No More Sand for the 98-Pound Weakling of the Web

Well, everyone certainly misjudged Yahoo CEO Jerry Yang’s resolve.

While BoomTown maintained from the start that the $31 a share Microsoft has bid for the Internet portal co-founded by Yang was way too cheap and wrote yesterday that Yahoo would not fold as quickly as some were predicting and also highlighted the widespread unhappiness at the troubled Internet portal at the prospect of a Microsoft takeover, like many, I did think Yahoo was probably out of ways to repel the $44.6 billion offer.

I had neglected to consider the I’m-not-going-to-take-it-anymore option.

In an uncharacteristically bold and even slightly crazy move, showing the kind of drive that it has needed to show for far too long, the Internet company that couldn’t is apparently about to reject Microsoft’s unsolicited proposal to buy it.

And, if Yang was not already an iconic and beloved figure in Silicon Valley, the prospect of him standing up to the not-so-beloved Microsoft is epic and will instantly make him a hero to many here.

Perhaps a doomed hero, which we will get to later, but a hero nonetheless.

According to a report by Matthew Karnitschnig in The Wall Street Journal today, Yahoo’s board (which apparently also grew a backbone overnight) will reject Microsoft’s offer as too low.

The story noted that the board has determined that it “massively undervalues” Yahoo and is an attempt by Microsoft CEO Steve Ballmer to “steal” the company in a time of weakness in its stock, which dipped dangerously below $20 a share early last week.

Instead, the board thinks that the stock is worth at least $40 a share, or $12 billion over what Microsoft has offered.

This is much more than a negotiating tactic to squeeze a few more dollars out of Microsoft, as had been thought Yahoo might try, but a full-scale rejection that it become a pawn in Microsoft’s efforts to strike a blow at arch-nemesis Google.

Yahoo also has initiated its “poison pill,” an anti-takeover tactic designed to make it even harder for Microsoft to win.

Yahoo has been working, even before this takeover battle, with Google on a deal to outsource some of its search-ad business, in hopes of buoying its fortunes.

Make no mistake: This is a high-stakes game of flinch that Yahoo is about to undertake, betting that Microsoft will not up the ante and wage a nasty takeover battle to get Yahoo.

Such a fight is a real risk for Microsoft–Yahoo employees already are queasy at the prospect of working for the software giant and a vicious David-and-Goliath showdown will only result in the kind of takeover that might not be worth it.

Or so Yahoo’s board hopes.

Please see this disclosure related to me and Google.