Blodget has a good summary of Jerry Yang’s Yahoo note to the troops articulating the reasons for the rejection of Microsoft’s offer and the company’s future plans.    He gives Yang an A- but I think this might be generous.  

I’m wondering if Yahoo didn’t fail recently, rather years ago when many lines of separation were drawn between technologists and most of the company management.  I assume there were official lines drawn, but I’m talking more in terms of culture here.     My bullishness about Yahoo has rested on the assumption that the technologists would eventually have their day and as with Google would create the tools necessary to keep Yahoo competitive and interface with the broader developer community as Google has done so effectively to bring more awareness and use of Yahoo tools, effectively widening their footprint over the internet landscape.  

I no longer thing there is enough technological empowerment at Yahoo to make this likely anytime soon.   It will take a LOT more than peppy emails and a combative stance here.  Recent defections from Yahoo suggest that even internally Yahoos are more bullish on Google than their own company.   

So, if we assume Yahoo’s got to do something really big is Microsoft or News Corp the best fit.    From Yahoo’s perspective clearly they’d love it if News Corp was willing to pony up as much as MS, and frankly this seems like a more likely winning combination than MS and Yahoo which would have a lot of initial, and perhaps long term, contentiousness.   Fox Interactive is run brilliantly, and applying these management principles to Yahoo could do a world of good to the bottom line of the combined company.    As a Yahoo shareholder I’m rooting for that option though I’d predict MS will win this battle because of the difficulties News Corp will have showing how valuing Yahoo at 50 billion+  is justified given how difficult it may be to make a lot more money from the combined company in anything short of many years.

disclosure:  Long on Yahoo