For someone who is still mulling things over about what to do about his more than five percent investment in Yahoo, hedge fund investor and activist shareholder Daniel Loeb has been very busy lately getting his arsenal ready.

While deciding whether to mount a proxy fight — a potentially nasty public fight with the Silicon Valley Internet giant that sources said could start much earlier than the expected February 24 filing date to make a board challenge — he’s also had at least one phone meeting with new Yahoo CEO Scott Thompson in the last week to talk about the company’s future.

Sources said the talk was cordial, although the pair were not yet discussing any kind of rapprochement, which presumably could lead to board seats for Loeb.

But how far Loeb will go and how far Yahoo will give are the big open questions that are about to be answered.

The earliest nominations for directors by outsiders like Loeb can be submitted is February 24. He then has a month after that to propose a competing slate.

Starting last fall when he started accumulating Yahoo shares, Loeb had aggressively called for the ouster of Yahoo’s Chairman Roy Bostock and director and co-founder Jerry Yang. Yang stepped away from Yahoo earlier this month and Bostock just announced his upcoming departure this week.

Despite the renewed communication with Yahoo, Loeb is still acting like he might opt to fight — or at least freak out Yahoo enough to cooperate.

Among his recent activities, according to many sources:

* Attempting to assemble an alternate slate of directors — including trying to persuade high-profile entrepreneurs such as David Goldberg and Max Levchin to join his board. Loeb has been to Silicon Valley several times to stir that pot.

* Meeting with a spate of powerful tech execs, here and elsewhere, in order to gain support for his battle and search for his own preferred leaders for Yahoo. A favorite is Hulu CEO Jason Kilar.

* Working on hiring a top outside crisis communications firm to handle the expected onslaught of media mudslinging that is sure to take place.

* Buttonholing large Yahoo investors to join him and getting, sources said, more support than expected from bigger ones. That’s no surprise: Capital Research Global Investors and Capital World Investors, Yahoo’s biggest institutional shareholders, voted against the company’s board in its last proxy battle and has been much disgruntled with the latest Yahoo stumbles.

* Recently reaching out to top Yahoo execs, including both Yahoo’s Chief Product Officer Blake Irving and Americas head Ross Levinsohn. Irving was so spooked by Loeb’s hello-there, several sources said, that he sent an email to Yahoo’s top staff about the contact attempt, noting he did not return the call (teacher’s pet alert!).

These are, of course, classic activist tactics by Loeb, aimed at getting the changes he wants made at Yahoo by applying real and perceived pressure.

Loeb had previously criticized the company’s talks with private equity investors, saying the prices being discussed were too low, which helped scuttle those talks.

Yahoo has also tried to gird itself and to assuage other shareholders and the media, as it can hardly stand what a proxy fight will do to its already battered image.

Some recent moves to look like it is on the move include: Loudly negotiating with its Asian partners for a big payday; making significant board changes; and hiring Thompson. Next up, as I previously reported, a large-scale restructuring and the inevitable cost-saving layoffs.

Who wins — and who blinks — in this Loeb versus Yahoo face-off, though, is still to be determined.

Earlier today, I had reported that Yahoo Chairman Roy Bostock was stepping down.

He is, and the full letter he just released saying so is below.

Bostock did not say in the missive who will be Yahoo chairman in his place. Intuit CEO Brad Smith has a full-time job, and the newly installed Weather Channel CEO David Kenny does, too. Among the current directors, that would leave Sue James, Patti Hart and newly installed Yahoo CEO Scott Thompson — or one of Yahoo’s new board members.

In the letter, Bostock outlined the departures of four board members and the addition of five more directors (two of which were just named); did a little back-patting of his recent efforts to turn Yahoo around (after presiding over the board that got the Silicon Valley Internet giant into this mess); noted that the Asian talks to sell Yahoo’s stakes there are proceeding (it’s coming!); gave Thompson a thumbs-up (go, Scott!); and delivered kudos to Jerry Yang, the co-founder who left only weeks ago.

“Working with Jerry was always a delight,” wrote Bostock.

(Me, not so much, I would guess! Bygones?)

All kidding aside, Bostock has been the subject of a lot of criticism about Yahoo’s troubles, both deserved and undeserved, most especially for the non-sale to Microsoft several years ago. Many, including activist shareholder Daniel Loeb most recently, have called for his resignation.

It has not been an easy job, to be sure, so it must be a bit of a relief for the longtime advertising exec, who serves on other prominent boards, to finally pull away from the Yahoo black hole.

So, who’s next?

One interesting line in the letter, which everyone already knew, was that none of the various bids from outside investors have passed muster.

Wrote Bostock: “We have engaged with potential investors and reviewed proposals concerning an equity investment in the Company, although at this time there have not been any proposals which have been deemed by the Committee to be attractive to our shareholders.”

Here’s the Bostock letter:

Yahoo! Releases Chairman’s Update for Shareholders

SUNNYVALE, Calif., February 7, 2012 – Yahoo! Inc (NASDAQ: YHOO), the premier digital media company, today released the following shareholder update from its Chairman Roy Bostock.
February 7, 2012

Dear Fellow Shareholders:

I write today to update you on the actions the Yahoo! board has taken, and the actions it is pursuing, to increase shareholder value and position the Company for growth. These actions result from a process I initiated about six months ago in a special meeting of the independent directors in which we analyzed the reasons why Yahoo! was not meeting either our own expectations or those of our shareholders.

The board decided then to move aggressively on three fronts to position Yahoo! for future success: one, we initiated a search for a new Chief Executive Officer with a vision and set of skills to lead Yahoo! into the future; two, we undertook a comprehensive strategic and structural review of the business; and three, we decided to assess the composition of the Company’s board of directors relative to its ability to enhance the prospects for Yahoo!’s future success. We have made progress on all three fronts.

First, and most importantly, we have appointed Scott Thompson as CEO to lead our company. Scott is a capable and dynamic leader who brings the experience and expertise the Company needs to achieve robust growth and success in the marketplace. Over the coming months and years, Scott will lead an outstanding team of Yahoos to deliver engaging user experiences driven by innovative products.

Second, we have made significant progress on the comprehensive strategic review which is overseen by the board’s Transactions and Strategic Planning Committee, chaired by director Brad Smith, the CEO of Intuit. The Committee’s guiding principle has been to assess alternatives which would increase value for all Yahoo! shareholders, and the Committee has been open to any transaction or initiative that would serve this objective.

As part of this review, we have pursued a wide range of discussions with potential partners. We have engaged with potential investors and reviewed proposals concerning an equity investment in the Company, although at this time there have not been any proposals which have been deemed by the Committee to be attractive to our shareholders. 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.

Finally, the board has concluded that in order to accelerate the Company’s transformation, the combination of a new Chief Executive Officer with an enhanced team of independent directors would provide Yahoo! with the expertise and perspectives necessary to drive innovation and growth going forward. Therefore, Mr. Joshi, Mr. Kern, Mr. Wilson and I have volunteered not to stand for re-election at the next shareholders’ meeting.

Furthermore, the board today elected two highly qualified independent directors, Alfred Amoroso and Maynard Webb, Jr. Mr. Amoroso served as President and CEO of Rovi Corporation until December 2011 and, among other positions, had previously served as the President, CEO and Vice Chairman of META Group, Inc., the President and CEO of CrossWorlds Software, Inc. and as a member of the world-wide management committee of IBM Corporation. Mr. Webb, the Chairman of LiveOps, Inc., served as that company’s CEO until July 2011. Prior to that, Mr. Webb was Chief Operating Officer of eBay and Senior Vice President and Chief Information Officer for Gateway, Inc., in addition to management, leadership and board positions at several other companies spanning his 30-year career.

The board continues its search for additional independent directors. This search is being led by director Patti Hart, CEO of International Game Technology, Inc., who chairs our Nominating and Corporate Governance Committee. We anticipate announcing additional directors to round out the board as soon as this process concludes.

Separately, as previously announced, Jerry Yang has resigned from the board of directors and other positions within the Company to pursue his many interests outside of Yahoo!. Working with Jerry was always a delight. He is a visionary and a pioneer who contributed enormously to Yahoo! since he co-founded the Company in 1995. He will be missed. The board thanks him deeply for his service and commitment to the Company.

Thus, following this year’s Annual Meeting a majority of Yahoo!’s directors will be new to the board this year, and all directors will have joined the board since 2010. We believe that this reconfigured board, with a fresh set of perspectives and diverse set of skills, will enable the Company to move forward even more aggressively.

It has always been a privilege for me to serve as Chairman of Yahoo!. The employees of Yahoo! remain the heart, soul, and future of the company. And with Scott Thompson leading them, they are the reason why I believe Yahoo! will create significant shareholder value over the coming years.

In September, this board moved proactively and decisively to improve the performance of the Company for the benefit of its shareholders. These actions could not have been accomplished without the support and active participation of each director on the board. For that, I thank them. And I thank them for the knowledge, expertise, talents and commitment they have brought to Yahoo!. We all take pride in the fact that we are positioning Yahoo! for success in the future. Yahoo! is an incredibly strong brand with formidable assets. I have every expectation that under Scott’s leadership, working together with the reconstituted board, the Company will thrive for many years to come.

Sincerely,
Roy Bostock
Chairman of the Board

According to sources close to the situation, Yahoo has instituted a hiring freeze across the company and is considering a reduction in force in support units of the company.

While the details of any layoffs — which are expected to be small and selective for now — are still being worked out, sources said that the stricture not to fill hundreds of open positions is the first step toward significant cost-cutting initiatives across the Silicon Valley Internet giant, in the wake of what it expects to be another weak quarterly report next week and a looming proxy fight.

Yahoo reports its fourth quarter earnings Tuesday. While the company has managed to improve the results in the last part of the quarter, sources said they will still show continued weakness in its key businesses and consumer usage.

That’s as competitors such as Google and Facebook have been showing significant growth, especially in the display advertising market.

Thus, new Yahoo CEO Scott Thompson appears to be zeroing in on costs and managing for margins, said multiple sources, much as his predecessor Carol Bartz did at the start of her tenure.

But many think Yahoo needs even more drastic changes, including massive cuts in staff and also product arenas, to give the company new life.

That includes shifts in leadership at the top levels too. In a major move this week, co-founder Jerry Yang stepped down from the company’s board and all roles there. More directors are expected to leave soon, too.

That will likely come after negotiations to sell part of its lucrative stakes in both the Alibaba Group and Yahoo Japan are successfully completed.

While not a certainty, Yahoo’s board hopes that will happen sometime before activist shareholder Daniel Loeb initiates a proxy battle against the company in the coming month.

Sound complex?

It is, and also troubling to Yahoo’s long beleaguered rank and file, who have been worried about more layoffs.

The Yahoo troops have been under intense pressure and have suffered from ongoing attrition. Just yesterday, for example, Yahoo lost one of its top advertising execs, Seth Dallaire, to Amazon.

The company can ill afford such departures of key talent, even as it seeks to pare employee numbers in other parts of its business.

At the end of its last quarter, Yahoo reported that it had 13,700 staffers, down from 14,100 in the previous year.

Yahoo, of course, declined comment.

According to sources close to the situation, Guilherme Ribenboim, VP and managing director of Latin America and U.S. Hispanic markets, has left Yahoo for another job at a start-up.

The 12-year Yahoo veteran, who is located in Brazil, is widely respected at the troubled Silicon Valley Internet giant and leads an area that is growing for it.

[UPDATE: A Yahoo spokeswoman confirmed the departure of Ribenboim.]

[UPDATE NO. 2: Also leaving: Connie Lee Schiefer, the well-regarded Yahoo veteran of more than eight years. She was VP of product management at Yahoo's cloud platform group.]

Sources said that attrition — already a big problem at Yahoo — is about to hit the company hard. While the board and its top leaders try to figure out a strategy — either a sale or whatev — in the wake of the firing of CEO Carol Bartz, Yahoo has yet to put in place a new plan to hold onto talent.

“The people walking out the door is about to become a flood, unless management acts,” said one employee in a common sentiment among people I have interviewed at Yahoo.

According to sources at the company, Yahoo’s Carol Bartz is no longer CEO of Yahoo. CFO Tim Morse has been named interim CEO.

The situation around what is clearly an ouster is uncertain, but Bartz has had a very rocky tenure in her 32 months at the company.

[UPDATE: Yahoo confirmed the departure of Bartz in a press release outlining a reorganization.]

Bartz also sent a stunning email to staff, saying she had been ousted:

To all,

I am very sad to tell you that I’ve just been fired over the phone by Yahoo’s Chairman of the Board. It has been my pleasure to work with all of you and I wish you only the best going forward.

Carol

Several sources said the board, specifically Chairman Roy Bostock and Co-founder, as well as director Jerry Yang, acted today, informing Bartz by phone of the need to make a change.

What the next steps will be are unclear, but Yahoo needs desperately to explore a range of strategic changes to bring it back to its former glory.

But Wall Street liked the move, with Yahoo stock up more than six percent already in after-hours trading.

Sources said Morse held a call with Yahoo’s senior staff this afternoon, telling them Bartz was out and that a search for a permanent CEO will be commencing.

Why Yahoo’s board did not name a new leader immediately is curious and might indicate a larger deal around Yahoo is in the offing.

As I wrote earlier today, when the Internet giant announced on January 13, 2009, that it had hired longtime Silicon Valley tech veteran — who was well-regarded for her tenure at running Autodesk — to replace outgoing CEO and co-founder Yang and turn around the company, there was much hope.

At the time, she presented a take-no-prisoners image and was touted as someone with a reputation as a professional manager who could clean up the place.

Not so, as it has turned out.

While Bartz has streamlined certain areas and made some strong management hires, her performance has been decidedly bumpy and mostly downhill.

The share price has settled in at about $12.50 (just about where it was when Bartz took over), Yahoo’s recent financial results have been weak, its key advertising business is struggling, its attrition rate among engineers and others is startlingly high and its product innovation cycle seems stopped up.

Add to that: Weak relationships with key Asian partners, a pricey but failed marketing effort and a proclivity for embarrassing verbal gaffes by Bartz.

Still, given that Yahoo’s Internet traffic, top media sites and brand remain huge, the going-sideways situation has again caused some investors — including powerful private equity firms and other monied investors — to pull out their spreadsheets about a variety of scenarios related to Yahoo.

The players who have sniffed around of late are powerful, sources said, including Silver Lake Partners, Andreessen Horowitz, former News Corp. exec Peter Chernin and Providence Equity Partners, among others. Also in the Wall Street rumor mill recently are large companies: AT&T, News Corp. and Verizon.

All the schemes are different — ranging from taking it private to making a large investment to splitting it into parts — although they all seem to require cooperation with Yahoo to get done.

And while there is no serious effort afoot as yet, there have been increasing signs of late that Yahoo’s board is ready to listen to any serious offers, said multiple sources, especially as the company has continued to drift under the leadership of Bartz.

While board chairman Bostock has publicly backed Bartz — after all, he was her biggest champion at the time of her hiring — multiple sources said he had started to become more involved at looking at the management issues at the company and its challenges.

Yang — still a key figure at Yahoo — has also become more active, said sources, and tensions between him and Bartz have increased over the last few months.

The increasing pressure on the directors of the company from its major shareholders to act has gained in recent months, said sources.

Thus, Bartz is gone and the next chapter in Yahoo’s corporate drama begins.

[Photo credit: Asa Mathat for All Things Digital]

Related posts

• As Yahoo Continues to Wobble, Investors (And Board) Eye Options
• Exclusive: Carol Bartz Out at Yahoo; CFO Tim Morse Named Interim CEO
• Carol Bartz’s Last F%*& You — Now Aimed at Yahoo Board
• Yahoo’s Statement on Bartz Ouster
• Wall Street Likes Bartz’s Firing — Yahoo Stock Spikes on News
• My Picks for Yahoo’s Next CEO — Maybe Snoop Dogg, Ya Digg?

Second, Amitabh Srivastava, head of Microsoft’s Azure cloud platform business, announced that he’s leaving the company. Srivastava, who joined Microsoft in 1997, was widely considered to be a possible successor to Muglia, but lost out to Nadella.

One of the few ever to be named a Distinguished Engineer at Microsoft–an honor now known as Technical Fellow–he was tapped, along with Brian Valentine, by then Windows chief Jim Allchin to take over the Windows engineering efforts in 2003 at a time when the operating system was being widely derided as plagued with security and other problems. Srivastava had his team draw up a map depicting how all the various pieces of the Windows source fit together. It was eight feet tall, 11 feet wide, and was described in a 2005 Wall Street Journal story as looking like a “haphazard train map with hundreds of tracks crisscrossing each other.”

Srivastava and Valentine are credited with the 2004 proposal to streamline how all those pieces functioned, a plan that would allow various features to be added or removed without disrupting the whole operating system. The idea was a partial response to the looming threat from Google, which that year had launched Gmail. The problem was their plan required throwing out a lot of legacy source code that had been in Windows for years, and starting fresh.

Srivastava’s changes included automating testing on features that had for years been done by hand. Code with too many bugs were sent to “code jail.” Over time, code flowing into what was to become Windows Vista improved.

We all know what happened with Vista–it too was widely panned. But the engineering processes put in place had a lot to do with the many improvements that appeared in Windows 7.

Srivastava then moved on to a new Microsoft project in 2006, code named Red Dog, now known as Azure, which launched in 2008. From this he pivoted to running the server and cloud division, overseeing Microsoft’s relationships with enterprise and data center customers.

People I’ve been talking to who tend to know a lot about the internal politics at Microsoft say this isn’t the last of the changes. Now that Muglia’s replacement has been announced, Nadella is going to want to name key members for his team, which means that those not tapped will probably choose to leave as well. The management shake-up at Microsoft is not over yet.

Srivastava has a Ph.D. in computer science from Penn State, and was invited to deliver the commencement address at the school’s College of Engineering in 2008, which is in the video below. Key quote: “In the end, it’s all about execution.”

Rivet’s departure follows that of CEO Dirk Meyer, who resigned back in January, also rather abruptly. No word yet on AMD’s plans to replace either exec. CFO Thomas Seifert continues to serve as interim CEO of the company.

In a blog post, Scott Guilfoyle, PayPal’s CTO, made the announcement and introduced the new head of the platform team, Matthew Mengerink.

But the departure of Bedier to Google is a big blow to PayPal, considering that both companies are racing to build next-generation payment platforms with a strong mobile component.

Bedier held the title of VP of platform and oversaw PayPal’s global payments platform, including mobile.

Mengerink is an internal replacement for the position, having worked at PayPal for 10 years. He previously led the PayPal architecture, infrastructure, payments development, core technologies, international development, customer quality and engineering services teams.

I will update when I hear more on what Bedier will be doing at Google.

It’s the latest development in a shareholder lawsuit against HP in which the plaintiffs have alleged that HP’s board of directors let Hurd walk out the door with too much money when he resigned following accusations of sexual harassment by a onetime contractor. They’re seeking an order that would require Hurd to disgorge the payments he received as his severance deal.

The judge, James Ware, ignored Hurd’s argument that he deserves to see documents relating to the matter that so far HP has refused to share, though the ruling doesn’t address whether he’ll ultimately get to see them or not. Hurd had objected to a new investigation, saying he would agree to it only if he were to get copies of the initial demand letter from shareholders that led to the lawsuit, as well as related documents that are under seal in a separate shareholder case on the same issue that’s before the Delaware Court of Chancery. Ware scheduled a hearing on March 20 to hear an update on the investigation.

Hurd resigned from HP in August after accusations about sexual harassment arose from Jodie Fisher, a onetime actress and former HP contractor. He was found not to have violated HP’s sexual harassment policy, but was found to have violated HP’s expense-reporting policy. After leaving HP, he went on to become co-president of Oracle, after Oracle CEO Larry Ellison criticized HP’s board of directors for its handling of the incident.

The various boardroom dramas that have roiled HP’s directors during the last decade have often overshadowed HP itself. Last August’s blowup involving the departure of CEO Mark Hurd following accusations of sexual harassment occurred against the backdrop of lingering memories of the 2006 scandal involving the use of illegal methods to spy on journalists that ended the tenures of three HP directors.

Before that there was a public fight against HP’s 2002 acquisition of Compaq, led by dissident director Walter Hewlett, who eventually lost his seat. The Compaq deal ultimately cost Carly Fiorina her job at HP after a boardroom confrontation in 2005.

The result of all this is that boardroom drama has become something of an HP specialty, along with printers, computers and IT services. Criticizing the board’s actions has become something of a sport, with Oracle CEO Larry Ellison serving as the most public practitioner.

Shareholders appeared to agree that a change was overdue. HP shares shot up right away as word of a shake-up began to leak right before markets closed yesterday. HP shares closed up one percent today, trading at levels not seen since before Hurd’s abrupt departure in August.

The four departing directors were deeply involved in the Hurd kerfuffle. Two were Hurd defenders, and the other two wanted him out. All four volunteered. Chairman Ray Lane, in an interview with The Wall Street Journal, said the debate over Hurd’s status “took a lot out of this board.”

It’s highly unusual for a company to change its board so deeply and so suddenly. The five new additions became directors effective today without any input from shareholders, and will serve until a vote can be held to approve them for a full one-year term at the next shareholder meeting in March.

Shareholders in theory have the power to offer their own slate of directors, but there’s little time for that, and even if some group were to do so, its only option would be to do so at its own expense. SEC rules governing the access to the proxy nominating process are currently being challenged in court by the U.S. Chamber of Commerce and Business Roundtable, and so the rules that would allow shareholders to more easily submit their own list of names are on hold pending the outcome.

Absent a proxy challenge, HP shareholders will be put in the position of accepting a board on which seven of 13 directors are brand-new. That’s a lot of new blood and may turn out to be the kind of change HP’s board needs. And getting the change done all at once rather than gradually may prove the better option.

However, I can’t help but wonder: In seeking to close out a period in which HP’s board became known more for its drama than anything else, is more drama the right answer?

Word of a new probe comes in response to a shareholder lawsuit in federal court in California claiming that HP paid Hurd too much in severance when he left. In the meantime, both HP and the shareholders suing have asked the judge to put the case on hold until the investigation is complete.

Hurd says he wants to see a copy of the shareholder demand that led to the lawsuit, and will oppose the delay in the case until that happens. HP says that as a subject of the inquiry, Hurd isn’t entitled to see any of the documents in question.

In the Delaware case, Hurd’s lawyers argued that the original letters from Jodie Fisher, a onetime actress and a former HP contractor who accused Hurd of sexual harassment, shouldn’t be made public.

Hurd, you’ll recall, went on to become co-president of Oracle, after Oracle CEO Larry Ellison raked HP’s board over the coals for its handling of the incident. Ellison wasn’t alone, as former General Electric CEO Jack Welch later piled on.

Muglia is a 22-year Microsoft veteran who joined from Rolm in 1988 and was the first product manager for SQL Server. The news comes as Microsoft announced a preview of its next generation Enterprise Resource Planning, Dynamics AX 6. I’m told there’s no connection between the timing of the two.

Muglia would be the third division head to leave Microsoft in recent memory. The others are Stephen Elop who left to run Nokia last year, and Robbie Bach, who ran Microsoft’s entertainment division.

Muglia only been elevated to the job two years ago, nearly to the day. The Server and Tools Business is at $14.9 billion in annual revenue (fiscal 2010) Microsoft’s third largest division behind the Windows/Windows Live Division and and the Microsoft Business Division, both of which reported revenues north of $18 billion in 2010. On Muglia’s watch sales at STB grew more than 12 percent, and its operating margins went from 31 percent in 2008 to 37 percent in 2010. However, STB is nowhere near as profitable as the other two divisions: Business Division reported operating margins of 63 percent in 2010 while Windows saw 70 percent. Ballmer says in his memo that he’s eager to see stronger growth from STB.

Muglia is described by people I’ve talked to as a capable, well-respected manager who has over the years weathered the various corporate storms that have hit him, and usually come out on top. In 2002 for instance, he was replaced as the head of Microsoft’s .Net initiative. Reports at the time said he had requested the change out of frustration with the business model. By 2003 he was running the Windows Server Division and in 2005 was tapped to run STB as a senior vice president. He’s also been the key executive on Microsoft’s Azure cloud computing platform.

Ballmer’s memo to Microsoft employees is below.

From: Steve Ballmer
Sent: Monday, January 10, 2011
To: Microsoft – All Employees
Subject: STB – Building on Success, Moving Forward

There are very few $15B businesses in the software industry, and Microsoft is the only company that has built three of them. While Windows and Office are household words, our Server and Tools Business has quietly and steadily grown to be the unquestioned leader in server computing. We have driven the industry forward and established the foundation for an entire generation of business applications. We have overcome significant competitive challenges. Over the past twenty years, the outstanding leadership from everyone involved in STB has made it a $15B business today.

We are now ready to build on our success and move forward into the era of cloud computing. Once again, Microsoft and our STB team are defining the future of business computing. In October, we completed an incredibly successful PDC where we detailed the future of the cloud, outlining Platform as a Service and demonstrating the rapid advancement of Windows Azure.

The best time to think about change is when you are in a position of strength, and that’s where we are today with STB – leading the server business, successful with our developer tools, and poised to lead the rapidly emerging cloud future. Bob Muglia and I have been talking about the overall business and what is needed to accelerate our growth. In this context, I have decided that now is the time to put new leadership in place for STB. This is simply recognition that all businesses go through cycles and need new and different talent to manage through those cycles. Bob has been a phenomenal partner throughout this process, and he and his leadership team have the right strategy in place.

In conjunction with this leadership change, Bob has decided to leave Microsoft this summer. He will continue to actively run STB as I conduct an internal and external search for the new leader. Bob will onboard the new leader and will also complete additional projects for me.

Bob has been a founder and leader of our server business from its earliest inception. He has led our Developer, Office, and Mobile Devices Divisions, and key parts of Windows NT and our Online Services business. I’ve worked with him in many capacities over the years and I’ve always appreciated his customer focus, technical depth, people leadership skills, and his positive energy. I want to thank Bob for his hard work, many accomplishments, and his focus on putting Microsoft first for 23 years.

We enter this new decade with STB providing the platform for today’s business solutions, and uniquely well-positioned to drive the future of cloud computing. I believe STB will continue to lead the industry with outstanding products and services for our customers and exceptional results for our business.

Thanks,
Steve

However, added sources, Google is fighting hard to counter the Twitter offer, so Pichai could easily stay with his current employer. At Google, which he joined in April 2004, Pichai is a VP of Product Management.

If successful, the hiring of Pichai would be a major raid for Twitter, and mark its place next to Facebook as an up-and-comer in the race to entice away top Google executives.

More importantly, Twitter could use the product help.

The San Francisco microblogging company, which just raised a massive funding, has done relatively little product development recently, in large part because its focus has been absorbed by overwhelming growth and infrastructure problems.

Pichai certainly fits the bill as a head of product for Twitter, given his job at Google. The well-regarded tech exec heads the Silicon Valley search giant’s high-profile Chrome browser and Chrome OS efforts.

Pichai was front and center at an unveiling of Chrome OS plans in November, and touted the Chrome browser’s 40 million users only a year after its debut in 2009.

But not everyone is so sanguine. Paul Buchheit, founder of Gmail (and FriendFeed) predicted a very short life for Google’s still-in-beta Chrome OS, noting–on Twitter in December–that he thought the product would be axed or fused with Android in 2011.

As Mobilized’s Ina Fried wrote at the time:

Google originally hoped to have Chrome OS-based computers for sale this year, but has run into some delays. Last week, the company released a beta version of the software and distributed to testers an unbranded laptop running the operating system. However, it’s worth noting that in doing so, Google has hardly made the strongest hardware case for the operating system, using a relatively bulky netbook with a reliable, but hardly power-sipping Intel Atom processor.

The idea of merging the two operating systems has some merit. Doing so would pair a top-notch browser with an ecosystem that already has a lot of applications and developers.

For now, the operating systems are distinct, with Android running hundreds of thousands of applications and used largely on phones, along with a few tablets, such as Samsung’s Galaxy Tab. However, Google VP Andy Rubin confirmed after his appearance at last week’s D: Dive Into Mobile that the company is working on a new version of Android, known as Honeycomb, that is geared exclusively to tablets. (The full video of Rubin’s onstage appearance was posted on our site earlier today.)

Acer and a couple of other hardware makers have said they plan to do Chrome OS netbooks next year once the software is ready.

If hired, Pichai would fill an open spot left by the departure of longtime Twitter VP of Product Jason Goldman, who stepped down at the beginning of December.

The attempt to bring on Pichai to lead product brings into question former CEO Evan Williams’s role at the company. When he stepped down as CEO, Williams said it was in order to focus on product strategy, and when Goldman gave up his position, many assumed Williams was the natural substitute.

While Pichai would be a strong choice for the job, he has not been an active user of the product.

Until recently, that is.

Pichai’s own Twitter account has a grand total of 118 tweets, with about a third of them posted in the last month.

Yesterday, in an interview with BoomTown’s Kara Swisher at D@CES, Twitter CEO Dick Costolo said some product goals for Twitter included a better experience for passive users and a more “agnostic” experience across platforms.

Costolo also mentioned a new zero tolerance policy for infrastructure problems, and said that Twitter does not consider itself a “platform company,” but rather one that has APIs.

The Google-Twitter connection is strong, and not just on the we-want-to-buy-you front–Google has often cast its acquisitive eyes at Twitter and still does.

And many Twitter employees were formerly Googlers, although not all in the same era or area.

Costolo himself came to Twitter after being at Google, which had acquired his last start-up, FeedBurner.

Other former Googlers include many on Twitter’s product team, such as Othman Laraki and Elad Gil, who were product managers at Google Mobile Maps and Google Toolbar before joining Twitter through its acquisition of their geo start-up Mixer Labs.

In addition, last year, Twitter nabbed Google lawyer Alexander Macgillivray as its general counsel.

And, of course, Twitter co-founders Williams and Biz Stone had worked at Google after it bought Blogger. They created Twitter after they left the company.

It’s possible that Pichai leaving Google might have something to do with the company favoring the Android mobile operating system over Chrome OS, but seems more likely that the Twitter role would just be a compelling opportunity for him.

Twitter declined comment, and Google has not responded to an inquiry about Pichai.

Until this nail-biting talent raid has a resolution, here’s a video of Pichai talking at the Web 2.0 Summit in 2009:

He won’t be replacing departing Chief Marketing Officer Michael Mendenhall as previously thought. Instead, Apotheker says a search is underway for a new chief marketing officer.

In a memo circulated to HP employees this afternoon, and which you can read below, Apotheker says that communicating a “shared vision” will be an important part of how he runs HP. To that end he has tapped a trusted communications hand in Wohl, who ran communications for him at SAP. Apotheker says in the new job Wohl will be deeply involved in unveiling what he calls “a new strategy and vision for HP.” (Might it perhaps have something to do with a shift toward services?)

The memo, in full, is below. And below that is a second memo, circulated to HP employees yesterday from Chief Strategy and Technology Officer Shane Robison concerning Mendenhall’s departure.

From: CEO – Leo Apotheker
Sent: Friday, January 07, 2011 2:09 PM
Subject: Organizational Announcement — Chief Communications Officer, Chief Marketing Officer

LÉO APOTHEKER
CEO

TO/ All HP Employees

After spending two months listening and talking to HP employees, investors and shareholders, I believe that one of the ways to drive our entire business forward is to articulate the value and the richness of HP, shared vision for our products and services, delivered with a common voice. To that end, I have created the position of Chief Communications Officer, reporting directly to me and I will have the Chief Marketing Officer report directly to me as well.

Starting January 18th, Bill Wohl, a recognized public relations veteran with 25-years experience, will join HP as SVP and Chief Communications Officer. Bill comes to HP after nearly 12 years at SAP, where he was a member of the company’s Senior Executive Team. As VP of Global Communications, Bill led his global team in development and execution of the strategic communications programs for SAP Field Operations. During his tenure, Bill was a trusted communications counselor to the company’s executive team across a range of strategic issues such as crisis, M&A, product launches and global company events. In addition, he was responsible for communications for SAP co-CEO Bill McDermott, and, as VP of Product and Field Communications, he handled communications for me during my tenure as SAP’s President.

Bill will be responsible for overseeing and coordinating communications across HP, and lead efforts to help me unveil the new strategy and vision for HP. He holds a Bachelor Degree in Public Affairs from the University of Delaware. In his spare time, he serves as an emergency medical technician and firefighter, responding to emergency 911 calls for the West Grove volunteer fire department (an organization for which he also has served as President and ambulance leadership positions) for the last 25+ years. Bill is relocating to the Bay Area, and starts at HP on January 18. Please join me in welcoming Bill to the company.

In addition, HP has commenced a search for a new Chief Marketing Officer, who will now oversee corporate marketing activities as we work to promote a pan-HP vision of our products and services for our customers. I would like to thank Michael Mendenhall for his service to HP and wish him the best as he moves to a new chapter in his life.

HP has tremendous opportunities to leverage its assets and deliver new and better solutions to our customers. In the months ahead, I will share more with you all about exciting new changes to the company’s strategy.

Please join me in extending a warm welcome to Bill Wohl.

Best,

Léo

SHANE ROBISON
Executive Vice President, Chief Strategy and Technology Officer

TO/ OST Employees

DATE/ January 6, 2011

SUBJECT/ Organizational Announcement

It is with regret that I write to let you know that Michael Mendenhall has decided to leave HP to pursue other opportunities. Michael has served as SVP and Chief Marketing Officer for three years and helped transform Corporate Marketing into a world-class organization, working to promote the HP brand and enhance our corporate reputation.

Among his many achievements, Michael helped boost HP’s corporate brand image and standing while advancing our efforts around Social Innovation and the Environment. In 2010, HP was ranked #10 by Interbrand in its ranking of the Best Global Brands, the first time in HP’s history that we had ever broken into the Top 10. We also ranked No. 12 in Millward Brown’s global brand valuation study. In 2010, Newsweek put HP at No. 2 in its list of America’s Greenest Companies, both in the U.S. and globally. HP was also ranked the No. 1 Corporate Citizen by CR (Corporate Responsibility) magazine in its list of Top 100 Best Corporate Citizens last year.

On a personal note, I want to thank Michael for all his work, for his commitment to the company and his staff and for his friendship. I also thank Michael for agreeing to stay on at HP for some time to ensure a smooth transition.

Please join me in thanking Michael for his service to HP and in wishing him well.

Sincerely,

Shane

It’s not yet clear why, and there are conflicting narratives developing around his as-of-yet unannounced departure. Some sources close to HP tell me he’s simply hopping trains and heading off to a new opportunity. But others claim he’s been replaced by an SAP executive recruited by CEO and former SAP chief Léo Apotheker.

Interestingly, SAP tells me that Bill Wohl, vice president of Global Field Communications and head of Integrated Communications for Co-CEO Bill McDermott, is leaving the company….

Reached for comment, HP declined to give one.

UPDATE: Sure enough, Wohl is indeed headed to HP, where he’ll serve as chief communications officer, reporting to Apotheker. Still no comment from the parties.

Charles Songhurst (pictured here), one of Microsoft’s top corporate strategy and M&A execs, is departing the company, according to several sources.

Sources said he was leaving for a new opportunity, and he is not the only big business-development-related departure recently.

Another exec leaving is Senior Director of Corporate Strategy and Acquisitions Fritz Lanman, who TechCrunch reported late yesterday was moving to create a new social start-up called 5Star.

The departure of Songhurst is perplexing, as sources said he has been a favorite of CEO Steve Ballmer.

He also was a key exec in crafting Microsoft’s search and online advertising deal with Yahoo, which was a long and convoluted journey to say the least for the software giant.

But since then, Microsoft has done relatively little in the way of significant acquisitions or big partnership deals, which perhaps might be part of the reason for Songhurst’s departure.

Microsoft declined comment after a BoomTown query.

Plaintiffs in the lawsuit are seeking records related to Hurd’s departure from HP in August, including a letter that accused him of sexually harassing Jodie Fisher, a sometimes-actress who worked as a contractor for HP. The U.S. Securities and Exchange Commission is also looking into the possibility that Hurd told Fisher about HP’s then-confidential plans to acquire IT services firm EDS.

Hurd has been trying to keep the letter from being made public, and argued to the judge that since it is his personal property, he should be allowed to join the lawsuit as a party to that end. In the motion, Hurd’s lawyers argue that the letter was sent to “achieve private resolution of a potential dispute” between Hurd and Fisher.

To say BoomTown is not a person who likes to hear when I arrive at a vacation spot, “Have a magical day,” is an understatement.

In fact, if I were a Disney character, I would be an unholy mash-up of Cruella de Vil, Grumpy and Scrooge McDuck.

Yet, here I am for the rest of the week–after just barely escaping snow prison in New York–at Disney World in Florida, with the wife and kids and a lot of preternaturally peppy folks from all over the world.

In other words, it’s a small world after all, instead of just a smaller Yahoo via layoffs and exec departures. Or, Pirates of the Caribbean and not Pirates of Silicon Valley.

You get the idea.

(Although since Walt Mossberg and I will be interviewing Disney CEO Robert Iger at D: All Things Digital, our ninth conference in June of next year, it’s kind of work-related.)

In any case, I won’t be posting much–except for putting up the last of the D: Dive Into Mobile full videos–until a week from now.

But, all week, All Things Digital writers will be weighing in on the year past and the one ahead, starting with MediaMemo’s Peter Kafka later today.

When I return, I’ll be setting the stage for the upcoming Consumer Electronics Show in Las Vegas (my kind of theme park!), where we will be putting on an afternoon of interviews with big names in tech for D@CES.

After that, it’s right into the expected move of Apple iPhone to Verizon and more, since the tech parade–just like the Electrical Parade on Main Street in the Magic Kingdom–never seems to stop.

So, until 2011, have a magical day. And I mean that in the Cruella-ist way.

That’s because, here’s a video of Disney World 3D in Google Earth that is already causing me to freak out:

After BoomTown broke the news earlier today that CBS Interactive President Neil Ashe was stepping down from his job, we had a little chitchat as to why and what’s next.

“We were at the end of a successful transition and integration with CBS,” said Ashe about the media giant’s $1.8 billion purchase of CNET Networks in mid-2008, in a phone interview with me. “And so it was time for a breath of fresh air for me.”

What that breath will be, Ashe would not specify yet, because he said he had not actually looked around for a new gig as his contract with CBS was nearing its end.

“I wanted to finish this first,” he said about his job at CBS Interactive.

And what this is, said 42-year-old Ashe, is a “unique combination of Internet native and the power of broadcast media.”

He noted that the “Internet is now electricity–always on and everywhere–which means it is not such a unique thing, and so you can do almost anything.”

When Ashe came to CNET in 2002, he said the company was losing tens of millions of dollars and had to prove to marketers that online ads worked.

“It has definitely not been a straight path from there to here, and we have seen as much confusion as you can throw at us,” he said. “And, if anything now, the pace of change is accelerating.”

The move will be a formal acknowledgment of a practical reality: The video site is already under the day-to-day control of Google veteran Salar Kamangar, and industry insiders have been speculating that Hurley would step out for more than a year. Hurley himself told TechCrunch’s Robin Wauters that he’s been a de facto advisor for the past two years.

Hurley’s departure means that all three of YouTube’s co-founders have moved on. Jawed Karim had left the company before Google acquired it for $1.65 billion in 2006, and Steve Chen left his spot as chief technology officer in the fall of 2008. No word on what Hurley’s next full-time gig will be.

UPDATE: Hurley’s official statement, released via Google tonight, reiterates what he’s already said onstage–”For the past two years, I’ve taken on more of an advisory role at YouTube as Salar Kamangar has led the company’s day-to-day operations. I will continue to serve in an advisory capacity and am excited to witness the next phase of YouTube’s growth.”

Here’s Hurley and Chen in what still may be my favorite YouTube video, shot shortly after they sold their start-up:

Later today after the markets close, Microsoft will make its first-quarter earnings announcement, which a consensus of Wall Street analysts expect to show earnings of 55 cents a share on $15.8 billion in revenue.

That’s a big lift from the year before, of course, when earnings were 40 cents a share and revenues were lower.

Nonetheless, Wall Street has been downgrading Microsoft’s stock, mostly due to worries about the surging popularity of the Apple iPad, the introduction of even more upcoming tablets and the trend’s overall impact on PC and, especially, netbook sales that run the company’s software.

Along with a growing focus on cloud computing, many will be looking for any sign of weakness in Microsoft’s core Windows software business, due to the interest by both consumers and businesses in the tablet phenom.

Microsoft is also working on a tablet offering, which is not slated for arrival until next year, along with a plethora of other companies from Google to Hewlett-Packard to Research in Motion.

The question on the minds of many: Can Microsoft be more nimble with regard to tablets than it has been in the smartphone race?

Also of interest: Sales of its new Office 2010–which came out in the quarter–and news of the progress of its Bing search service, as well as any sign of what the software giant has to say about some recent key exec departures.

That includes Business Division President Stephen Elop heading to Nokia and Chief Software Architect Ray Ozzie simply retiring.

Microsoft is certainly not the hot mess Yahoo has been, but it will be interesting to hear the kind of signals coming out of the company later today.

“Some people leave, some get promoted and some good people arrive.”

Yes, indeedy, and this afternoon, it was David Katz’s turn to say goodbye. He was Yahoo’s VP for Mobile, North America. (He is pictured here, and you can read his bio here.)

The move, said sources, is part of a reorganization in the wake of the departure of David Ko, SVP Audience of Mobile and Local, North America.

He was replaced by Raymond Stern, who also heads business development.

If it seems a little confusing, it is because it is.

But there are all kinds of management rejiggering discussions going on after the additional departures of U.S. head Hilary Schneider and Media VP Jimmy Pitaro.

Mobile is an important arena for Yahoo, as Bartz also stressed in the call today.

Let’s hope Dave lands somewhere good, as he seems so nice from this recent video from the CTIA conference just two weeks ago, posted by Yahoo:

Here we go with the Yahoo third-quarter earnings call starring CEO Carol Bartz, who has some–in the immortal words of Ricky Ricardo–‘splaining to do.

Yahoo turned in a much-needed solid quarterly earnings report, with slightly better-than-expected earnings, although still weak revenue.

Of course, there are all the takeover rumors, the exec departures and fights with partners such as China’s Alibaba Group.

2 pm PT: First on is the lovely investor relations lady, Marta, saying stuff I never pay attention to.

But Bartz came on right away and she sounded subdued and very much on script.

Good idea!

She began by explaining what she has been up to and–once again with feeling–exactly what Yahoo is.

“The key words are innovative, content, media and communications,” she stressed.

Technology is all well and good, but Yahoo is the “largest digital media, content and communications company.”

She also briefly addressed the departure of execs: “Some people leave, some get promoted and some good people arrive.”

Well, you could put such turmoil that matter-of-factly, I suppose.

Bartz then asked the question: “What have we done to re-engineer Yahoo?”

She reeled off a list she has repeated many times before, the point of which was to let us all know she has been mighty busy cleaning up the big mess she had to deal with on arrival.

So lay off, all you naysayers! It’s kind of like what President Barack Obama is saying these days, as he looks forward to huge political losses in the upcoming election.

It’s apparently a disciplined approach. “First you walk, then you run.” Then, she added, you FLY!

Don’t look down, Carol!

She promised to talk about what’s on all our minds–as in the takeover swirl related to AOL, News Corp. and a passel of private equity moneybags circling Yahoo.

2:15 pm: Time for the numbers from CFO Tim Morse, which you can see here.

He was much jauntier than usual. I wonder if that was in the script. Smile with your voice, Tim!

I mostly did not listen to this spiel, as it was a recount of the numbers I already read. But there are some nuggets.

Apparently, for example, revenue for owned and operated search is down because users are clicking on the really good new results from the Microsoft algorithmic search transition, so they are not clicking on paid search as much.

Hmmm….I wonder what happens when they get great.

Then it was on to earnings and stock repurchases, designed to goose the shares, which Yahoo considers undervalued.

So do investors.

Next, he moved on to the outlook, which was weak.

And Morse also noted the uncertainty that has to do with the search and online advertising alliance transition. “Caution is warranted,” said Morse.

“We’re pleased with our third-quarter results,” summarized Morse, seemingly ignoring the revenue issue.

2:31 pm: Bartz was then back on discussing the search alliance and the rocky relationship with China’s Alibaba Group. Rocky is my word and actually is also Alibaba’s.

At least all is well with Microsoft, Yahoo’s one-time nemesis.

It has been a big transition, of course, Bartz noted. Indeed.

Then Bartz went out of her way in praising Alibaba CEO Jack Ma, whom many sources said she has treated shabbily in the past.

It is “a good productive business relationship,” said Bartz.

Other than that, she politely suggested we all butt out of what Yahoo is going to do with the asset, a 29 percent stake of Alibaba.com worth $3.1 billion, according to the company.

Finally, Bartz said Yahoo had “potential” and promised a payoff to shareholders in the months ahead.

That would be nice.

2:38 pm: Time for Q&A.

The first question was about the search revenue growth. Soon!

The next was about search revenue and display advertising and a left-field query on engagement on smartphones.

Same answer, and also people will use Yahoo on any screen.

Next question was on display growth. Same answer.

Will any of these analysts ask the good questions about takeover rumors and other thorny management issues?

Wait, finally there came a sheepish request for clarification about the rumors–well, they are real, so realmors–about takeover plans by private equity folks, along with AOL’s Tim Armstrong.

“As tempting as it is to tell you what I really think, you know I can’t comment,” said Bartz, who really sounded like she wanted to comment.

Give in, Carol! In the words of Oscar Wilde, which is BoomTown’s operating motto: “I can resist everything except temptation.”

Nope, she will not utter a word about “hypothetical this and hypothetical that.”

Instead, the boilerplate: “We like our strategy, we like our progress, and that’s what we’re focused on.”

Next, more questions about revenue weakness. Bartz blamed it all on the drag of search revenue. “The main drag on our growth has been search revenue,” she noted.

She said it will get better once the whole transition kicks in.

Bartz did sound convincing, especially when she noted it was part of a six-year trend in decline in search. By the end of 2011, she promised, it will all be different.

But, in the immortal words of Clint Eastwood in “Dirty Harry”: “You’ve got to ask yourself one question: Do I feel lucky? Well, do ya, punk?”

Now, a question about a “bloated” work force. Yahoo employee count is up seven percent, although costs are down 12 percent.

Morse: “No, we’re not bloated.”

Bartz took a question about competition in the display market, as in Yahoo is going to get smacked by rivals, such as Google.

“There is always competition and competition only makes us better,” said Bartz. “We’re running very fast and not going to give up this leadership in display very easily.”

Given Google’s inroads here, she better run faster than the Road Runner.

The last question was about monetization of mobile.

Lots of pretty, empty words from Bartz, especially since Yahoo does not have a really competitive offering compared to Google and Apple.

It should be added that both Google and Apple smoked it in terms of revenue growth in their quarterly earnings this week.

Also, I hear that Facebook social networking site is growing pretty quickly.

And it ended, with nary a decent question from Wall Street analysts about the clear turmoil at the long-troubled Silicon Valley icon and answers about what Bartz is going to do to address it.

The media is in listen-only mode for these calls, which is a shame, since I for one would love to listen to what Bartz has to say.

I know you’re busy and all, Carol, but perhaps you can talk over dinner soon?

Make no mistake–there are no definitive offers on the table to do a variety of takeover deals of Yahoo by either private equity moneybags or from big media giants such as News Corp. or smaller Web firms such as AOL.

But that does not mean that major players are not circling Yahoo (YHOO) and assessing the situation aggressively, a fact reflected in the rise in the Internet giant’s stock price today based on the many rumors swirling around it.

Despite being news to some, BoomTown had previously written about all these various scenarios, including interest from News Corp. and AOL, after the recent departure of a trio of top Yahoo media and sales execs brought into sharp relief the pressure that CEO Carol Bartz is under to turn around the company.

Yahoo shares were up almost six percent to close at $15.25, a high of late. It is up to $16.20 in after-hours trading.

According to sources close to the situation, that’s because big PE firms such as Silver Lake Partners, as well as News Corp. (NWS), AOL (AOL) and others, all have their PowerPoints and speadsheets opened up to try to figure out if there is a deal to be made to buy all or a piece of Yahoo in the wake of corporate turmoil, slow revenue growth and weak stock under the leadership of CEO Carol Bartz.

Sources said the key players in the growing soap opera are the execs who run Yahoo-affiliated companies in Japan and China. That would be Masayoshi Son of Yahoo Japan and Jack Ma of the Alibaba Group.

Yahoo owns big and lucrative stakes in both companies, assets which make up a big part of the company’s current valuation.

The sale of those stakes is what has some investors interested, since–if thorny tax issues can be solved–it would make the purchase of part or all of the well-known Silicon Valley company very inexpensive in relative terms.

Sources added that any approach would have to be nonhostile, since Yahoo still has some stringent antitakeover provisions in place from a hostile attempt a few years ago by Microsoft (MSFT).

But alternate CEOs to Bartz are part of the ruminations:

As I wrote two weeks ago, which was again reported today:

Most frequently mentioned by big investors in Yahoo: AOL (AOL) and its CEO Tim Armstrong.

Armstrong, said sources, has not shied away from the idea of Yahoo acquiring AOL and installing him as CEO with Bartz as chairman. AOL’s valuation is just $2.65 billion.

Although AOL has also been trying to turn itself around and is in a much less powerful position than Yahoo, Wall Street likes Armstrong’s story for AOL as a modern-day media and media distribution company.

“At least he has a narrative that is believable,” said one big investor in both companies. “Bartz has no vision.”

Among the other credible candidates most mentioned: News Corp. digital head Jon Miller, if the media giant were part of any deal, and Juniper Networks (JNPR) CEO Kevin Johnson, who was the architect of the failed acquisition of Yahoo by Microsoft.

What’s interesting here is what the board–and, most specifically, co-founder and former CEO Jerry Yang–is doing now.

For certain, it is receiving an incoming flood of negative communications from big shareholders, most of whom are unhappy with Bartz’s management. One big investor recently told board members that their continued inaction in the face of all the trouble was unsettling.

One big event coming up is the third-quarter earnings report by Yahoo on Tuesday, after the market closes.

If Yahoo’s sales remain as flat as they were in the second quarter, even with improved earnings, there will be even more scrutiny of Bartz to find growth.

And if Yahoo misses? Watch out.

One way might be via a big acquisition. Yahoo has recently been contemplating the local space, especially social discounting phenom Groupon. But the price would have to be high, sources said–well above $2 billion in cash and stock.

Would such a bold move be enough to keep the predators of Yahoo at bay? We’ll see, as the purple world turns.

A Yahoo PR person declined to comment on the stock rise.

Of course, rising on speculation, a higher stock is a problem for acquirers, as it makes Yahoo more expensive. Still, sources said a Yahoo deal of about $20 a share is entirely “doable.”