationship between Yahoo and its Asian partners has long been fraught, and today the difficulty of reaching an agreement remains a vexing issue. That’s because it is hard and complex and because no one wants to do what the other side wants.

I am no tax attorney, but it seems as if Yahoo will ultimately come to some deal with China’s Alibaba and Japan’s SoftBank, which could include big investors like Russia’s DST Global.

And, as I reported last week, the Asian partners want to strike a deal with the current board rather than lose leverage with a much cannier new owner.

It’s a tough decision in all aspects to strike, but would remove the focus on the fact that Yahoo’s most valuable asset is something it is not running and simply holds due to a good stock trade in years past.

Years past should be the operative thought here, since the Asian assets have nothing to do with what Yahoo needs to do with its core U.S. and global brand.

You know, the thing that allowed them to buy those lucrative Asian assets in the first place?

Strategery

And that’s the crux of all this, isn’t it? Yahoo needs a new strategy and fast.

Or it needs to clarify and hone its current strategies around advertising and media and define itself once and for all. While it often touts itself as a premier digital media company, it’s still not clear exactly what Yahoo is saying by that.

In fact, incredibly, sources told me that the board was still wrangling over the tired issue of what Yahoo is at its most recent meeting — essentially, is it a products company or a media company?

If I had to listen to that who-am-I-anyway debate again, I think I would scream, given how many important Web trends that Yahoo has whiffed in recent years, many of which were right in its own wheelhouse.

How much damage this has caused to Yahoo’s core business is a critical one to determine, with many feeling the situation is too far gone to revive it and others confident that this is simply an issue of poor execution.

I am in the middle on this one, but all the indicators of Yahoo’s business have long been heading in the wrong direction, and results in the next quarter are expected to underline this even more.

Thus, the board’s navel-gazing at this point is untoward, considering that it is presiding over the possibility of a sale that should not have had to happen in the first place. While it is not quite a fire sale, it’s no cause for celebration at all the attention, either.

In fact, it’s also pointless, since — if this all resolves as it should — the current Yahoo board will not be the one determining the company’s future any longer. Remember that: This group should and will be gone for the most part.

Yahoo shareholders and employees can hope, at least.

Then, it will be up to the next group of leaders to make the very hard choices — including what are likely to be massive layoffs and radical surgery on its offerings — for what’s to come next.

In the end, that is all that will matter. Until then, as usual, you’ll have to sit tight.

One of Yahoo’s biggest problems — brain drain — has turned out to be an asset for private equity firms and other players interested in figuring out their best moves related to the Silicon Valley Internet giant.

A plethora of ex-Yahoos, including many former top execs, are getting buttonholed by those who want to know more about the inner workings of the company that might not be obvious from its copious financial data available publicly.

That includes former Americas head Hilary Schneider, who has a longer-term consulting gig with TPG Capital, one of the several PE firms that has recently signed a non-disclosure agreement with Yahoo; former COO and President Sue Decker, who has had a longtime informal relationship with Blackstone, which has not signed the NDA and has been in talks with Yahoo’s Asian partners, China’s Alibaba Group and Japan’s SoftBank; and even former CEO Carol Bartz, who sources say has also been contacted to get her insights.

She is one of many in that regard, in a large pool of former Yahoos, such as: LinkedIn CEO Jeff Weiner, who had run Yahoo’s media efforts; Chegg CEO Dan Rosensweig, former Yahoo COO; SurveyMonkey CEO Dave Goldberg, who ran swathes of Yahoo’s entertainment properties; Criteo CEO Greg Coleman, former Yahoo sales head; former CEO Terry Semel, who is now an investor; former communications exec Brad Garlinghouse, who is now at AOL; and Demand Media Chief Revenue Officer Joanne Bradford, who also was a top Yahoo advertising exec.

Not all are cooperating with the requests for a chitchat about Yahoo, but there is much incoming interest in ex-Yahoos and what they might know.

There’s lots more where that came from, from all parts and all levels of Yahoo, given the breadth of the exes now doing very well — thank you very much — throughout the tech and media industries.

Thus, calls from PE firms, from Silver Lake to Bain Capital to Providence Equity Partners, as well as interest from major and majorly irritated shareholders, such as activist hedge fund investor Dan Loeb.

It’s a smart idea to tap this rich vein of information, as all contemplate possible multi-billion-dollar investments.

While some of these execs have not worked at Yahoo in many years, all have significant knowledge about the challenges and also the culture that cannot be gleaned from spreadsheets.

They also know a lot about the internal politics and personalities of the existing inside players, too. More importantly, several were involved in similar previous major business decisions at Yahoo.

Decker, for example, was a key exec in the Yahoo takeover attempt by Microsoft several years ago; Schneider and Bartz were deeply involved in striking the advertising and search partnership with Microsoft.

“Between everyone, it’s a good way to figure out where all the bodies are buried,” said one person close to the situation. “And there are a lot of bodies.”

After his unusually enthusiastic declaration at a Silicon Valley event last week that “we are very, very interested” in buying the “whole” of Yahoo, you might imagine Alibaba Group co-founder and CEO Jack Ma running out of the speech looking for a giant pile of cash to pay for it immediately.

Instead, according to sources close to the situation, what the Chinese entrepreneur got was a cold dose of CFIUS — or Committee on Foreign Investment in the United States, the federal interagency review process for foreign investment deals.

Translation: If you are from China and want to buy our U.S. companies, we are going to have to give you a major look-see and it is not going to be pretty.

Perhaps that’s fair, but the prospect that even a purchase such as Yahoo, a consumer business that seems to have little in the way of national security concerns, might enter the buzzsaw of U.S. politics apparently surprised Ma.

Thus, sources said, that while it remains very interested, Alibaba is now at least a little concerned about the feasibility of the deal and that Ma is “perplexed” about why the U.S. has such restrictive rules against foreign ownership of a consumer business.

That said, he has been in touch with Yahoo co-founder and board member Jerry Yang and is likely to make a more official visit soon with others involved in Yahoo’s strategic review.

In addition, sources said, rumors of an imminent Yahoo bid hook-up with DST Global and Silver Lake — which recently invested in Alibaba — are overblown. While Ma did say last week at his much-noticed speech at Stanford University that he was talking to a lot of buyers, Alibaba is not closely aligned with anyone as yet.

Of course, given that Yahoo owns a 40 percent stake in Alibaba, Ma will be a big player in any deal done.

That’s because of a 2005 agreement that stipulates that if there is a change of control, Yahoo must give Alibaba a 15-day chance to buy back its stake.

Still, after his effusive I-want-Yahoo-now speech that caught the Internet giant and its bidders off guard, dialing back the rhetoric a bit is probably no surprise given the delicate dancing now going on.

In other words, a case of wanna-be-buyer’s remorse.

Of course I have something to say about the news yesterday that AOL would be a key investor in a new early-stage venture fund being started by TechCrunch’s perpetually petulant editor Michael Arrington — with a big, fat and decidedly greasy assist from a panoply of Silicon Valley’s most powerful VC firms and angel investors.

Arrington has previously called me “chief whiner” — oooh, buuuurn, although fair enough, since I have compared him to an egomaniac turtle named Yertle in the past — about my nagging him over the importance of upholding standards of fairness and ethics in journalism.

So as not to let him down, let me begin the whining.

First, my initial reaction when I first heard about the deal: Ugh. Sigh. Hopelessly corrupt. Now 100 percent more icky! A giant, greedy, Silicon Valley pig pile.

I was upset.

By early evening, after my kids told me to chillax, my dark mood had changed to accept that the transaction — however profoundly distasteful to me — was part and parcel of the insidious log-rolling, back-scratching ecosystem that has happened in every other center of power in the universe since the beginning of time.

And so it goes in Silicon Valley.

In fact, the creation of a $20 million investment kitty that Arrington has dubbed CrunchFund is simply the formalization of a long-standing arrangement that has already been going on since he founded his popular tech blog.

That is to say, in which the basic standards of journalism are first warped by calling it newfangled truth-telling and then endlessly corroded by using a wily and unusually aggressive combination of favors and threats to extract, from start-ups and VCs in need of press, both exclusive access and information.

And now, inevitably, money.

This could have been a lot cleaner, of course, by Arrington simply resigning from TechCrunch, becoming a VC and perhaps starting a new blog where his agenda is much clearer, from which he could huff and puff away as he does with much entertaining gusto at real and (mostly) imagined slights.

There is certainly precedent for VCs blogging, including Fred Wilson, Brad Feld and Ben Horowitz. And, despite my criticisms about ethics, it is clear that Arrington is a talented writer whose unique voice would be even stronger if it was truly seen as separate from what has become a news organization.

But because of his obvious need to be the center of attention — requiring the ermine kingmaker mantle and foisting his patented I’m-here-to-tell-it-like-it-is attitude on us all — that appears to be impossible.

(By the way, I await Arrington’s usual inane rant about the fictional conflicts of interest related to my gay Google marriage anytime now in 3 … 2 … 1, always and purposefully leaving out the pertinent facts that I can only wed one person, get no financial benefit and am also a prominent critic of the scary search behemoth, while he can make a badillion questionable and grossly tangled investments.)

Personal annoyances aside, what’s most interesting here is the group of Silicon Valley power players who lined up to bow and scrape and then hand over a small pile of dough to the blogger who would be king.

They include: Sequoia Capital, Redpoint Ventures, Kleiner Perkins, Greylock Partners, Austin Ventures and Accel Partners, as well as individual investments from partners at Benchmark Capital and Andreessen Horowitz, entrepreneur Kevin Rose and DST Global’s Yuri Milner. And, of course, the inevitable Arrington BFF Ron Conway.

Holy googa mooga, that would be, well, everyone, except Ashton Kutcher and Justin Timberlake (who will surely appear soon enough).

As one person also pointed out to me, I don’t recall this many competing VCs investing in one company, let alone another venture fund.

It goes without saying that the reasons they all decided to jump in this fetid pool with abandon are quite varied, if all entirely compromised.

One investor told me — off the record, naturally — that he thought it would be an interesting experiment to see what happened and so he wanted in, especially since everyone else was doing it.

Another well-known VC said that there is no downside to being financially affiliated, especially in attracting talent to its start-ups, with Arrington and, by extension, TechCrunch.

The well-respected Reid Hoffman of Greylock was the only one brave enough to talk on the record, explaining the reasoning pretty clearly:

“Techcrunch will get some real deal flow from entrepreneurs that we would otherwise not see, because they have established a prominent position as the SV/Tech industry information feed. As many tech entrepreneurs read it — both within Silicon Valley and globally — and view the information news feed to be their target for announcing themselves to the world, Crunchfund will have access to deal flow to these diverse and early stage companies. Some of these companies will be the kind of early stage companies with billion-dollar potential that Greylock invests in.”

There you have it: No one can afford to be out of the deal flow in these times, even if it means cutting corners.

While TechCrunch’s owner, AOL, said Arrington will no longer be managing editor, with only writing duties at the site he dominates and with no editorial control, Hoffman’s use of TechCrunch for CrunchFund was accurate, because in the eyes of many they are interchangeable.

That’s due to the fact that Arrington still breaks or is clearly the source for important stories on the site and, more importantly, is the big swinging dude who attracts all the eager entrepreneurs to the party. He is the fulcrum of that site, even as it has grown.

And so it will remain, I am guessing, no matter how much AOL insists it will not be so, because the easy questions pile up quickly:

Will Arrington keep doing what are clearly news stories, for example, even though he protesteth too much — as he did in the New York Times yesterday — that he is not a journalist?

And, if so, is it right for him to do so given his insider status, creating a nonparity of sourcing and crystal clear conflicts of interest?

Most of all, can he resist his palpable love of news-breaking and scoops, even if he gets them in ever more unseemly ways?

As if to make it all pretty, Arrington told reporters yesterday that he has put a clause in his limited partnership agreement so he can report on anything he likes, and in any way, about his investors and their companies, however confidential, except those he invests in.

O joyous day! Freedom of the press is preserved and our sacred First Amendment can breathe a sigh of relief, now that it is enshrined in an unholy blogger-VC LP agreement.

After pausing for a moment so that Thomas Jefferson and Edward R. Murrow can stop spinning in their graves, you can go down this road for many increasingly bumpy miles, which only becomes more twisted and confusing as it continues.

I finally talked to one investor in CrunchFund, who said simply and honestly: “It’s not that much money, so who cares?”

Indeed, who does care anymore about crossing what had long been very bright lines in journalism and, if you want to get all cosmic, in life?

Obviously, most of all, not AOL, or its CEO Tim Armstrong, or its head of content, Arianna Huffington. The pair, for whatever reason, decided to make a startling exception for Arrington from a rule that explicitly bars reporters at its media units from investing in the companies they cover.

That happened after he recently did a complete 180 from a previous decision to stop investing and jumped right back in, leaving Armstrong and Huffington to clean up the ethical mess.

They only made it worse, with their decision to throw journalism under the bus by letting Arrington do as he pleased, while touting how important it was for other content sites at AOL to remain more pure.

In the spirit of full disclosure, these kinds of ethical lapses are endemic these days in journalism. Case in point: The appalling phone-hacking controversy taking place at News Corp.’s News International unit in Britain.

While I cannot speak for Dow Jones, I can say that the behavior in another News Corp. property certainly takes its toll on those who adhere to higher standards at the company, especially when it comes to morale.

Thus, I can imagine how others feel at AOL — including those you-know-who-you-are silent ones at TechCrunch — who can’t and, more to the point, wouldn’t make the deals Arrington has been allowed to get away with.

It is not a good feeling, I can assure you.

And, while I have not spoken to her about it, I’d imagine that Huffington cannot be thrilled to be pushing for better journalism at AOL and trying to burnish her cred by hiring some top reporters, while also having to deal with this.

That’s okay, because Armstrong was perfectly willing to do the awkward pretzel-twist needed to explain away the controversial situation, also in an interview with the Times:

“TechCrunch is a different property and they have different standards. We have a traditional understanding of journalism with the exception of TechCrunch, which is different but is transparent about it.”

In this case, Tim, I am sorry to inform you that transparency is a complete canard and is more likely to end up covering up a lot more transgressions than it ever will reveal.

And, essentially and lazily sloughing it off by saying, “That’s just Mike being Mike,” is not going to cut it, at least not with me.

Not that any amount of tsk-tsking about it matters, I suppose, as Arrington finally gets his fervent Pinocchio-on-a-star wish to be a real-boy VC, can add yet another tainted buck to the pile of billions his venture pals already have, and just call it another typical day in Silicon Valley.

Still, when you are the designated whiner-in-chief, it is pretty much all one can do.

As these companies are wont to do in the middle of the night, Yahoo, SoftBank and the Alibaba Group have reached an agreement in their nasty dispute around the Alipay payments unit, and they are ready to talk about it.

Well, not Alibaba’s CEO Jack Ma (pictured here), Yahoo’s CEO Carol Bartz or SoftBank’s Masa Son, but their functionaries are all set to discuss the deal.

The issue has revolved around the spinning out of Alipay by the Chinese Internet giant Alibaba, without the approval of large stakeholders Yahoo and Japan’s SoftBank, which the pair felt was a big no-no.

Much mishegas followed, but the trio has been hard at work on a settlement, which is here now.

Of course, had the three companies cooperated in the first place as joint owners and board members of Alibaba, this all would have been unnecessary.

5:48 am PT: The call starts without all kinds of regulatory info about what can and cannot be said, before being thrown to Yahoo CFO Tim Morse.

One interesting wrinkle is that SoftBank’s Ron Fisher cannot speak at all, due to some Japanese laws, which are unexplained. But, said Morse, he’s there to show his support.

Go, Ron!

Alibaba’s CFO Joe Tsai is up first to talk about the deal over Alipay, which he stresses does not really make much money now. As he says, it is “marginally profitable.”

Tsai walks through the facts that they have already outlined earlier today, including a variety of payments from Alipay to Alibaba, since — let’s be clear — it used to be part of Alibaba.

But Alibaba said it had to spin it out in order to get critical regulatory approvals from the Chinese government, which caused this mess.

Morse now comes on, noting the whole squabble really had “no direct impact” from a financial point of view on Yahoo or SoftBank at this time related to its Alibaba assets.

Well, shareholders of Yahoo might beg to differ, considering the huge hit the stock has taken due to the fight. Wall Street has long considered Yahoo’s Asian assets its most valuable part.

But Morse is pleased the complex agreement has finally been reached — I am guessing it was not easy to negotiate among three different countries with so much pressure.

5:59 am: Time for Q&A!

The first question is about more deets and also about the possibility of a liquidity event for Alibaba or its various units.

Tsai underscores that there might not be one or there might be one. In other words, the Chinese assets of Yahoo may or may not ever pay off.

The next question is about why Yahoo and SoftBank should have a cap on an asset they used to own 100 percent of. Good point!

Neither Morse or Tsai really answers the question, except for Tsai talking about how certain rules over foreign ownership of payment companies in China means it had to be like this.

“If you own 100 percent of the business that cannot operate, you own 100 percent of zero,” said Tsai.

Translation: That’s China, folks, so suck it up!

The next question is a promissory note, which Tsai says has value, even though it actually does not have value right now. China!

The analysts still are stuck on this fact that, under terms of the agreement, Yahoo will only get 37.5 percent of an IPO or other liquidity event, when it used to be owner of 100 percent of Alipay.

Good point: Will this happen to other Alibaba units, such as its Taobao commerce unit?

China is a good place to be, assures Tsai, which is cold comfort right now.

A lot of swirl around preferential terms in the deal for Alipay with Alibaba’s units, which seem to be the same as before. In other words, nothing has changed, except a lot of stock loss for Yahoo and less technical ownership of Alipay.

The Wall Street analysts on the line continue to be riveted to the idea of a liquidity event for Alipay and other Alibaba units, especially Taobao, and keep asking different versions of this question.

The last question is about more deets of the deal and new business ideas for Alibaba.

Tsai talks about a cloud-based system rolling out, for example.

The questioner moves to, you guessed it, a liquidity event.

“I don’t think we want to get into it at this point,” says Tsai.

Well, we do, but apparently Yahoo shareholders are not going to.

That said, the deal is finally settled, which has already given Yahoo shares a small bump today. And that’s not nothing.

Yahoo, SoftBank and the Alibaba Group have reached an agreement in their contentious dispute around the Alipay payments unit.

The trio have been in extended talks since Alibaba’s CEO Jack Ma spun Alipay out from Alibaba without the approval of Yahoo and Japan’s SoftBank, which own large stakes in Alibaba.

At the time, he said he did so in order to get critical regulatory approvals from the Chinese government. The move prompted an ugly fight between Alibaba and its partners.

In a statement, the trio said:

“The agreement is consistent with the two agreed-upon principles established at the outset of the negotiations: structure the inter-company relationship between Alipay and Taobao in order to preserve the value within Taobao and, by extension, within Alibaba Group; and provide that Alibaba Group is appropriately compensated for the value of Alipay.”

Under terms of the agreement, the three companies said that Alipay will continue providing payment services to Alibaba’s Taobao commerce site and other subsidiaries; Alibaba will be paid almost half of Alipay’s pretax income; and Alibaba will get between $2 billion and $6 billion — or 37.5 percent of the total equity value — in the event of an Alipay IPO or other liquidity event.

Yahoo has also filed a very detailed account of the deal here with the Securities and Exchange Commission, which you can read here and especially here.

Yahoo’s stock has risen 3.6 percent on the news so far this morning, but it is still just below $14 a share.

There will be a call at 5:45 am PT to explain it all, which I will be liveblogging, but here’s the full press release:

alipay

Yahoo turned in another flat performance in the second quarter, with $1.08 billion in revenue, which was slightly below Wall Street expectations.

Earnings per share were right on target, though, at 18 cents each, an increase of 18 percent. Net income was $237 million for the quarter.

Investors were expecting Yahoo to report revenue of $1.11 billion on earnings of 18 cents.

That means a revenue decline of five percent from a year ago, which Yahoo said was “primarily due to the revenue share related to the Search Agreement with Microsoft.”

More importantly, in a statement, Yahoo CEO Carol Bartz also pointed to changes in its display sales operations, a key business of Yahoo:

“We experienced softness in display revenue in the second half of the quarter due to comprehensive changes we have made in our sales organization to position ourselves for more rapid display growth in the future.”

Whatever the reason, it’s not good news for Yahoo, especially considering Google’s strong results last week. Then again, it’s better than the first quarter’s six percent drop in revenue for Yahoo.

That said, Yahoo stock was down between one and two percent in after-hours trading.

Here’s the full press release to peruse, before I begin liveblogging the earnings call at 2 pm PT, as well as a link to my post on its slide deck of the results:

YHOO_Q211PressRelease_Final

Nokia has already announced the key piece of its strategy–a shift to Windows Phone for future smartphones. Now the company is set to talk about the financial implications of that and go through the rest of its strategy, which includes a mix of Symbian and even a dash of MeeGo.

The investor event is scheduled to start shortly and due to run until about 2 pm London time. Mobilized will have live coverage, providing our battery holds out. I’ll try to mention only the high points, however. Mobilized loves numbers, but it is awfully early for a whole lot of financial speak, especially for the U.S. insomniacs tuning in.

12:02 pm: Still waiting for things to get going. But if you really want something to do, we have plenty of earlier coverage, including the press conference and the YouTube video of Microsoft CEO Steve Ballmer and Nokia CEO Stephen Elop, as well as a chat with Elop on how he made his big decision.

12:05 pm: Okay, things are getting going as Elop takes the stage (the same one as the earlier press conference.

12:06 pm: Elop is reviewing things. Lots of talk of both challenges and gems. If you read his memo, or anything else he’s said recently, you have heard this.

Battle of devices to war of ecosystems, etc. Mobilized has this part memorized.

12:09 pm: Smartphone strategy is just one piece.

Reviewing the three alternatives that Elop considered–MeeGo, Android or some partnership with Microsoft.

As for Google, Elop says it is the case there are some advantages for that approach.

“There’s something happening there. There’s no denying that.”

However, Elop says the company was worried it would be late and be just one of many, and was not sure how it could leverage assets like its Navteq location-based services.

“Our sense was differentiation could be a pretty big challenge,” Elop says. “The risk for commoditization would increase dramatically.”

Feels profit would have eventually moved to Google, with handsets becoming a commodity.

“It felt a little bit like giving up and not enough like fighting back,” Elop says.

12:12 pm: As for Microsoft, Elop says both companies are bringing something to the table.

As expected, Elop is characterizing this as more strategic than just taking a license to Windows Phone. Talking about Nokia services like mapping, local advertising and other things that Nokia can bring to the table.

“It’s far more interesting than a simple licensing deal,” Elop says. This was the only strategy that makes it a three horse race with Google and Apple.

Elop says he is convinced that Nokia will be able to differentiate within the Windows Phone ecosystem on a sustainable basis.

12:15 pm: There were some challenges and potential disadvantages, he acknowledges.

Top among these is the fact that Windows Phone 7 is new on the market.

“It’s early,” he says. “Will it succeed?”

12:17 pm: Also, there is the issue of being locked in or a lack of control. Elop does not disclose terms but says the company has flexibility and “substantial control” over the future of the ecosystem.

“This is not your mother’s OEM deal with Microsoft,” Elop says.

12:17 pm: Elop says the deal is at the “term sheet” stage, noting that the companies have yet to sign the “definitive agreement.”

12:18 pm: Already the engineers are working through, and Elop says this deal will allow Nokia to move far faster than it has in recent years.

12:18 pm: He’s also making the cost-saving argument, saying Nokia can focus its investment, which he acknowledges hasn’t been getting the return it should.

Elop earlier acknowledged that the company expects significant cost savings from the move as well as substantial workforce reductions.

“Bottom line: Products that are more competitive,” he says.

12:22 pm: Operators are excited by a third viable option, Elop says.

“A two-horse race is not a satisfactory [situation] for operators,” Elop says.

Elop says that Microsoft-Nokia will be operator-friendly, as compared with Google and Apple.

12:24 pm: Elop talking about differentiation–a key concern of analysts and investors.

Elop talks about Windows Phone as offering differentiation form Apple and Google, but also insisting that Nokia has the assets and business terms it needs to stand out from other Windows Phones. He focuses on camera technologies and “unique relationship.”

Stresses again that this is not a standard handset maker agreement. But he also says that just because Nokia can change lots of things within Windows Phone, doesn’t mean it should.

Nokia, he says, must “resist the temptation to customize just for the sake of customization.”

12:27 pm: Now talking about Symbian. For those that missed it, Elop reiterates this is a transition strategy, but adds that the company still expects to sell 150 million more Symbian devices before that transition is complete.

12:29 pm: Strategy is more than just smartphones. He wants the company to be a leading force in connecting the next billion people to the Internet via phones in emerging markets. “The market for feature phones is pushing down the price curve and that is an opportunity for Nokia.”

Nokia will do incremental work in that area–things like Nokia Money for people that don’t have a bank account or telephone. Another, Nokia Life Tools, helps connect, say, farmers to market information.

This area is still a target for innovation, he says, but it also faces competition from Chinese-made phones based on MediaTek chipsets.

Elop says that the company must also plan for the future so that it can be disruptive down the road. “As they say in Finland, it is time to shoot ahead of the duck,” he says.

That’s where MeeGo comes in–the mobile version of Linux that until recently was seen as Nokia’s future. Nokia said that team will ship a phone later this year and then see where the future is headed.

12:35 pm: Want to point out this New York Times article that said both Google and Microsoft were offering hundreds of millions of dollars in engineering and marketing support in order to woo Nokia.

12:36 pm: Elop now talking about cost cuts, including significant job reductions.

“We are not announcing how many and in what country,” Elop says, but adds that the company wants to move quickly on that front.

He says that he has made changes to the business to ensure speed, including leadership structure changes aimed at ensuring accountability. “If things go well today, I’ll be the CEO.”

Of note, the two of the three business unit leaders are women–Mary McDowell, who will lead lower-end phones, and Jo Harlow, who will head the smartphone business.

12:40 pm: Nokia looking for a new leader for its services and developer division. The acting head is Tero Ojanpera, but he will soon be looking for other opportunities within Nokia, Elop says.

Also of note, Louise Pentland, who is head of the legal and intellectual property unit, is being elevated to the top leadership team.

“We have one of the strongest patent portfolios out there” he says, adding that he would encourage all players to take a license to said patents. (hear that, Apple?)

New leader of North American sales unit to be named in coming days.

“We are creating a different industry,” Elop says in closing his introductory remarks.

12:44 pm: Elop Brings on CFO Timo Ihamuotila to go through the numbers.

12:46 pm: Ihamuotila acknowledged Nokia didn’t meet the targets it had set out to achieve at its last financial analyst day.

“Our execution did not cut it.” he says.

12:49 pm: Ah, Now on to the good stuff. CFO talking financial impact from Microsoft deal. Says should be good over the long term.

Slide shows royalty payments to Microsoft causing lower gross margins, but says sales and marketing support from Microsoft should lower operating expenses.

“We will receive substantial go-to market support from Microsoft,” he says, without giving numbers.

12:52 pm: Ihamuotila talking now about the company’s long-term targets for devices and services period “after the transition period.”

Device sales to grow faster than the market, with operating margins of 10 percent or more–but this is only after the transition period, which the company has said could last this year and next.

Significant uncertainties in this period.

Ihamuotila shows a slide showing Symbian sales slowly giving way to Windows Phone with lower-end mobile phones remaining about half of sales.

12:57 pm: Ihamuotila shows chart of how it expects to cut R&D with the company investing less in services, more in entry-level phones and far less on MeeGo, though still some. The investment in Symbian will be replaced by a far lower investment in Windows Phone R&D. Overall, R&D should be a fraction of what it was.

1:02 pm: Over long term, Ihamuotila says that the Microsoft deal should help significantly boost the company’s Navteq navigation business.

“We think this new strategy is the best way to maximize long-term value, both to our shareholders and to other stakeholders,” Ihamuotila says.

On to Q&A for financial analysts.

1:03 pm: Question on how Nokia will keep employees motivated, something else and when to expect the first Windows Phone.

“Thanks for the one question” Elop quips, before addressing them in turn.

Elop says that the key is on focused innovation so they see the fresh opportunities (at least for the ones who don’t get cut by the large workforce reductions also promised).

He also pointed to his sharply worded memo, which he said was designed to convey the message that “Here is the truth, we’re making decisions and we’re moving forward.”

Won’t give date on first Windows Phone, but says again that the move will allow a substantially faster pace than the company was on with Symbian.

1:07 pm: Elop is asked about some of the challenges with Microsoft and Nokia each responsible for different pieces of software and services, as opposed to Google and Apple, where things are more integrated.

“We wanted to drive operational simplicity,” Elop says, adding that the companies talked about other arrangements, though not a full-on acquisition. The companies, Elop says, decided not to go with the operational complexity of a joint venture.

1:10 pm: Elop says Nokia has opportunities to differentiate from other Windows Phone devices, but adds it is in Nokia’s interest for there to be other strong handset players supporting Windows Phone.

“We’ve got to make Windows Phone successful,” he says.

Nokia’s mapping technology, he says, will benefit rivals like Samsung and HTC. “We’re willing to make those trades,” Elop says.

1:11 pm: Elop is asked why he feels comfortable with a “bet the farm” strategy on Microsoft, a company he clearly knows well.

Elop points out that it was harder to see how Microsoft would rapidly be successful without someone like Nokia.

“But this is now different,” he says, adding that this is now an ecosystem that Microsoft and Nokia are jointly helping to build.

Mapping and local advertising were not part of the ecosystem before the Nokia-Microsoft partnership.

As for impact of the transition, it’s hard to say, Elop says. Symbian is strong in some places where Apple and Google are present today.

1:14 pm: Asked whether Nokia will remain profitable during the transition. “It’s hard to say financially, and I am not going to provide any further specific guidance.”

1:17 pm: Elop won’t say when the first Windows Phone will ship, but lots and lots by next year at various price points.

“We’ll be shipping in volume in 2012,” he says.

1:20 pm: Another two-parter! 1) Why will Symbian be supported if it is transitioning away? 2) Why does Nokia think it will be able to have double-digit operating margins using someone else’s platform?

Elop: They recognize Symbian is key to Nokia being able to transition, but he agrees that consumers will have to want the Symbian phones Nokia builds. CFO also notes that less than half of Symbian phones are sold through carriers.

As for question on margins, CFO says the company has opportunities for higher margins around services and advertising.

1:23 pm: Asked about how the company is confident Windows Phone can get to lower prices, Elop says that was a key consideration, down to which chipsets will be supported, etc.

Between the two companies there was a lot of work to get a high degree of confidence.

“That was a critical evaluation,” he says.

That said, Elop agrees there is a smartphone market below Windows Phone that Nokia will manage with an evolution of today’s Series 30 and Series 40 operating systems.

1:31 pm: Elop: Some of the hardware designs that would have run MeeGo or Symbian will be repurposed for Windows Phone. Some devices may come out with similar models for both Windows Phone and Symbian.

1:32 pm: Question again on who pays whom in Microsoft-Nokia. Is there a lump payment from Microsoft?

Elop doesn’t answer and instead refers to slide that shows opportunities on both sides. Saying value going both ways. As for Microsoft’s payments, “That is a significant part of the conversation,” Elop says.

1:35 pm: Two good questions: Can Windows Phone be put on any current devices? What happens to QT development layer that Nokia bought and had sought to unify developer approach?

Elop: It’s not as simple as plugging in and downloading on to current phones, though some technologies can be repurposed.

QT continues to be the development for Symbian and lone MeeGo device. Also could have a role on low-end devices.

However, Elop says, “We are not proposing a QT on Windows Phone” approach. Adding another development environment could fork the ecosystem, which is not good for Nokia or Windows Phone, he says. Development environment for Windows Phone will be Silverlight and XNA–Microsoft’s current tools.

1:38 pm: Asked about branding, he says in some cases you will see both Microsoft and Nokia brands. Examples could include Nokia Search powered by Bing or Bing maps powered by Nokia, though he says those are examples and not final choices.

1:39 pm: Asking about tablets, questioner points out that Nokia had an early lead in tablets, but Apple “stole the show.”

“We are not announcing today a specific tablet strategy,” he reiterates, saying that Microsoft creates opportunities.

Elop notes that there are rumors of Windows Phone and Windows that could power tablets.

“We could do that,” he says. “We might do that.”

Also an opportunity for Nokia to step back into the game using its own software.

1:41 pm: Elop wrapping up.

“We have set a new course for Nokia,” he says, adding that despite what has been written, Nokia is still an incredibly powerful company, though perhaps not in North America. “Today we are diving forward” he says. “We have a strong partner in Microsoft who is incented as are we in making this successful.”

Investor guy closes by reminding there were forward-looking statements. He’s still going as people leave the room.

COMPLETE COVERAGE:

• Nokia’s Stephen Elop Talks to Mobilized About the Big Microsoft Deal (Video)
• Massive Layoffs Expected at Nokia
• Nokia’s Microsoft Partnership: Does the New Strategy Add Up?
• Live From the Nokia-Microsoft Press Conference: It’s a Windows Phone World After All
• More From Nokia: Forecast Gets Cloudy, Plus Expected Executive Changes
• Nokia-Microsoft: What Steve Ballmer and Stephen Elop Have to Say in Their Joint Letter
• Nokia Confirms Microsoft Partnership With YouTube Video
• R&D Spending: Nokia Vs. Apple Shows Size Doesn’t Matter
• Not Seeing Much Return on That Massive R&D Spend, Are You, Nokia?
• Nokia: Big and Slow

Intel will pay Nvidia in five annual installments beginning Jan. 18, and in return will receive full access to Nvidia’s full range of patents, which had been part of the dispute. Nvidia will retain use of certain Intel patents that had also been in dispute.

“This agreement ends the legal dispute between the companies, preserves patent peace and provides protections that allow for continued freedom in product design,” said Doug Melamed, Intel senior vice president and general counsel, in a statement.

The fight had been over the terms of a 2004 agreement under which Intel granted Nvidia access to some of Intel’s technology for use in its chipsets, the chips that sit between the microprocessor and the graphics chip like connecting tissue. The cross-licensing agreement allowed Nvidia to make chipsets that were compatible with Intel microprocessors.

The trouble began in 2008, when Intel released its Nehalem generation of PC chips. The two companies disagreed over whether the 2004 agreement allowed Nvidia to make chipsets that would work with Nehalem chips and generations of chips that would follow. They filed dueling lawsuits in the Delaware Court of Chancery in early 2009. Intel asked a judge to rule that the agreement didn’t cover Nehalem and future generations of chips, while Nvidia sued for breach of contract, and sought to terminate Intel’s right to use some Nvidia patents that had been part of the agreement.

As I reported last December for Businessweek, the dispute caught the attention of the Federal Trade Commission, which added it to an antitrust complaint that was later settled.

The larger backdrop here is the growing threat Nvidia’s chips, known as graphics processing units (or GPUs), pose to Intel’s chips in servers and supercomputers. Engineers often refer to this as the CPU-GPU debate, where Intel’s chips are referred to as CPUs.

GPUs are common in most PCs, and usually handle the processing required to make games look good and run smoothly, working in concert with the CPU.

Since GPU chips do certain kind of math known as a floating point operation a lot faster than a CPU, they’re increasingly being used in systems that Intel has traditionally considered its primary domain: Heavy-duty financial modeling (oil and gas exploration is a good example). They’re also making a huge splash in the rarefied world of supercomputing: Nvidia GPU chips are being used in three of the top five systems on the elite Top 500 list of the world’s most powerful supercomputers. And as we all saw at CES last week, they’re starting to show up in tablet and other PC-like devices running Windows with the full support of Microsoft.

The dispute between them, which effectively put Nvidia out of the business of making chipsets that were compatible with Intel chips, certainly hurt. Though for Intel’s part, losing the Nvidia patents in question could have conceivably hurt its new Sandy Bridge chips, which combine a GPU and a CPU into one single component. Intel formally launched Sandy Bridge at CES last week.

And as recently as last week, sources familiar with the matter were saying that a new trial date was scheduled for February. Nvidia CEO Jen-Hsun Huang was careful not to directly answer a question about that from Mobilized’s Ina Fried in an interview at our D@CES event last week: