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 will announce the impending departure of four of its longtime board members, including chairman Roy Bostock.

The others headed out the door are Hewlett-Packard exec Vyomesh Joshi, Gary Wilson and Arthur Kern.

I had reported in several previous posts that this exact group of directors was leaving, and noted in one yesterday that it was about to happen, and that new board members were also on the way.

And, presto, it is so!

(Update: Yahoo confirmed all in a letter it just released from Bostock, which I have posted separately.)

Yahoo’s two new directors are former Rovi CEO Fred Amoroso and LiveOps Chairman (and former CEO) Maynard Webb, who was once COO of eBay (pictured, left to right).

Rovi does digital entertainment technology, while LiveOps offers cloud-based enterprise solutions.

The Silicon Valley Internet giant will also be adding three more board members, said sources, but those people are not confirmed as yet.

And it is not clear who will be chairman of Yahoo’s board, either. Intuit CEO Brad Smith has a full-time job, and the newly installed Weather Channel CEO David Kenny does, too.

Sources said the news is coming after the markets close, with other updates, including: The news-free status of its ongoing strategery (the Asian deal is coming along — blah, blah, blah — but you read that here yesterday in much more detail); ladling praise on new CEO Scott Thompson (also formerly of eBay); and giving props to co-founder Jerry Yang, who stepped away from the board and from the company several weeks ago.

The moves by Yahoo are designed to thwart a possible proxy fight that might be coming from activist shareholder Daniel Loeb, who has been working on a board slate of his own.

It’s been hard for him, and also for Yahoo, to attract significant names to the board. The two new additions are solid tech execs, although certainly not high-profile appointments.

Yahoo declined to comment.

Here are their bios from the Rovi and LiveOps Web sites, if you want to know more:

Fred Amoroso is a member of Rovi Corporation’s Board of Directors.

Fred Amoroso is a member of Rovi Corporation’s Board of Directors. Fred Amoroso previously served as Rovi’s president and chief executive officer from July 2005 to December 2011. Prior to joining Rovi, Mr. Amoroso served as an advisor to Warburg Pincus, an investment firm from September 2004 to June 2005. From July 2002 to August 2004, Mr. Amoroso served as the president, chief executive officer and vice chairman of Meta Group, an information technology research and advisory firm. From October 1999 until its merger with IBM in January 2002, Mr. Amoroso served as president, chief executive officer and a director of CrossWorlds Software, Inc. Prior to CrossWorlds, Amoroso was a member of the world-wide management committee of IBM, was general manager of IBM Global Services Asia Pacific and held various other executive positions at IBM. Before joining IBM, Amoroso held various positions at Price Waterhouse, now PricewaterhouseCoopers, including lead technology partner.

Mr. Amoroso holds a B.S. in systems engineering and M.S. in operations research from Polytechnic Institute of Brooklyn.

As Chairman, Maynard brings almost 30 years of experience developing and leading high-growth companies to his role at LiveOps. From December 20, 2006 to July 18, 2011, Maynard was also LiveOps CEO. He joined LiveOps from eBay where he served as Chief Operating Officer. At eBay, Maynard directed engineering and technology operations, product development, customer support, trust and safety, global billing, human resources, and legal functions. Prior to eBay, Maynard was Senior Vice President and Chief Information Officer for Gateway, Inc. He has also held management and leadership positions at Bay Networks, Quantum Corporation, Thomas-Conrad Corporation and IBM. A respected member of the Silicon Valley technology community, Maynard sits on the boards of several successful companies, including Salesforce.com, Admob and Baynote. Maynard holds a Bachelor of Arts degree from Florida Atlantic University.

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. 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.

According to sources close to the situation, new Yahoo CEO Scott Thompson is meeting with the two private equity firms that had made previous partial investment overtures to the Silicon Valley Internet company.

While those deals are now tabled, sources said that Thompson and the Yahoo board still wants to engage investors — Silver Lake and TPG Capital — in discussions about how to best turn around Yahoo.

Thus, sources said, Thompson was interested in meeting with the firms — as well as others involved, such as VC Marc Andreessen, who had been working with Silver Lake — in order to discuss their ideas and get up to speed on them.

And, of course, keep the discussions alive to see if there is any kind of different deal to be done in the future.

That’s after, of course, Yahoo completes its complex negotiations with its Asian partners — Alibaba Group and SoftBank — over selling off parts of its own stakes there.

While Yahoo’s success in resolving Asia is not assured, this transaction was a key part of proposals for a PIPE — Private Investment in Public Equity — deal that both Silver Lake and TPG had made.

But, after shareholders looked askance on such a deal due to price and other issues, Yahoo decided to negotiate on its own and picked a new CEO.

Still, in a have-your-cake-and-eat-it-too move, the company leadership also did not want to close the door on the PE firms (and their money and expertise). completely.

That’s especially true, since the distinct possibility of a proxy fight from activist Yahoo investor Daniel Loeb is now hovering over the company’s neck.

Both Loeb and Yahoo are scrambling to prep for the potential battle. Loeb is trying to assemble a slate of alternate directors, and shoring up other major Yahoo shareholders as allies, while Yahoo is moving to shed some directors while also adding new ones.

Hence, the meetings with PE firms to keep the proverbial ball rolling, which presents at least the facade that the company is intent on turning the core parts of Yahoo around by any means possible.

Sources close to the PE firms remain dubious, with both feeling burned by the last process.

“I’m not sure anything will come of this, and the way Yahoo conducted the last talks was not encouraging,” said one source. “But it does not cost anything to keep listening.”

Here’s a really terrific video tribute to legendary Hollywood director and producer Steven Spielberg, done for the recent 2012 David O. Selznick Achievement Award from the Producers Guild.

It highlights a plethora of films Spielberg has made over his long movie career, many of which — once you see them strung together — have a heavy techie, special-effects or simply sci-fi element.

It’s pretty impressive to see such a significant body of work collected so well.

Enjoy:

Yahoo filed the letter that Jerry Yang sent resigning from the board of directors, as well as all other positions at the company he co-founded 17 years ago.

(To liven it up, despite a vow to use fewer of them this year, I had to go with a LOLcat.)

It’s similar to the statement he made at the time of the departure earlier this week, and is unusually short given the importance of the move.

Here it is, penned to Yahoo Chairman Roy Bostock:

January 16, 2012
Roy Bostock
Chairman
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Roy:

I am writing to inform you that I hereby resign from the Board of Directors of, and all other positions with, Yahoo! Inc. effective January 17, 2012.

My time at Yahoo!, from its founding to the present, has encompassed some of the most exciting and rewarding experiences of my life. However, the time
has come for me to pursue other interests outside of Yahoo! As I leave the company I co-founded nearly 17 years ago, I am enthusiastic about the appointment of Scott Thompson as Chief Executive Officer and his ability, along with the entire Yahoo! leadership team, to guide Yahoo! into an exciting and successful future.

Sincerely
/s/ Jerry Yang
Jerry Yang

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.

Yahoo co-founders David Filo and Jerry Yang

Yes, he jumped, even though being pushed was surely looming on the horizon ahead.

But the decision of Yahoo co-founder, former CEO and director Jerry Yang to leave Yahoo was indeed sudden, with the board meeting just this morning about the issue.

It was so sudden, in fact, that Yahoo’s key execs — including its communications arm — had only a few minutes heads-up to what is arguably one of the more momentous events in the history of the Silicon Valley Internet giant.

In fact, newly installed CEO Scott Thompson was in Los Angeles in a previously planned visit to meet his new staffers, said multiple sources, forcing him to participate in the board meeting from there.

As it turns out, according to numerous sources, Yang had had enough, and had finally realized that perhaps the many players in the ongoing Yahoo drama inside and outside the company had also had enough of him.

As I wrote last week about the possibility of Yang stepping down from the board, such a move of a founder from its board is unusual, although it was possible in this case:

“While Internet company founders usually stick on boards, it’s not a given, especially with all the turmoil at Yahoo, some of which is related to Yang.”

In fact, as the pressure has mounted on Yahoo to right its ever-listing ship, a lot of the rancor was being piled atop Yang, whether deserved or — in some cases — undeserved.

That’s because, even after the rough time he had as CEO of Yahoo, Yang had remained unusually active in its affairs, joining internal meetings and being part of discussions about its strategic alternatives.

And while he might protest that he was doing what was asked of him by the board, his status as the company founder made it hard to minimize his clout.

“It’s hard to ignore Jerry Yang,” said one exec. “He has an impact on everything, even if he thinks he does not.”

The recent negotiations with Yahoo’s Asian partners is a case in point. While board member Brad Smith and others have been a key part of the talks to sell off parts of its stakes there — which are critical to Yahoo to complete — execs at both China’s Alibaba Group and Japan’s SoftBank both pointed to a too-strong influence of Yang in the deal as a possible stumbling block.

Yang served on both the boards of Alibaba and SoftBank’s Yahoo Japan, so his interest would have been obvious. But sources involved in the talks would often blame him for their rocky nature and difficulty.

“Jerry just does not want to sell,” one said to me last week.

Maybe he didn’t or maybe he did, but one thing was clear: Yang had become a lightning rod for a lot of the trouble Yahoo has gotten into over the years.

That was true with major investors, who have been more loudly saying of late to its board that his continued presence was a problem. The most vocal, of course, was Yahoo’s activist shareholder Daniel Loeb, who has called for Yang’s ouster, and has been contemplating a proxy fight to make it so.

Loeb was out in Silicon Valley last week, talking to possible alternate board members, many of whom have been longtime colleagues and even friends of Yang, and took the meeting anyway.

Worse, perhaps, was the prospect that Yang has also been losing his most ardent fan base: Yahoo employees.

With all the mishegas over recent years, they had also begun to question his role as a leader in the company, many voting with their feet by leaving in droves.

With a new CEO in place, and the possible chance that its Asian problems were moving in the right direction, it had to have sunk in for Yang that it had finally become time to make peace with the present by abandoning his future at Yahoo.

Thus, he wanted to leave on his own terms, even if — in the end — the man who is most definitely one of the Internet’s most important pioneers did not have much of a choice.

According to sources close to the situation, Yahoo co-founder Jerry Yang is just the first shoe to drop in what is shaping up to be what looks like a large exodus of board members from the Silicon Valley Internet company.

Sources said four other directors will also step down soon. As I wrote last week, in a post suggesting Yang might also go, the prime candidates to go appear to be: Chairman Roy Bostock, Arthur Kern, Vyomesh Joshi, and Gary Wilson.

As I noted in a post titled “Yahapocalypse Now?”:

While some departures seem most obvious — longtime board members Vyomesh Joshi, Arthur Kern and Gary Wilson — the really interesting part will be the possible exit of Chairman Roy Bostock.

While it now is more of a when rather than an if, many sources report, how it goes down is the key part of the move. And who will be the chairman then will be the big conundrum — either an internal candidate, such as David Kenny, or a fresh-eyed outsider.

Another question mark: Whether co-founder Jerry Yang could also move along off the board with Bostock. While Internet company founders usually stick on boards, it’s not a given, especially with all the turmoil at Yahoo, some of which is related to Yang.

And the major impetus for the board cleansing, besides the obvious need to drastically shake up what might be the most dysfunctional board in all of tech? Worries about possible lawsuits, as well as a proxy fight that could spell disaster for the already troubled Yahoo.

Sources said among the issues most worrisome is how this board conducted recent attempts to sell part of the company to private equity firms rather than sell it whole.

In addition, shareholder pressures — especially the distinct possibility of a proxy fight from Daniel Loeb of Third Point — have been mounting on the Yahoo board.

Still, it does look like Yang still motored out of the company he co-founded — an accomplishment that should be feted, despite recent misses at Yahoo — on his own, even if he had few other good options in the end.

If you thought things were going to quiet down with Yahoo now that it has installed new CEO Scott Thompson in place, think again!

That’s because of a very unusual — well, to be fair, unusual for most companies, but not for perpetually storm-tossed Yahoo — confluence of important events about to take place all at once over the next six weeks.

And, like a very dicey game of corporate Jenga, each has the ability to upend and impact the other significantly, either for the good or, well, for the bad.

Here are the four horsemen of the possible Yahapocalypse, all riding into town very soon:

Q4 Results: Yahoo will report its fourth quarter earnings on January 24th, after the markets close. While sources said the company has managed to turn around what was looking like a first-class disaster, it’s still not going to be a pretty picture when it comes to advertising growth, consumer engagement and other key metrics.

Simply put, Yahoo needs to show investors a fast-growing business. Instead, sources said the Q4 results will likely come in at the bottom of the expected range, which should be unimpressive, even though this has been business as usual at Yahoo for some time.

If Google and others have strong reports, of course, it will make the situation worse.

Along with goosing its ad business again, Yahoo needs to spur innovation and intro some cool new products in new arenas to make Silicon Valley and others perk up.

Proxy Fight?: Weak results will give a nice lift to potential efforts by activist investor Daniel Loeb of Third Point — a major Yahoo shareholder — to wage a proxy fight for control of the company. He’s already here in Silicon Valley this week searching for possible board members for an alternate slate of directors.

As I wrote earlier today, the earliest nominations for directors can be submitted is February 24. Loeb then has a month after that to submit a competing roster.

Worse for Yahoo, many of Yahoo’s major investors are mulling backing Loeb if he initiates a battle for control of the company.

There’s no doubt that Loeb is and means to be a thorn in Yahoo’s side — he already made a lot of noise about its consideration of partial investments from private equity firms, due to low share prices — until major changes take place at the company.

And by major, Loeb’s intent seems to be along these baseball lines: Throw the bums out!

Board in Flux: Speaking of the board, it’s not the pretty picture of solidarity as you might think.

Actually, no one in their right mind thinks that. This board is about as dysfunctional as they come. (It’s like that group on “American Horror Story,” minus the bald dwarf in the basement.)

Right now, several sources report, various factions are jockeying over which board members go and which stay. The Wall Street Journal reported last week on a formal search for new board members to replace outgoing ones, but it’s much more complex than just that.

While some departures seem most obvious — longtime board members Vyomesh Joshi, Arthur Kern and Gary Wilson — the really interesting part will be the possible exit of Chairman Roy Bostock.

While it now is more of a when rather than an if, many sources report, how it goes down is the key part of the move. And who will be the chairman then will be the big conundrum — either an internal candidate, such as David Kenny, or a fresh-eyed outsider.

Another question mark: Whether co-founder Jerry Yang could also move along off the board with Bostock. While Internet company founders usually stick on boards, it’s not a given, especially with all the turmoil at Yahoo, some of which is related to Yang.

For now, make no mistake, Bostock is still in charge of the board and Yang is the only real power behind that power, despite the recent influence of director Brad Smith.

But, with all the pressure by shareholders, some sources suggest that it might finally be time for some significant change at the board level, starting with the pair most associated with all its troubles.

Or, um, not.

If there is going to be any action at all, expect it before February 24th — when Loeb can start making real trouble.

Asian Solution: A lot of the above hinges on whether Bostock and Yang can deliver the promise of a deal with its long disgruntled Asian partners, Alibaba Group and SoftBank.

The trio is now engaged on negotiations about a tax-free deal, in which Yahoo would sell back some of its stakes in its Asian properties and get money and other operating assets in return.

While it’s good news that the talks are finally proceeding with some level of normal functionality, it’s still a complex situation and one with a lot of outstanding questions.

Most important: Which operating assets will be bought in the deal to hand over to Yahoo? And also, what will the valuations be?

Sources close to the situation said that the talks remain slow-going and frustrating — “The stop-and-go of all time,” joked one person involved. But they are moving forward, which is no small thing when it comes to these three.

That’s critical for Yahoo, which can ill afford to disappoint shareholders if no lucrative, cash-rich deal happens in Asia. And, it needs to happen before Loeb can act on a proxy fight too, since a successful end to its Asian issues will negate his momentum dramatically.

Oh Yeah, Running the Core Business Stuff: As usual, a full and fraught month for Yahoo and its directors, who have other things to do, I assume.

But not me and not new CEO Thompson. By the way, the former eBay exec will presumably be very busy doing some significant rejiggering of the core Yahoo business in the meantime.

Could that mean a new product direction for Yahoo, for example, around data? Could it mean a passel of new execs? Could it mean layoffs?

Or, could it mean Thompson will finally solve the ultimate sword-in-the-stone question: What is Yahoo?

And that, in the end, will be the real victory.

When you own a large chunk of a major Silicon Valley Internet company, it’s probably not a surprise that you want to come to the center of the tech world to have a look around.

But Yahoo — of which Third Point’s Daniel Loeb owns over five percent — is unlikely to get a visit from the activist shareholder, who is in California this week.

Several sources said he has contacted many former Yahoos and other tech execs for meetings in the Internet heartland to chitchat about digital issues.

And, of course, search for possible board members for an alternate slate of directors, in case he decides to wage a proxy fight against Yahoo.

The earliest nominations for directors can be submitted is February 24 for those “shareholder proposals not intended for inclusion in proxy materials and for nomination of director candidates,” according to Yahoo’s corporate bylaws on such matters.

Loeb then has a month after that to submit a competing slate. In addition, many of Yahoo’s major investors are mulling backing Loeb if he initiates a battle for control of the company.

But it’s not a definite move as yet. The New York-based investor has not decided whether he will take on a proxy fight, sources said, given he has yet to assess Yahoo’s new CEO, former eBay exec Scott Thompson.

Thompson was president of the online commerce site’s PayPal payments division.

But while there is a formal process, you will hear a lot of noise coming long before that, unless Yahoo gives Loeb board seats to quiet him down — which is unlikely but possible.

Such an ugly fight is not one Yahoo can afford to have, and it has already shown some cloddish sensibilities in its response to a recent letters by Loeb asking for the ouster of its Chairman Roy Bostock and co-founder and director Jerry Yang.

But given how badly the last Yahoo shareholder tussle with Carl Icahn went, another proxy battle could be deadly, and might drag on through the first half of 2012. In his Yahoo tussle, Icahn ultimately got three seats on the Yahoo board, but eventually went away with everyone the poorer.

And no one wants a replay of that.

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.

I’ve seen two performances of The Lord of the Rings in Concert, which is great fun and has been at New York’s Radio City Music Hall in previous autumns. But not this year.

But next year — and the year after that — I can renew my Hobbit habit. Yesterday the trailer for the first of two films based on “The Hobbit” hit the Internet. This one will be called “The Hobbit: An Unexpected Journey” and will be in 3-D. It will cover roughly the first half of the J.R.R. Tolkien novel that predates the “Lord” trilogy, and includes the finding of the ring that’s central to the later story. Also there’s one surprise: The trailer sure makes it look like Gandalf and Galadriel are, or once were, an item. I sure don’t remember that from the books.

We here at AllThingsD have been paying close attention to the progress of these films, hanging on every video-blog posting by famed director Peter Jackson. (And if you haven’t seen them, they’re very fun to watch: Part 1; Part 2; Part 3.) I don’t think I’m the only member of the team that has a Hobbit habit. But I’m probably the only one who will admit it.

Anyhow, here’s the trailer. Enjoy:

Whatever you want to call him or her — a silver bullet, the cure or, as I like to say, the last unicorn — Yahoo’s ever-seeking and never-deciding board has now renewed its focus on finding a new CEO.

Also on the docket: Working on a deal to sell back at least some of its stake in its twin Asian assets — Yahoo Japan and the Alibaba Group — back to the companies. A partial sale of stock back could placate the often tense situation among the partners.

What is clear is that the two bids from private equity firms are now in an undetermined circling pattern — due to a variety of concerns around shareholder unrest (Occupy Yahoo looms for 2012).

Therefore, the idea of bringing in said fantasy leader to perhaps finally be the one to revive the long-troubled company has returned to the forefront of action, according to numerous sources both inside and outside the company.

The concept in short, said people familiar with the situation: Hire some compelling and entrepreneurial CEO to get the company moving again from a product point of view, do a massive organizational overhaul and help settle Yahoo’s thorny Asian issues.

While a number of names have been rumored in reports — such as Google business lead Nikesh Arora, who is actually not likely to leave his top post at the search giant — sources said the board has been targeting a number of candidates, including Hulu CEO Jason Kilar.

Others on Yahoo’s wish list include Juniper CEO Kevin Johnson and online advertising entrepreneur Brian McAndrews, who sold aQuantive to Microsoft. There are several others also being considered.

Sources said Kilar has met with Yahoo board members about the offer, but his hiring would be a long shot.

It’s an interesting — if complex — gambit to bring in Kilar, who has had his own wrangles with the multi-owner structure of the premium video service over the years.

Kilar’s status at Hulu has been in question ever since it was put on the block, then removed and then — well — who knows.

Hulu’s owners — News Corp., Disney and Providence Equity Partners, along with Comcast (which is a now a passive investor) — did not like the offers it got from various bidders, including Yahoo.

While the media giants have made noises about wanting to keep a stake in distribution, their commitment to that remains unclear.

The situation has put Kilar — who already had tense relations with the service’s shareholders — in limbo until a valuation is determined next year. Without going into the complex details, Kilar has a large equity stake that could be liquid in April, related to certain rights held by Providence.

It is well known that Kilar has been concerned the team that built Hulu gets some sort of payout for their work. In fact, many years ago, Hulu was seen as a possible IPO candidate.

What’s not in question is Kilar’s talent at creating a cohesive team and a compelling product — especially with an advertising and media focus — and the need at Yahoo for a vibrant leader to encourage innovation and discourage its rapidly increasing attrition issues.

The search for a new Yahoo CEO — which is being led by director Patti Hart, and is being conducted by Heidrick & Struggles — had been mostly sidelined until recently, as the board solicited bids for a partial investment from PE firms.

Two emerged, from Silver Lake and TPG Capital, which had wanted to pay from $16.50 to $18 a share for a stake of just under 20 percent in what is called a PIPE (Private Investment in Public Equity) arrangement.

But the low price, and worries about lawsuits and even a proxy fight related to such a deal, have slowed down the momentum significantly, said sources.

Instead, Yahoo has told bidders it will get back to them in the coming weeks about the direction it will take. Thus, the focus on lining up CEO candidates and plans related to reviving Yahoo.

Some of those possible execs have put their hand up, while others — like Kilar — are being solicited. In addition, some still think that Yahoo board member David Kenny remains an internal option, especially if the board of Yahoo gets a refresh, despite his recent announcement that he has no intention of seeking the job.

In general, this shift should not come has a surprise for the hurry-up-and-wait board of Yahoo, which has struggled over the years to make good choices for the Silicon Valley Internet giant.

That drift has resulted in a downturn in its prospects, even as other companies have surged.

Those troubles were brought into sharp focus in a recent report by new Goldman Sachs Internet analyst Heath Terry, who strafed Yahoo in his “sell” recommendation.

Among the gems by an analyst whose investment bank is currently an advisor to Yahoo on its strategic options:

Yahoo simply faces too many competitive and structural headwinds to believe any kind of meaningful turnaround is possible. While there is significant asset value on the balance sheet and in the company’s large, though increasingly less engaged user base, we continue to believe, as we have since before the first Microsoft offer, that the segment of management driving the company is intent on trying to revive Yahoo as a company, regardless of the cost to shareholders.

And, noting the need for a new CEO:

We would become more positive if we felt there was a likely event in the near term that might unlock the value of the balance sheet assets at Yahoo. While we believe the aggregate value of those assets is above the value reflected in YHOO, in order to be more positive on the stock we would need some proof that management is willing and able to take the steps necessary to unlock that value either through a sale or distribution to shareholders. Meanwhile, the declining profitability of the core display advertising business is masked by a search business that continues to lose share and relies on artificial support from Microsoft. We would become more positive on the core Yahoo business if the company is able to find a new CEO capable of focusing the business on its core advertising and communications opportunities, rationalizing costs, and driving growth. This would require user growth and especially engagement improvements in both online and mobile, improving monetization of advertising inventory, and stabilizing its search business.

In other words: Wanted, one unicorn to work magic against increasingly troublesome dragons. Ability to sparkle a plus.

“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.

What an amazing coincidence.

On the very day Yahoo’s board is considering actual bids from two private equity firms interested in deals to buy close to 20 percent of the company for between $16.50 and $17.50 a share, comes a spate of eerily similar breathless media postings that there’s another bid in the making for $20!

That’s totes better, right? I mean, how can Yahoo’s directors accept a real live lesser-priced bid now when there’s a prettier one in the fog just ahead?

No, really, it’s there — if you squint really, really hard.

Except it’s not even close, when you actually check with two of the key members of the group of alleged buyers, which would apparently be Blackstone, Bain Capital and Yahoo’s Asian partners, Alibaba Group and SoftBank.

Sources close to Blackstone and Alibaba said while there have been talks, which have been previously reported weeks ago here and elsewhere, there is no bid in the offing that is close to fruition and at that price.

In an unusual public statement, in fact, Alibaba’s John Spelich said flatly: “Alibaba Group has not made a decision to be part of a whole-company bid for Yahoo.”

This from a company whose voluble CEO Jack Ma is prone to making giant and noisy speeches to signal his interest in finding a way — any way — to get back shares of the Chinese Internet giant from Yahoo.

Not this time, and several sources close to Alibaba reiterated that it was nowhere near close to any bid as yet and that a price is still up in the air. In addition, sources added, Alibaba might decide to work with another PE group, such as Providence Equity.

In addition, sources noted that if Alibaba could strike an adequate deal with private equity bidders to get a large chunk of the stake back, it would be highly preferable to a hostile takeover of Yahoo that could end in tears and little else.

“The threat of a takeover is more useful than the damage an actual takeover would cause for everyone,” said one person close to the situation. “No one wants this to be unfriendly.”

So why the rumors — doubtlessly being spread around by hopelessly cynical Wall Street types interested only in stock manipulation — surfacing today?

Simple: To get some easy-to-play media outlet to bite, report it as speculative fact and cause the stock of Yahoo to take flight tomorrow.

Hey, it could happen!

Sadly, this junior-league trick has already worked — Yahoo shares were up a dollar to $16.72 in after-hours trading tonight.

It is likely to go even higher tomorrow, which could cause the board of Yahoo to delay accepting either of the partial bids from Silver Lake or TPG Capital, even if they were the best thing for the company and its employees.

Except that the job of the Yahoo board is to evaluate what’s before them and not what is perhaps, someday, soon, wait-by-the-phone, really soon, I promise is going to be delivered.

In fact, several sources noted that it’s not clear if the Yahoo board has even asked for parties to submit whole-company bids yet.

When and if Yahoo’s board does that and if something better actually does come down the pike, with a much fatter price tag of $20 or more, then the directors can mull that over.

That would be the prudent thing to do for the company, its employees and its shareholders, even if Yahoo’s stock gets a temporary lift now.

Maybe I am just a hopeless Silicon Valley romantic and not a hardened Wall Street M&A type, but the survival of Yahoo is the real point here, rather than the lining of bankers’ already fee-stuffed pockets.

And anything other than that is just fog.

I hate to use a personal story to make a professional point — but when I was in the hospital recently, after suffering from a mini-stroke, I got an important piece of health advice that, oddly enough, applies perfectly to Yahoo, the Silicon Valley Internet icon I cover very closely.

I know, I know, but listen up …

When I was close to going home, one of my doctors told me I had to make sure I paid attention to any signs that might indicate a recurrence. The issue around any possible future ischemic attack taking place, he said, is speed in getting critical care once any unusual symptoms become apparent, such as numbness, tingling, confusion and cognitive difficulty.

That’s because every second of delay translates to increased damage to cerebral cells that could badly impact speech, movement and worse.

“Remember,” the doctor intoned with great and very appropriate gravity. “Time is brain.”

Yes, indeed it is — for me, and also very much so for Yahoo these days.

Leaving aside my own mortality, one of the most important issues going forward for Yahoo’s long-hoped-for revival will be how quickly the company moves in the next month, in what has so far been a lugubrious and rumor-heavy process to figure out its strategic plan in the wake of the firing of CEO Carol Bartz in early September.

That means — going into a major holiday season — Yahoo has about 30 working days to make what has to be a complex and multiparty deal. It is likely to include private equity firms, big companies, Asian partners, investment bankers, major shareholders and scrutiny from the media, in an effort that is approximately akin to herding cats.

This from a board that has often moved with snail-like reflexes in the midst of much more minors crises, and has shown a talent for disaster.

So, while speed is sometimes the enemy of reason, in this case, it is now more necessary than ever before.

There are three key reasons why Yahoo’s leaders have to perform quickly now, each of which could spell even more turmoil for the long-troubled company, if botched.

The first is the possibility — actually, the probability — of a proxy fight that might begin informally just after the new year.

That’s when you could start hearing from someone like activist shareholder Daniel Loeb of Third Point — who has been vocal about ousting Yahoo board members, including co-founder Jerry Yang. Yahoo directors are fully aware that he is eyeing this ugly option, which will include readying an alternate slate of directors.

According to a Yahoo spokeswoman, the earliest nominations for directors can be submitted is February 24 for those “shareholder proposals not intended for inclusion in proxy materials and for nomination of director candidates.”

But while there is a formal process, you will hear it coming long before that, unless Yahoo gives Loeb board seats to quiet him down — which is unlikely but possible.

Such a noisy fight is not one Yahoo can afford to have, and it has already shown some cloddish sensibilities in its response to a recent letter by Loeb — who has many more shares than Yang, and should still be accorded a certain amount of respect, no matter what he says.

Given how badly the last Yahoo shareholder tussle with Carl Icahn went, another proxy battle could be deadly, and might drag on through the first half of 2012. In his Yahoo tussle, Icahn ultimately got three seats on the Yahoo board, but eventually went away with everyone the poorer.

Second, Yahoo will report its fourth-quarter earnings in late January, which will likely continue to show weakness in key sectors of its business. While interim CEO Tim Morse is doing a laudable job given the shaky circumstances, drops in advertising revenue growth, engagement and search are not anything Yahoo can keep making excuses for.

While it is likely the company’s beleaguered operating execs will pull out the stops to make the numbers look better — a new game I like to play is “how many homepage ads can they jam in there at the quarter’s end?” — it’s no panacea for the kinds of dramatic and even drastic changes that new ownership will have to make, sooner than later.

And, speaking of beleaguered, perhaps the most important reason that Yahoo has to get the lead out and clarify its situation is due to one consistent thing about the company: Talent attrition and employee fatigue.

Speaking to one exec after another in recent weeks, it is dead clear that Yahoo is increasingly hard-pressed to hold on to the best of its current employees, or to attract any terrific new ones.

The impact on product innovation, morale and more is obvious.

One exec who has long been one of the more cheerleader types for Yahoo — often calling me out in the past for being too negative on the company’s prospects — has recently turned weary, cynical and even depressed about the future — so much so that I now find myself bucking up the worker.

“You can’t hire anyone, since you can’t tell them honestly who their bosses might be in three months,” said the staffer. “And you can’t look anyone who works for you now in the eye and tell them it will turn out right in the end, either, given the track record so far.”

Indeed. And, more than any other factor that could hurt Yahoo in the competitive tech sector, brain drain is what will always get you in the end.

We are now posting the full videos from the recent AsiaD conference, which took place in Hong Kong in October.

We’re following the schedule of the actual event. Up now: Al Gore, former Vice President, Nobel Prize winner, environmental activist, sometime VC, occasional entrepreneur and all-around busy dude.

Of course, Gore talked about a wide range of issues, from the legacy of Apple’s Steve Jobs (Gore is on the company’s board), to being an adviser to Google, to the “broken” U.S. political system, to alternative energy.

Here’s his onstage interview with Walt Mossberg:

]]> http://allthingsd.com/20111118/former-vp-and-apple-director-al-gore-on-steve-jobs-and-more-the-full-asiad-interview-video/feed/ 0 http://allthingsd.com/20111118/viral-video-titanic-in-3d-gets-facebook-lift/ http://allthingsd.com/20111118/viral-video-titanic-in-3d-gets-facebook-lift/#comments Fri, 18 Nov 2011 08:15:37 +0000 Kara Swisher http://allthingsd.com/?p=145593

Hollywood director James Cameron debuted the trailer for the upcoming 3-D version of the huge movie hit, “Titanic,” on Facebook earlier this week, where he also delivered an intro.

Why? Perhaps it’s the movie’s nearly 10.5 million fans on the social networking site, which Cameron referenced.

You can only see those remarks on Facebook, but here’s the trailer for the rerelease, coming out next April, as well as a video of Cameron at the eighth D: All Things Digital conference in 2010, where he first revealed that “Titanic” would come out in 3-D:

]]> http://allthingsd.com/20111118/viral-video-titanic-in-3d-gets-facebook-lift/feed/ 0 http://allthingsd.com/20111117/exclusive-zyngas-van-natta-moves-to-strategic-advisor-feld-off-board-paul-in/ http://allthingsd.com/20111117/exclusive-zyngas-van-natta-moves-to-strategic-advisor-feld-off-board-paul-in/#comments Thu, 17 Nov 2011 18:30:08 +0000 Kara Swisher http://allthingsd.com/?p=145219

In a new filing with the Securities and Exchange Commission concerning its upcoming IPO, Zynga is expected to unveil two key management and board changes at the online gaming phenom:

Chief Business Officer Owen Van Natta — who came to the San Francisco-based start-up several years ago to help CEO Mark Pincus grow it and develop it — will step down from his job and become a strategic adviser focusing on major partnerships. He’ll still remain board member at Zynga, but will give up millions of pre-IPO shares by moving out of his operational role.

And director and venture investor Brad Feld will leave the the board, which VCs sometime do as companies move to a public offering and add members with more specific business experience.

In his place, longtime entrepreneur and investor Sunil Paul, who founded a company called FreeLoader with Pincus many moons ago, will join the board.

Zynga confirmed the changes to me in a statement by Pincus:

“Owen is a valuable business partner. He’s made great contributions to Zynga and continues to be an important part of our team.”

Sources said the changes related to Van Natta around are not part of a recent controversy around a Wall Street Journal story about clawing back of some share options grants of early Zynga employees who had become less involved in the company. While the company cannot actually take back already vested shares owned by those staffers, the article has put a lot of scrutiny on Zynga and raised questions about how to cope with the kind of hyper-growth some Internet firms experience.

That’s certainly been the kind of rocket ride Zynga has been on, as it has grown from a small social gaming company on Facebook to a high-profile public company.

Zynga is in the final stages of its IPO process, answering questions from the SEC that are typical. If all goes well, Zynga execs are expected to go on a road show after the Thanksgiving and go public by the end of the year at a market valuation of close to $20 billion.

That was different from when Van Natta officially got to Zynga in the spring of last year — after a rocky experience running the doomed Myspace. At the time, he told me at the time that planned to be focused on scaling the business and did not consider himself a long-term operating executive.

Since then, he has helped Pincus hire a series of experienced gaming execs, including a chief operating officer, a chief marketing officer and others.

Zynga was Van Natta’s third high-profile Web company in recent years. He was a top early exec for Mark Zuckerberg at Facebook until early 2008, and in 2009 he took over News Corp.’s (NWS) MySpace, a job that lasted less than a year.

Early in his career, Van Natta was also was a top strategy, marketing and deal exec for Amazon, which bought an early social networking start-up called PlanetAll that he worked at.

It will now be interesting to see what Van Natta does next, but it is unlikely he will take a permanent position. He is a longtime angel investor in Silicon Valley, including in hot start-ups such as Asana and still holds a significant stake in Facebook.

But, in moving out of his job at Zynga, he will be giving up many millions of shares of a rich trove he was given when he arrived at the company. That said, Van Natta already owns millions of accelerated vested shares and will get another large grant as a board member.

Translation: Don’t cry for Mr. Van Natta, Silicon Valley — he made $42 million last year from Zynga shares alone.

]]> http://allthingsd.com/20111117/exclusive-zyngas-van-natta-moves-to-strategic-advisor-feld-off-board-paul-in/feed/ 0 http://allthingsd.com/20111109/viral-video-more-hobbit-from-the-vlog-files-of-peter-jackson/ http://allthingsd.com/20111109/viral-video-more-hobbit-from-the-vlog-files-of-peter-jackson/#comments Wed, 09 Nov 2011 08:10:44 +0000 Kara Swisher http://allthingsd.com/?p=141649

Famed director Peter Jackson, who helmed the “Lord of the Rings” movie trilogy, has promised to continue his production video blog from the movie set of “The Hobbit,” which is filming in New Zealand.

The man keeps his promise with a new installment that has lots more action.

I read the classic book when I was but a wee lass, so I will be very interested to see how it comes to life.

Here’s the latest vlog:

]]> http://allthingsd.com/20111109/viral-video-more-hobbit-from-the-vlog-files-of-peter-jackson/feed/ 0 http://allthingsd.com/20111108/with-no-yahoo-ceo-pledge-david-kenny-back-in-the-strategic-fray/ http://allthingsd.com/20111108/with-no-yahoo-ceo-pledge-david-kenny-back-in-the-strategic-fray/#comments Tue, 08 Nov 2011 20:42:44 +0000 Kara Swisher http://allthingsd.com/?p=139031 What will David Kenny do?

Maybe get something cooking in the whole what-will-Yahoo-do stakes, now that one of Yahoo’s more active board members is back.

And by “back,” I mean that Kenny — no longer a candidate for CEO — has no further need to recuse himself from the strategic process in which the Silicon Valley Internet company finds itself.

In an interview with Advertising Age last week, Kenny — the well-regarded online ad exec who recently stepped down as president of network infrastructure giant Akamai — released an unusual statement:

As a matter of policy, I do not comment on matters related to Yahoo as a Yahoo director. However, as a personal matter, I want to clarify that I believe Yahoo is a great company with enormous potential, but I am not — and will not be — a candidate for the CEO position. I look forward to my continued service on the Yahoo Board of Directors.”

By removing himself from the fray, that means, according to several sources, that Kenny will be diving back into sleeve-rolling duties at Yahoo, as one of its — how can I put this? — less comatose board members.

In fact — until he was sidelined by the obvious conflict of interest inherent in wanting to be CEO, while also directing the fate of Yahoo for shareholder value — Kenny had been deeply involved in a lot of the changes that had taken place of late, after a long period of board inaction.

That included the ouster of CEO Carol Bartz, who was fired for a number of reasons, including lack of strategic vision. It was relatively new board member Kenny — he became a director in February — who led the strategy committee that had asked Bartz for her road map, which she did not deliver to their liking. Obviously.

Because of the swirl around his possible CEO candidacy — Kenny was a noticeable inside candidate, since he is well known in the Internet advertising world for running and then selling Digitas to the Publicis Groupe for $1.3 billion in 2006 — he gave up leadership of the committee to Intuit President Brad Smith.

Sources said it is unlikely Kenny will get that top job back, but he remains a member of the transactions committee, which is leading the strategic review of the company.

That’s the key slot for the independent board members of Yahoo, who must ultimately be the ones to determine what path or offer the company will take.

One plus: Kenny has close relationships with most of the bidders — largely private equity firms — looking at Yahoo, and also is well known among the media and tech companies poking around, too. He also has advertising — and now tech — experience, which will be much needed as Yahoo explores its options.

Most importantly, Kenny is an independent director, which will be very important to the process going forward, especially since a lot of the spotlight has fallen on Yahoo co-founder and director Jerry Yang.

Yang — who has been a bit of a Yahoo lightning rod at times — has been involved in some of the meetings with those interested, along with interim CEO Tim Morse. The company recently noted that this was at the behest of the board.

While these were only informational meetings so far — and not negotiations, as some reports have surmised — Yang’s involvement will likely have to be more curtailed, at least publicly, especially if any of the deals include using his own large stake in Yahoo.

“This process has to be above board, since it is so easy for those wanting a better deal to try to cause all kinds of trouble,” said one source. “The company is already under attack in that regard.”

That’s a reference to a recent salvo by hedge fund activist Dan Loeb, a major Yahoo shareholder who has taken aim at the board and, last week, at Yang. Loeb essentially accused Yang of double-dealing in the process.

Enter Kenny, along with Smith and — to an increasingly lesser extent, of late — Yahoo Chairman Roy Bostock. While there are other independent board members involved, these are the three to watch most closely now.

While some think Kenny still would like to be CEO of Yahoo — he was also on the short list several years ago when Bartz was hired — sources said he is more likely to take a job at another consumer Internet company.

While he certainly could slot into a large advertising firm or into the digital division of a big media concern, sources said Kenny is looking to be a CEO.

Just not at Yahoo.

At least for now, since down the road it is unclear what will become of Yahoo and who will run it in years to come.

In fact, it might even be Kenny in the end.

]]> http://allthingsd.com/20111108/with-no-yahoo-ceo-pledge-david-kenny-back-in-the-strategic-fray/feed/ 0 http://allthingsd.com/20111104/yahoos-activist-shareholder-loeb-now-targeting-jerry-yang/ http://allthingsd.com/20111104/yahoos-activist-shareholder-loeb-now-targeting-jerry-yang/#comments Fri, 04 Nov 2011 18:53:40 +0000 Kara Swisher http://allthingsd.com/?p=140701

Third Point’s Daniel Loeb — the smack-tastic hedge fund manager who has bought up a 5.23 percent stake in the Silicon Valley Internet giant and has been hitting some of Yahoo’s board upside the head with those shares ever since — is now taking aim at its co-founder and director Jerry Yang. Loeb wants him to step down as a director due to conflict of interest.

Loeb also reiterated his threat of a proxy fight to get control of the board. In fact, sources in Silicon Valley said he has already been reaching out to potential alternative board members.

In a previous 13-D filing with the Securities and Exchange Commission, Loeb had backed Yang against Yahoo Chairman Roy Bostock.

But that’s all over. Reports have surfaced that Yang has been trying to get a private equity firm to back a plan that would keep him and current management in charge of the company.

In a new letter to the Yahoo board today, Loeb said that Yang’s attempt amounts to cronyism and self-dealing.

Wrote Loeb, in part:

We are deeply concerned by news reports that you are considering a leveraged recapitalization that will allow private equity firms to gain substantial equity positions that will, when combined with Jerry Yang’s and David Filo’s ownership, effectively establish a controlling position in Yahoo. More troubling are reports that Mr. Yang is engaging in one-off discussions with private equity firms, presumably because it is in his best personal interests to do so. The Board and the Strategic Committee should not have permitted Mr. Yang to engage in these discussions, particularly given his ineptitude in dealing with the Microsoft negotiations to purchase the Company in 2008; it is now clear that he is simply not aligned with shareholders. At a bare minimum, Mr. Yang must declare whether he is a buyer or a seller — he cannot be both. If we are correct and he is effectively a buyer, corporate ethics require him to recuse himself from any further discussions on behalf of the Company. He should also be requested by the Company to promptly leave the Board and join Mr. Filo in solely an operating capacity.

Loeb is also demanding two seats on the board; in fact, the ones he hopes will be vacated by Bostock and Yang.

While it is likely the Yahoo board will try to minimize the Loeb letter, which is below in its entirety, other shareholders hold the same opinion of the prospects of the same-old-same-old staying on at Yahoo.

“Nothing can excuse such an action, and shareholders will not be bought off with a dividend of our own money while value is destroyed,” wrote Loeb, channeling a lot of others I have spoken to about a Yang insider deal.

Here is the full letter, Yahoo’s tiresomely typical (and borderline fibbish — but I will get to that later) rejoinder, as well the the new 13-D filing by Loeb:

Third Point LLC Letter to Yahoo! Inc. Board of Directors

NEW YORK — (BUSINESS WIRE) — Third Point Requests Two Yahoo Board Seats, Demands Yang’s Resignation from Board, and Opposes Reported Negotiations for “Sweetheart” Deal with Private Equity Firms

About Third Point LLC: Third Point is an investment firm headquartered in New York, managing $8.0 billion in assets, including a London Stock Exchange listed closed-end fund. Founded in 1995, Third Point follows an event-driven approach to investing globally.

Board of Directors
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089
Dear Members of the Board of Directors:

As you are aware, Third Point LLC (“Third Point”) manages investment funds that are, collectively, the second largest shareholder of Yahoo! Inc. (“Yahoo” or the “Company”).

We are deeply concerned by news reports that you are considering a leveraged recapitalization that will allow private equity firms to gain substantial equity positions that will, when combined with Jerry Yang’s and David Filo’s ownership, effectively establish a controlling position in Yahoo. More troubling are reports that Mr. Yang is engaging in one-off discussions with private equity firms, presumably because it is in his best personal interests to do so. The Board and the Strategic Committee should not have permitted Mr. Yang to engage in these discussions, particularly given his ineptitude in dealing with the Microsoft negotiations to purchase the Company in 2008; it is now clear that he is simply not aligned with shareholders. At a bare minimum, Mr. Yang must declare whether he is a buyer or a seller — he cannot be both. If we are correct and he is effectively a buyer, corporate ethics require him to recuse himself from any further discussions on behalf of the Company. He should also be requested by the Company to promptly leave the Board and join Mr. Filo in solely an operating capacity.

In our view, a leveraged recapitalization makes no sense and its only purpose would be to put substantial equity stakes into friendly hands to entrench management and transfer effective control without payment of a premium or even, it appears, a shareholder vote. Nothing can excuse such an action, and shareholders will not be bought off with a dividend of our own money while value is destroyed.

Moreover, such a transaction would undermine the basic tenets of free markets, including democratic voting, accountability and fairness. We do not blame our friends at the private equity firms rumored to be involved for trying to get the best deal possible for their investors; we have great respect for these firms and their leaders — Jim Coulter of Texas Pacific Group, Jonathan Nelson of Providence Equity Partners, Glenn Hutchins of Silver Lake, Henry Kravis of KKR and Stephen Schwarzman of Blackstone. However, we at Third Point are also in the value-maximizing business. We will not tolerate any transaction which appropriates for insiders opportunities that duly belong to current Yahoo shareholders. However, we would welcome the prospect of any of these firms’ presence on a reconstituted Yahoo Board of Directors and work on a long-term strategy for the Company should it be necessary for us to pursue a proxy contest next year.

If you, as board members, undertake the current course of action, Third Point will hold you personally responsible for such a flagrant violation of your duty of loyalty. Any transaction with a third party who assists members of management and the board in protecting their jobs, and/or involves the effective sale or transfer of control without payment of a control premium, will likewise be subject to scrutiny.

Given the Board’s inability — or perhaps unwillingness — to properly solicit true strategic alternative bids, let alone to negotiate them, Third Point demands that we be awarded two board seats — those created by the vacancies of Chairman Bostock and Mr. Yang, or two newly-created ones. We are prepared to assume these positions immediately.

Sincerely,

Daniel S. Loeb
Chief Executive Officer
Third Point LLC
390 Park Avenue
New York, New York 10022

Yahoo’s Board of Directors’ objective is, and always has been, to serve the best interests of all the company’s shareholders. The Board’s comprehensive strategic review is being properly managed for the benefit of all shareholders and is guided by outside counsel for the independent directors and investment bankers retained separately by the Board. The Board of Directors (eight independents and Mr. Yang) controls the strategic review process and has directed its Transactions and Strategic Planning Committee (comprised of four independent directors) to manage the process day-to-day and report regularly to the Board.

News reports based on rumor and speculation are just that. The Board’s comprehensive strategic review process is still underway, with a wide range of options under active consideration. We can assure all Yahoo shareholders that whatever the outcome of the strategic review process may be, it will serve the best interests of all the company’s shareholders.

Mr. Yang is one of 9 directors with the exact same fiduciary duties and motivation as all of his fellow directors — to serve the best interests of all the company’s shareholders. The Board and the Transactions and Strategic Planning Committee initiate, direct, and oversee any work Mr. Yang undertakes in relation to the strategic review process.

YHOO-20111104-SC13DA-0

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