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Engine Yard CEO John Dillon Talks About Competing Against His Old Company, Salesforce.com

Arik Hesseldahl — Mon, 07 Feb 2011 15:00:18 +0000

When Salesforce.com acquired the cloud development platform company Heroku for $212 million late last year, a lot of people were surprised.

John Dillon, the CEO of Engine Yard, was one of them. Dillon was CEO of Salesforce from 1999 until 2001, when he was ousted by founder and current CEO Marc Benioff. Heroku specializes in the development of Web applications on Ruby on Rails. So does Engine Yard. Now his old company is a competitor. He shared a few thoughts about that in an interview last week. But here are the highlights: First, he thinks Salesforce overpaid for Heroku. Second, he thinks the deal is an admission that Force.com, Salesforce’s own application development environment, isn’t working.

NewEnterprise: So John, what did you first think about the Heroku deal?

John Dillon: I certainly didn’t expect to compete with Salesforce. First of all, we know the Heroku guys really well. We even talked at one point about combining the companies. They’re into Ruby on Rails, which is the best environment for building applications in the cloud. We’re kind of going after the same market. They were going after smaller players and we were doing more industrial-size customers. Both companies had been approached to be acquired at different times, and in either case the deals didn’t get done. We had pretty good confidence in our future. So then Marc Benioff goes out and spends more than $200 million for a company doing maybe $2 to $3 million in revenue. It’s kind of an unbelievable multiple. Of course its a massive endorsement of Ruby on Rails, but it’s also an admission that Force.com isn’t working. You don’t spend that much to buy some additional technology if your core product is working well. I think they’re struggling, and I think they’ve created a bit of a Frankenstein.

You really seem to think Salesforce overpaid for Heroku.

Absolutely. It was somewhere between 80 and 100 times revenue. When VMware bought SpringSource it paid maybe 20 times revenue and that was considered a phenomenal deal.

If that’s true, why do you think Marc Benioff would pay that much?

Because he was desperate to find a way to shore up Force.com. He’s been touting it for three to four years and it hasn’t lived up to expectations.

So what does Engine Yard bring to the table?

We deliver a lot of the components you need to build and deploy and run applications in the cloud. There some 20 to 30 components, the load-balancers and Web servers and app servers, and databases, and Ruby on Rails. What we’ve done is we’ve integrated all that, and we’ve automated the ability to provision it and we’ve hardened it. That means the development team doesn’t have to worry about any of that. And that’s where you make a lot of mistakes that can cause your Web site to go down. But because we’ve used mostly open source, there’s not some big cost that you have to bear, when you’re using someone like Oracle that sells you all this stuff, and then you have to pay 20 percent a year in maintenance. Our customers pay us for success. Building the application is inexpensive. You can build it and if it doesn’t work you can throw it away. But when you build it and deploy it and lots of people use it that you start paying because it’s based on resource consumption.

Who are your customers?

They’re all over the map. And then we have your traditional enterprise companies. From a Web standpoint, we have Get Satisfaction. We have gaming companies like Playmesh that make social games for the iPhone. Most of our enterprise customers don’t let us name them. But we have a few Fortune 500 accounts. About 20 to 30 percent of the time we have customers who sign up using a credit card and we call them up and find they’re inside some household-name corporation.

What kind of an exit are you contemplating? IPO or get acquired?

I’m building the company to go the distance. We have the market opportunity and the executive management talent, and we have the business traction. So it seems very doable. The IPO market hasn’t been very friendly. If it opens up I think we’re a strong candidate to IPO in a couple years. It’s not very much fun to be a public company. We have a very real shot at it. But I also think this is going to be a really wild period in M&A activity. I think a lot of companies that don’t understand the cloud are going to buy their way in because they’re otherwise going to get left behind. Our investors are in it for the long haul and I have plenty of money and access to plenty of money. But if Salesforce is going to pay more than $200 million for Heroku then I like what our value looks like.

Is Larry Page the Consummate Anti-Social CEO?

Liz Gannes — Fri, 21 Jan 2011 09:00:44 +0000

Google’s new CEO isn’t much for the social Web. If he has a presence on Twitter, Facebook or LinkedIn, it was created with deep privacy settings or a fake name. I couldn’t even find a fleshed-out Google profile for Larry Page.

There are many other Fortune 500 CEOs in the same boat, and they certainly have plenty else to do with their time than post Facebook photos from Davos.

But non-Twittering CEOs are likely a dying breed, as transparency and authenticity in corporate communications come into vogue, and the younger generations move up through the ranks.

Google’s entire executive leadership is particularly anti-social for an Internet company, although unlike Page, Eric Schmidt, its CEO of the last 10 years, had the gumption to at least try Twitter and post updates every couple of weeks.

That their bosses decline to participate in what many see as the future of the Web is particularly grating for some young Google employees.

While the company circles around launching its own fully fledged social strategy, many Googlers feel that accountability for “getting social” starts at the top by leaders using the products themselves, rather than outright ignoring them.

Certainly, Page is incredibly private in all sorts of situations, both online and off. Here’s a memorable section from Ken Auletta’s book “Googled”:

“Larry Page is aggressively disdainful of marketing and public relations. In early 2008, Page instructed Google’s public relations department, which consisted of 130 people, that he would only give them a total of eight hours of his time that year for press conferences, speeches or interviews.”

That doesn’t seem like an approach that will go over well now that Page will be CEO of a company of Google’s stature, although perhaps he could save some time by crafting short tweets in lieu of full speeches.

While Page seems to be ignoring the social Web’s existence (he said Thursday he thinks it’s at the “very very early stages,” ceding comment on the topic to his co-founder Sergey Brin), the category has already had a significant competitive effect on Google.

The company says social is not yet negatively impacting its search business, but there are other ways it is creeping in: Through a significant talent drain to companies like Facebook, and a tarnishing of the company’s position as a tech leader.

In a way, part of the reason Page took control seems to be in response to the rise of Facebook, although there are clearly many other factors at play).

That’s because Page has now reinstated himself in a sacred position in Silicon Valley: The founder CEO.

One of the most impactful things the social Web has done is raised a new founder CEO to the tip-top of the tech industry: Mark Zuckerberg.

And, according to sources, the rise of Zuckerberg has been especially hard for Google co-founders Larry Page and Sergey Brin to watch.

Zuckerberg was also just named Time Magazine’s Person of the Year, an honor Page and Brin have never received.

And his company also just arranged a deal to raise money at a $50 billion valuation, making his own stake worth $15 billion, which happens to be the approximate net worth of each Page and Brin.

(As for Zuckerberg’s social media presence, he obviously uses Facebook quite actively, and also has a bare-bones LinkedIn profile and a Twitter account that hasn’t been updated in more than a year. And, like Page, he would not be considered a social butterfly in real life.)

So now Page has returned to presumably make Google innovative again with the passion of a founder. But with 10 years elapsed since he last had the job, he may want to go out and do a little personal market research on this whole social thing.

Please see the disclosure about Facebook in my ethics statement.

Dell Acquires SecureWorks, Embraces Security-as-Service

Arik Hesseldahl — Tue, 04 Jan 2011 16:37:25 +0000

Dell is starting the year off with another acquisition. This morning it announced plans to acquire SecureWorks, an 11-year old Atlanta-based security outfit that specializes in managed security services, security and risk consulting, and threat intelligence.

SecureWorks, which is privately held, says it has about 2,900 customers in 70 countries, and that its customers include 15 percent of the Fortune 500, as well as 1,500 banks and credit unions, though typical of a security company, it doesn’t name any of them. In 2009 it acquired the managed security business of VeriSign. It has about 700 employees and projected revenue of about $120 million.

It’s also known for its top-flight malware research team. Last year it was involved in the research and response around a banking Trojan called Origami, which originated in Russia and was designed to steal sign-in credentials.

Dell says the deal will expand its IT-as-service offerings. It also looks to be, at least in part, a reaction to Hewlett-Packard’s acquisition of security firm ArcSight in October. No financial terms are being disclosed, but Dell had been involved in a reselling partnership with SecureWorks since July of last year. It’s also Dell’s second acquisition in as many months. On Dec. 13 it spent $820 million for the health IT company Compellent.

Apple's "Back to the Mac" Event by the Numbers

John Paczkowski — Thu, 21 Oct 2010 11:05:55 +0000

As Apple events go, Wednesday’s was a bit lighter on metrics than some others we’ve seen this year. Still, there were quite a few worth noting, beginning with 13.7 million–the number of Macs sold in the fiscal year that ended in September–and continuing on with those listed below.

13.7 million Macs sold in FY 2010

That’s 3 times the number of Macs Apple sold just five years ago

The Mac’s installed base is 50 million

Mac sales accounted for $22 billion in revenue in FY 2010

That’s 33 percent of Apple’s revenue

And it’s enough to make the company’s Mac business No. 110 on the Fortune 500–if it were a standalone business

Quarterly Mac sales grew 2.5 times faster than the rest of the industry (according to IDC)

The Mac has outgrown the PC market for 18 straight quarters

The Mac claims 20.7 percent of the U.S. retail market (according to NPD)

There are 600,000 Mac developers

The above number is growing by 30,000 per month

Mac customer satisfaction is the highest in the industry

It’s No. 1 in customer satisfaction (according to ACSI)

It’s No. 1 in tech support for the last seven years (according to Consumer Reports)

It’s No. 1 in customer support (according to PC World)

There are 318 Apple retail stores in 11 countries

Apple retail stores sold 2.8 million Macs last year

50 percent of them were sold to first-time Mac buyers

Apple sold 2 million iPhoto photo books in the past year

There are 5 million GarageBand users

Survey Cites Who's Trustworthy on the Web

Nick Wingfield — Wed, 21 Apr 2010 07:00:55 +0000

Most consumer Web sites haven’t taken adequate measures to cut down on online fraud, according to a survey released Tuesday by an Internet advocacy group that promotes anti-fraud tools and standards.

The survey conducted by the Online Trust Alliance said only eight percent of major Web sites surveyed made it onto the organization’s “honor roll” of sites taking stringent measures to reduce online fraud enabled by forged emails, phishing sites and malware. The survey, conducted between late March and early April, looked at 1,200 Web sites and 500 million emails purporting to be from those sites, all of which were either Fortune 500 companies, top Internet retailers and federal government Web sites.

To make it onto the honor roll, the Web sites had to be free of malware–malicious code that can be used to steal personal data from Web surfers–or links to sites containing malware.

Read the rest of this post on the original site

AOL Poaches Another Google Exec

John Paczkowski — Thu, 04 Feb 2010 19:00:24 +0000

[ See post to watch video ]

The One-Year Report Card of Yahoo’s Carol Bartz–Financials: C+

Kara Swisher — Sat, 16 Jan 2010 07:48:21 +0000

Yesterday, BoomTown began grading the performance of Yahoo CEO Carol Bartz, after she gave herself a B- for overall performance for the year since she took over the troubled Internet giant.

But I decided to be more specific, splitting the grades into five categories: Management, financials, product innovation, deal-making and moxie.

For management, I gave Bartz an A-, because she has been a definite improvement on previous leadership in terms of decision-making, speed and essentially grabbing the mantle of control firmly from the start.

Some thought I was too generous and others thought the grade should have been an A+. Which means it was just about right!

Today, let’s look at financials–by which I mean Yahoo’s fiscal performance and its stock price.

In this regard, Bartz only gets a C++ (it’s a techie joke, get it?).

I could have given her a B- here, I guess, but–to me–C+ simply means financials have remained in a holding zone under Bartz, so she does not deserve to be completely decried, or applauded either.

Why? Well, let’s start with the stock.

While Yahoo (YHOO) shares are up about 38 percent for the year, which is a good thing, they still lag those of other Internet companies, as well as the market.

In the same period, the Nasdaq was up about 44 percent, Google’s stock has doubled and Microsoft (MSFT) shares are also up a lot more.

In an interview with Bloomberg recently, Bartz claimed that Yahoo was in the “penalty box” with investors–a hangover from former management, presumably–and this is the reason for its weaker stock gain.

Whatever. But Bartz has been the CEO for a year and Wall Street is still holding out. Thus, she has to fully take the blame instead of pointing at the previous administration.

In other words, former CEO and co-founder Jerry Yang and the Yangtanic are ancient history. So, all is forgiven, Jerry (call me!).

Bartz also blamed the recession for Yahoo’s continued revenue decline in 2009, about 12 percent overall in the most recent quarter.

She told Bloomberg, “We came out of one of the worst climates ever. And if you look at growth of Fortune 500 companies, only being down 12 or 15 percent is damn good. I’m not going to apologize for our growth.”

Again, whatever. But she runs a company in a high-growth industry and is not selling hams or socks, so perhaps bragging that being down 12 to 15 percent is “damn good” is a bit of a stretch.

(Microsoft certainly did not crow over its 14 percent decline in revenue in the most recent quarter even though it beat expectations, and its fiscal results rely a lot on something that does get profoundly affected–namely, sales of PCs–in a recession.)

Specifically, in the third quarter, Yahoo’s search advertising revenue was off 19 percent, and display was off eight percent at “Owned and Operated” sites on Yahoo.

Google, in contrast, reported a seven percent rise in its third-quarter results, and its execs projected a mood of smooth sailing ahead and no more econalypse. Financial performance at Amazon (AMZN) was also way up, as it was at Netflix (NFLX) and Apple (AAPL).

Still, Yahoo’s fiscal performance relies a lot on premium branded advertising, so it has remained weaker and will do so until the economy really comes back.

Many analysts are predicting exactly that, with double-digit sales growth in this area ahead.

And Yahoo’s bottom line is likely to get a boost when its costs are off-loaded to Microsoft, as part of the search and advertising partnership Bartz struck with the software giant earlier this year. The deal awaits regulatory approval, which is likely, and will then start to kick in later in the year.

Still, a dark cloud hangs ominously over the persistent search share declines Yahoo has suffered, which Bartz and others attribute to loss of toolbar and other distribution deals that Google (GOOG) and Microsoft picked up.

But query growth rates are also down and that’s a red flag, especially since Microsoft and Google are up a lot.

Nonetheless, depending on how these various parts of Yahoo revenue sort themselves out, along with Bartz’s cost-cutting, Yahoo’s bottom line is most likely to look better in the quarters ahead, so the stock could certainly go up quickly.

And so could her financial grade. Bartz is well known for being great at managing the bottom line and Wall Street expectations, so I suspect it is top of mind for her.

That said, once that registers, everyone will then be looking for not just a return to normal, but for actual growth.

And that can only come from product innovation–the name of the game in Silicon Valley–which is what will be on the grading block Monday.

Lady Blog Network BlogHer Gives Bloggers a Pay Cut

Peter Kafka — Thu, 11 Dec 2008 18:03:53 +0000

BlogHer, a women’s ad network/publishing network and conference organizer, is cutting the amount it pays to its blog partners by 10 percent. That’s really sort of a double cut, since the blog owners/writers in its network get paid based on the ads BlogHer can sell, and ads are already under pressure.

The only real surprise here is that the BlogHer founders–Lisa Stone, Elisa Camahort Page and Jory Des Jardins–don’t blame the economy for the cuts. Rather, they say that they have to reduce payments because they’re so successful:

When BlogHer’s network was created in 2006, we began with 35 blogs, a few advertisers and a small number of staff members to sell and manage the entire network. Today, BlogHer’s network is more than 2,500 blogs strong, and we’re working with dozens of advertisers each quarter. We have had to grow our technology infrastructure and staff dramatically to keep pace with network growth. Because many of these costs are fixed, expanding our network to compete for Fortune 500 advertisers has been a major investment.”

BlogHer was founded in 2005, and has received funding from Venrock, the Rockefeller family’s VC arm, and Peacock Equity, the JV between GE’s (GE) NBC and GE Commercial Finance.

Here’s the full text of the email from the BlogHer founders to their blog partners:

December 10, 2008
Hi everyone,

This is a long letter, but an important one, so thank you for your attention during this busy time of year. We’re writing to share with you:

* One change that BlogHerAds is making to our contract terms with you, effective January 1, 2009. This change will require your agreement, and instructions will be provided on how to indicate your agreement.

* One change in our payment processes, also effective January 1, 2009

* One new benefit: A new way to receive your payments online, immediately available to all members

This letter explains what the changes are, and how they will affect you.

In the past year, BlogHer expanded and competed for more advertising dollars for your blogs. The good news is that we successfully grew our business in the worst economy in the nation’s history. However, because of the current climate, we need to make some changes so that BlogHer can continue to invest in the resources necessary to recruit the very best advertising for your blogs.

* Contract Change -Your revenue share percentage

When BlogHer’s network was created in 2006, we began with 35 blogs, a few advertisers and a small number of staff members to sell and manage the entire network. Today, BlogHer’s network is more than 2,500 blogs strong, and we’re working with dozens of advertisers each quarter. We have had to grow our technology infrastructure and staff dramatically to keep pace with network growth. Because many of these costs are fixed, expanding our network to compete for Fortune 500 advertisers has been a major investment.

Currently, you get a revenue share of 100 percent of gross advertising fees received by BlogHer. Effective January 1, 2009, we will apply your revenue share to 90 percent of gross advertising fees, thus reducing your revenue share by 10 percent. To document this change, we need to amend the first sentence of Section III.A.3 of our Agreement to read:

For the purposes of this Agreement, the term “Revenue” means the gross fees actually received by BlogHer for Advertising Impressions originating from the Advertising on Partner’s Blog, less an administrative fee equal to ten percent (10%) of the Gross Fees to cover sales commissions, costs associated with serving the advertisements, administrative third party fees, campaign referral fees and other miscellaneous administrative expenses.

Here’s what the difference will mean to individual bloggers:
Currently, on a $10 CPM, a network blogger earns $5 per 1,000 impressions if the number of impressions on the blogger’s site is equal to less than one million. With a 10% deduction from gross revenue to cover our operating costs, a network blogger will now earn 50% of $9.00, or $4.50 per 1,000 impressions. (As always, BlogHer will not take a revenue share on BlogHer house ads or on remnant inventory – 100% of that total revenue will still go directly to you.)

While we have needed to make this change for some time, we held off for as long as possible. We are acting now in order to continue aggressively pursuing new revenue for you and your sites.

What we are asking you to do now:

We have added a section to your BlogHerAds profile with a summary of this change. Please visit your BlogHerAds profile and check the box indicating that you accept these changes to your contract by December 19, 2008. If you have any questions, please don’t hesitate to contact us via our help desk form.

This is an opt-in contract change, so you must indicate your acceptance of these terms. If you do not visit your profile and accept these terms, we will have to suspend ads on your site, starting January 1, 2009, until acceptance is received.

Please accept these changes now by logging into your profile at
https://www.blogherads.com/user/login and clicking the Accept Terms of Service box.

* Payment Process Change – Net 45-days payment terms for each month’s payment of your revenue share

Our contract with you currently allows us to pay your revenue share 45 days from the date we receive payment from our advertisers. We’ve actually been paying you much sooner than we receive payment! BlogHer has consistently sent payments within 30 days following the close of each month for that month’s revenue. As we have scaled in number of both bloggers and advertisers on the network, we need to extend our payment schedule to 45 days from each month’s close, rather than 30 days. This is a more realistic schedule and will allow us to continue to scale, while continuing to get your payment to you more quickly and efficiently than paying you 45 days after we receive payment.

To effect this change, there will be a one-time 45-day gap between your payment for November’s revenue and your payment for December’s revenue. Subsequent to that you will continue to receive a check every 30 days, by the 15th of each month.

Here’s how your payment schedule will look:
Your revenue share for December 2008, which would normally have been received by January 31, 2009, will now be received by February 15, 2009. Going forward, you will continue to receive a check on the 15th of each month for the calendar month prior to the immediately preceding month (as long as you’ve earned or accrued at least $25 by the end of that calendar month.)

Near-term schedule:
November 08 revenue will be paid December 30th
December 08 revenue will be paid February 15th
January 09 revenue will be paid March 15th
February 09 revenue will be paid April 15th
March 09 revenue will be paid May 15th

* New Benefit (optional) – switching from paper checks to electronic payments

Many of you have asked about receiving ad revenue shares via electronic payments. Effective January 1st, BlogHer is making it possible for all members, domestic and international, to select PayPal as a payment option. We have switched to using Mass PayPal, which has the following benefits:

* No charge to you. BlogHer covers the entire surcharge for using Mass PayPal

* Using PayPal eliminates paper checks, and any inefficiencies with the U.S. Postal Service or if you should move physical addresses

If you are interested in switching to PayPal, you may choose the PayPal option of payment, along with entering your PayPal email address, by logging into your profile and going to Your account > Edit > About You, and selecting either check or PayPal under the Payment Preference header.

This change is optional and offered as a service to our bloggers. We hope it is good news to many of you! Please let us know if you have any questions about PayPal payment of your BlogHer Network revenue share.

As 2008 comes to an end, we are thankful for our partnership with each of you and proud of the pioneering publishing network for writers that we are building together. We and the entire BlogHer team will be working very hard to make 2009 a year of continued growth.

Best,

Elisa, Jory and Lisa

After Vote-Gate, Heads Must Roll on Yahoo's Board

Eric Jackson — Thu, 07 Aug 2008 00:00:50 +0000

To anyone who says that it’s inconsequential that Yahoo understated the level of shareholder dissatisfaction by more than half thanks to a “tabulation error” by its proxy counter, Broadridge Financial Solutions, I say: You couldn’t be more wrong.

This incident will have ramifications in the coming weeks for the composition of Yahoo’s board. But here’s the shocking thing: This latest batch of numbers might still underrepresent the level of disdain shareholders have for this board.

Any corporate election that doesn’t receive 95 to 98 percent support from shareholders for the incumbent management and board is an anomaly. Yahoo’s first press release from last Friday suggested that, despite all the hubbub of the failed merger talks with Microsoft and public criticism from Carl Icahn and others, Yahoo (YHOO) shareholders had let the incumbents off the hook.

Chairman Roy Bostock and CEO Jerry Yang were re-elected with 79.5 percent and 84 percent support respectively. These relatively benign results (compared to last year’s), combined with the fact that there were not more pointed questions at the meeting last week, led some observers to conclude that this board had “faced down” its critics.

Not quite. Gordon Crawford of Capital Research Global Investors did all Yahoo shareholders a favor by demanding a recount. Yahoo and Broadridge complied.

And results of that recount were alarmingly different from the first set of numbers. We’ve all heard of +/- 4 percent in polling, but when was the last time you heard of +/- 50 percent?

The recount might set a modern-day record among S&P 500 companies for the most “withhold” votes for a board in a corporate election. Only Vyomesh Joshi, head of Hewlett-Packard’s (HPQ) printer group, got off without a serious warning from shareholders (a 7.1 percent “withhold” vote).

The “withhold” vote for Bostock was 39.6 percent, not 20.5 percent as originally reported. And 33.7 percent of Yahoo shareholders withheld their support from Yang, not 14.6 percent.

Other Yahoo directors who fared poorly in the election were Gary Wilson (27.7 percent of votes withheld) and Compensation committee members Ronald Burkle (37.9 percent withheld) and Arthur Kern (31.7 percent withheld).

What would we all be doing today if Crawford had never called for a recount? If a “tabulation error” happens and no one is there to hear it, did it happen at all? We will never know.

And there will likely be more shoes to drop in this tragedy of errors. This “tabulation error” was only one of two major question marks surrounding last Friday’s initial voting results. Yahoo easily made Broadridge the fall guy for this first error.

The second error–how few eligible shares were counted in the final tally–isn’t so easily eluded. And for that, Yahoo will be the fall guy.

Only 75.8 percent of the eligible shares as of the June 3 record date were voted in this election. After such intense media scrutiny in the past few months, it seems odd that so few investors participated.

Last weekend, I dove into the numbers in detail and reviewed them against numbers from the last two Yahoo elections. On Sunday night I wrote about the most recent Yahoo shareholder vote and verified that there were 200 million fewer votes cast this year compared to the average over the last two years. I called on Yahoo to appoint an independent third party to review and certify the voting process.

Yesterday, as news of the voting irregularities circulated, I received a number of complaints from frustrated shareholders.

Some claimed they had received multiple proxies from Yahoo over the last month, with several arriving Aug. 4–the Monday after the election. Some said they had had trouble voting by phone. Others, who had initially voted for Icahn’s slate, said when they tried to re-vote against the Yahoo board, they weren’t able to do so.

How many other shareholders encountered similar difficulties? Without a full inquiry, we’ll never know.

These missing votes could have had an even more significant impact on the overall results. For example, Bostock received “for” votes from fewer than half of the total shares eligible to vote (only 45.8 percent of the 1.4 billion shares eligible to vote). He truly lacks the approval of the majority of the shareholders he is supposed to represent. With a 47 percent vote, Burkle also lacks majority support. And while Yang won majority support, he did so by the skin of his teeth, with just a 50.2 percent vote.

Governance Matters

At Friday’s meeting, I asked Yang, Yahoo President Sue Decker and Bostock about three issues that suggest to me that Yahoo’s governance oversight has been lax.

(1)

(2) Decker serves on three Fortune 500 boards: Intel (INTC), Costco (COST), and Berkshire Hathaway (BRK). Her duties to those companies required her to attend at least 22 meetings last year, according to proxy filings. And each meeting required significant preparation. As a Yahoo shareholder, I fail to see how outside commitments like these benefit Yahoo. Are they really necessary? Shouldn’t Decker drop a few of them until Yahoo finds solid footing again?

(3) About a third–31 to 36 percent–of Yahoo shareholders voted against the re-election of Roy Bostock and fellow Compensation Committee members Burkle and Kern last year. Yet all three continue to sit on this committee (or the board). Why? And why did they agree to pay outside directors average total compensation of $500,000 last year? Google’s (GOOG) outside directors were paid $250,000, on average, for their services last year. Decker received $2,700 for sitting on the Berkshire Hathaway board (and $110,000 per year for serving on the Intel and Costco boards). Why is Yahoo paying its directors so much?

I found the trio’s answers to these questions unconvincing. Particularly surprising were Bostock’s comments on Compensation Committee member tenure and compensation.

In the first place, Bostock said while 32 percent of shareholders voted against his reelection last year, 68 percent voted for him. And that’s not bad, he said. This glass-half-full logic explains why he has never bothered to explain to shareholders why he, Burkle and Kern have remained on the Compensation Committee and the Yahoo board.

Second, Bostock disputed my assertion that Yahoo’s outside directors were paid an average of $500,000 last year. When I asked him if he was definitively stating that he did not receive compensation of about $500,000 last year, he said “yes.” Yet, according to Yahoo’s own proxy statement, Bostock earned total compensation of $499,264 last year. 2007 compensation for Yahoo’s other board members was as follows:

Ronald Burkle: $482,046
Eric Hippeau: $496,674
Vyomesh Joshi: $519,520
Arthur Kern: $496,990
Robert Kotick: $492,774
Edward Kozel: $516,202
Mary Agnes Wilderotter: $205,832 (for five months of service; annualized $493,997)
Gary Wilson: $482,046

The average compensation for each Yahoo outside director in 2007: $497,531.

Third, Bostock also claimed that this year’s vote would be a far better indication of shareholder support for Yahoo’s Compensation Committee than last year. With 39.6 percent of shareholders withholding support from Bostock and 37.9 percent withholding it from Burkle, isn’t it time for them to step aside?

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me

Given all this, I am deeply concerned that my interests and those of all Yahoo shareholders are not being protected by the company’s board.

We need to know why 200 million shares were missing from this year’s vote as compared to the last two years’.

We need to know why so many proxies were mailed late to shareholders (on our dime).

We need to know why so many shareholders are questioning whether their votes were counted.

Yahoo will try to sweep all these concerns under the rug, but we shouldn’t allow it. The company should immediately appoint an independent third party to address these questions and assure shareholders that their votes were properly counted.

Immediate Changes to the Board

Also, Yahoo needs to immediately make some changes to the composition of its board. Bostock and Burkle should do the honorable thing and step down from this board.

In truth, this should have happened a year ago. One wonders what might have happened in the last 12 months with Microsoft negotiations had Yahoo acted swiftly, following the 2007 annual meeting, to remove them.

Yah…eww

John Paczkowski — Mon, 05 May 2008 11:51:08 +0000

There’s a reason why we’re the only Fortune 500 company with an exclamation point at the end of our name, and now is the time to demonstrate what that exclamation point stands for.”

–Yahoo CEO Jerry Yang

The market is finally having its say about the collapse of the Microsoft-Yahoo deal and its words are far from kind. Shares of Yahoo (YHOO) plunged some 21% in premarket trading this morning after Microsoft (MSFT) abandoned its takeover bid, wiping out about $8.7 billion of the company’s market value. Yahoo’s current premarket price is about 30% below Microsoft’s final offer of $33 a share, which the company deemed inadequate.

Meanwhile, investors are eyeing the market’s opening with a dark, albeit bemused, cynicism–as well as a little wish-it-were-so fancy. From the YHOO message boards this morning …

Fed Opens Yahoo Lending Facility

In response to recent events [the] Federal Reserve Board voted unanimously to authorize the Federal Reserve Bank of New York to create a Yahoo Lending Facility (YLF) to avoid significant stock market disruption and to support Yahoo Inc. shares. Yahoo Inc. and its authorized agents will be able to borrow from the facility to support stock price.

This facility will be available for business on Monday, May 5. It will be in place for at least six months and may be extended as conditions warrant. The interest rate charged on the credit will be the same as the primary credit rate, or discount rate, at the Federal Reserve Bank of New York.

In addition, Yahoo Inc. shareholders who are unable to sell their shares at or above Friday, May 2 closing price, will be able to swap Yahoo shares for the U.S. Treasuries at the set price of $29.70 per share.”

UPDATE:

A few moments after market open, Yahoo is down 17.2% to $23.79. Microsoft is up a little over 2% to $29.83.