Yang Reaches End Of Yahoo's Rope

Microsoft's $33 per share offer for Yahoo! is looking pretty darn good after their close today at $10.63 today. And while Microsoft's stock price has taken a beating right along with everyone else, they've tracked pretty close to the Dow's fall, where the same can't be said for Yahoo. Yahoo's stockholders have taken an even steeper ride down. Everyone's asking, if Yahoo's not getting bought by Microsoft, how are they going to compete against Google, which is the problem they had before the whole Microsoft buyout offer tussle between Jerry and Steve Ballmer began. It looks like Yahoo's board has the same question, and more to the point, who's the right person to lead the organization. Jerry Yang's tenure has run its course, possibly clearing the way for Ballmer to take another run at Yahoo.

It's not very often that a founder or entrepreneur stays in the leadership role of the company they build. The skills, expectations and experiences are usually just too different running a large public company than it is of a smaller, entrepreneurial company. We've seen the same thing happen at VMware recently. There are a few exceptions, such as Microsoft and Bill Gates, but those are far and few between. Those companies tend to be fully formed around the personality of their leader, much like Gates and Microsoft, Ellison and Oracle, Jobs and Apple (even with John Scully's period of running Apple), and Perot and EDS (before Ross decided to start giving elephant tap dancing lessons to GM.)  Frankly, the ouster of founders usually happens much, much earlier in a startup company's life. Unless founders and early participants maintain control, or the company experiences a very rapid rise to the top of the market, it's pretty likely other "experienced" managed will be brought in at some point in time to help the company grow and reach the next level.

Ousters like Jerry Yang's at Yahoo and Diane Greene's at VMware are a signal of a pretty big change for those companies. Many startups are what I call "personality driven" companies. They're companies who form around a founder and/or entrepreneur leader who's personality strongly shapes and drives the company, often times in seemingly inseperable ways. When those leaders leave suddenly, more traditional or professional management comes in, changing the culture pretty significantly. It's a form of maturation for the company. I've got to believe those companies suffer a pretty significant identity crisis in the process until they figure who they are without the formative leader. Such is certainly the case with Gates' transition to Ray Ozzie at Microsoft. Ozzie's done smart things in the process though by creating a new technology vision and strategy with Windows Azure, Live Mesh, and online Windows applications that the company can get behind. That takes a good deal of the focus off the individual leader and puts it back on the product, company, customer and the market.

Now it's time for Yahoo to go through that same metamorphosis. Red pill or blue. It will be interesting to see what emerges in the process. I'm all for a strong Yahoo or even a Yahoo integrated into Microsoft. Google needs a very strong competitor to make them, and the rest of the market even better.

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