dot-com bubble (2002–2009)
Yahoo! was one of the few surviving large Internet companies after the dot-com bubble burst. Nevertheless, on September 26, 2001, Yahoo! stocks closed at a five-year low of $4.06 (split-adjusted).
Yahoo! formed partnerships with telecommunications and Internet providers to create content-rich broadband services to compete with AOL. On June 3, 2002, SBC and Yahoo! launched a national co-branded dial service.[23] In July 2003, BT Openworld announced an alliance with Yahoo!.[24] On August 23, 2005, Yahoo! and Verizon launched an integrated DSL service.[25]
In late 2002, Yahoo! began to bolster its search services by acquiring other search engines. In December 2002, Yahoo! acquired Inktomi. In February 2005, Yahoo! acquired Konfabulator and rebranded it Yahoo! Widgets,[26] a desktop application and in July 2003, it acquired Overture Services, Inc. and its subsidiaries AltaVista and AlltheWeb. On February 18, 2004, Yahoo! dropped Google-powered results and returned to using its own technology to provide search results.
In 2004, in response to Google's release of Gmail, Yahoo! upgraded the storage of all free Yahoo! Mail accounts from 4 MB to 1 GB, and all Yahoo! Mail Plus accounts to 2 GB. On July 9, 2004, Yahoo! acquired e-mail provider Oddpost to add an Ajax interface to Yahoo! Mail.[27] On October 13, 2005, Yahoo! and Microsoft announced that Yahoo! Messenger and MSN Messenger would become interoperable. In 2007, Yahoo! took out the storage meters, thus allowing users unlimited storage.
Yahoo! continued acquiring companies to expand its range of services, particularly Web 2.0 services. Yahoo! Launchcast became Yahoo! Music on February 9, 2005. On March 20, 2005, Yahoo! purchased photo sharing service Flickr.[28] On March 29, 2005, the company launched its blogging and social networking service Yahoo! 360°. In June 2005, Yahoo! acquired blo.gs, a service based on RSS feed aggregation. Yahoo! then bought online social event calendar Upcoming.org on October 4, 2005. Yahoo! acquired social bookmark site del.icio.us on December 9, 2005 and then playlist sharing community webjay on January 9, 2006.
On August 27, 2007, Yahoo! released a new version of Yahoo! Mail. It adds Yahoo! Messenger integration. (which includes Windows Live Messenger due to the networks' federation) and free text messages (not necessarily free to the receiver) to mobile phones in the U.S., Canada, India and the Philippines.[29]
On January 29, 2008, Yahoo! announced that the company was laying off 1,000 employees as the company had suffered severely in its inability to effectively compete with industry search leader Google. The cuts represent 7 percent of the company's workforce of 14,300. Employees are being invited to apply for an unknown number of new positions that are expected to open as the company expands areas that promise faster growth.[30]
In February, 2008, Yahoo! acquired Cambridge, Massachusetts-based Maven Networks, a supplier of internet video players and video advertising tools, for approx. $160 million.
Yahoo! announced on November 17, 2008 that Yang would be stepping down as CEO.[31]
On December 10, 2008, Yahoo! began laying off 1,520 employees around the world as the company tries to deal with its financial difficulties.[32]
[edit] Acquisition attempt by Microsoft
Microsoft and Yahoo! pursued merger discussions in 2005, 2006, and 2007, that were all ultimately unsuccessful. At the time, analysts were skeptical about the wisdom of a business combination.[33][34]
On February 1, 2008, after its friendly takeover offer was rebuffed by Yahoo!, Microsoft made an unsolicited takeover bid to buy Yahoo! for US$44.6 billion in cash and stock.[35][36] Days later, Yahoo! considered alternatives to the merger with Microsoft, including a merger with internet giant Google[37] or a potential transaction with News Corp.[38] However, on February 11, 2008, Yahoo! decided to reject Microsoft's offer as "substantially undervaluing" Yahoo!'s brand, audience, investments, and growth prospects.[39] As of February 22, two Detroit based pension companies have sued Yahoo! and their board of directors for breaching their duty to shareholders by opposing Microsoft's takeover bid and pursuing "value destructive" third-party deals.[40][dead link] In early March, Google CEO Eric Schmidt went on record saying that he was concerned that a potential Microsoft-Yahoo! merger might hurt the Internet by compromising its openness.[41] The value of Microsoft's cash and stock offer declined with Microsoft's stock price, falling to $42.2 billion by April 4.[42] On April 5, Microsoft CEO Steve Ballmer sent a letter to Yahoo!'s board of directors stating that if within three weeks they had not accepted the deal, Microsoft would approach shareholders directly in hopes of a electing a new board and moving forward with merger talks.[43][dead link] In response, Yahoo! stated on April 7 that they were not against a merger, but that they wanted a better offer. In addition, they stated that Microsoft's "aggressive" approach was worsening their relationship and the chances of a "friendly" merger.[44] Later the same day, Yahoo! stated that the original $45 billion offer was not acceptable.[44] Following this, there has been considerable discussion of having Time Warner's AOL and Yahoo! merge, instead of the originally proposed Microsoft deal.[45]
On May 3, 2008, Microsoft withdrew their offer. During a meeting between Ballmer and Yang, Microsoft had offered to raise its offer by $5 billion to $33 per share, while Yahoo! demanded $37. One of Ballmer's lieutenants suggested that Yang would implement a poison pill to make the takeover as difficult as possible, saying "They are going to burn the furniture if we go hostile. They are going to destroy the place."[46][47]
Analysts say that Yahoo!'s shares, which closed at $28.67 on May 2, are likely to drop below $25 and perhaps as low as $20 on May 5, which would put significant pressure on Yang to engineer a turnaround of the company. Some suggest that institutional investors would file lawsuits against Yahoo!'s board of directors for not acting in shareholder interest by refusing Microsoft's offer.[48][49]
On May 5, 2008, following Microsoft's withdrawal Yahoo!'s stock plunged some 13% lower to $23.02 in Monday trading and trimmed about $6 billion off of its market capitalization.[50]
After Microsoft's failed bid to acquire Yahoo!, Microsoft is rumored to be looking at acquiring LiveDoor, a leading Japanese portal and the leading blogging service in Japan, to strengthen its position against Yahoo! Japan.
On June 12, 2008, Yahoo announced that it had ended all talks with Microsoft about purchasing either part of the business (the search advertising business) or all of the company. Talks had taken place the previous weekend (June 8), during which Microsoft allegedly told Yahoo that it was no longer interested in a purchase of the entire company at the price offered earlier -- $33/share. Also on June 12, Yahoo announced a non-exclusive search advertising alliance with Google.[51] Upon this announcement, many executives and senior employees have announced their plans to leave the company as it appears that they have lost confidence in Yahoo's strategies. According to market analysts, these pending departures are also impacting Wall Street's perception of the company. [52]
On July 7, 2008, Microsoft said it would reconsider proposing another bid for Yahoo if the company's nine directors were ousted at the annual meeting scheduled to be held on August 1, 2008. Microsoft believes it would be able to better negotiate with a new board.[53]
Billionaire investor Carl Icahn, calling the current board irrational in its approach to talks with Microsoft, launched a proxy fight to replace Yahoo's board. On July 21, 2008 Yahoo settled with Carl Icahn, agreeing to appoint him and two allies to an expanded board.
On November 30, 2008, Microsoft offered to buy Yahoo's Search business for $20 billion.
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