Hang in there with Yahoo

(picture taken by Geoff Price at a Yahoo customer summit, Spring 2000)

Today Microsoft officially walked away from the Yahoo acquisition.

This time I think it is final. What will happen now? They’ll continue to innovate while pundits punt.

This evening, the Google/Yahoo ad pact was announced, and hopefully it could slow down the drop in YHOO’s stock price (or at least keep it at $20 or better). I also anticipate that Yahoo will soon make a strategic acquisition that allows it to make a bigger splash in Web 2.0 (social networking, etc.). While the company may seem overvalued (50 plus times earnings), it could grow into its shoes with a few product breakthroughs.

I predict that many pundits will be predicting Yahoo’s demise over the next few days. Some already believe the stock will be at $15 at the end of 2008. Don’t let them fool you. While Yahoo may swoon up to 20% from last week’s price — it may end up with an end of the year value of $25 or better.

While I am not a stock picker, I am a student of the business cycle. Carl and gang will not lose their shirt, but the bet didn’t pay off. He jumped in, started giving orders like an owner, and will jump out the picture like a gambler on a losing streak. Meanwhile, if you’ll hang in there with Yahoo, you might find a real buying opportunity in the next week for a long haul investment.

I believe in Jerry Yang and never believed that Microsoft could retain Yahoo assets (top talent and key partners). I thought that MicroYoo would be another HP/Compaq and value would disappear. I think Jerry knew that too, and after being involved in a few flameout acquisitions (broadcast.com, geocities, arguably Hot Jobs), he swallowed the poison pill and ultimately pushed big softie away. Maybe I’m just loyal as an ex-Yahoo, but I’m happy things have turned out the way they have.