Yahoo Sinks, Apple Stalls, Google's Spacey

June 12, 2008 — -- One company in free-fall, another treading water and the third literally shooting into outer space … This week offered a unique look at the life cycle of great high-technology companies.

The company in free-fall is, of course, Yahoo! In spurning Microsoft's offer, the company's executives seemed almost gleeful, as if they dodged a dangerous bullet and could now return to the status quo. Even a deal with Google, which is rumored to be in the works as I write this, won't be enough to turn around Yahoo's fortunes.

If the history of mergers and acquisitions teaches us anything, it is that if one company wants you, it's likely that others do as well. It's like sharks — if you see one, there's probably a lot more nearby. And, worse, if that first one manages to nick you — as Microsoft did by not only setting a de facto price on Yahoo but also exposing the lack of discipline amongst the latter firm's senior management — then the blood in the water is likely to set off a feeding frenzy.

Last week that blood drew one of the world's biggest Great Whites, Carl Icahn, who systematically set about to buy up Yahoo shares in order to land a board seat, fire executive Jerry Yang and his lieutenants and then dismantle the company. Icahn is betting — and would you care to bet against Carl freaking Icahn? — that he can sell off pieces of Yahoo to total a whole lot more than he will pay to capture control of the entire company.

And that's only the beginning. Jeff Weiner, the guy who runs Yahoo.com and Yahoo Messenger and Yahoo Mail, is splitting from the company to go work for a couple of venture capital firms. He joins a growing list of Yahoo's best and brightest who have already bailed out of the company.

If there is any Intellectual Capital equivalent to Moore's Law it is that, no matter what their public explanations, when the smartest folks leave a company that company will soon be in serious trouble, and wherever those folks end up, that company will soon be a whole lot more successful.

Right now, Yahoo is bleeding talent from every doorway. And that means that even if Yang and what remains of his staff can manage to right their listing company, Yahoo will still be dead in the water, lacking in the kind of talent it will need to get moving again and keep up with the competition.

As I said a couple weeks ago in this column, Yahoo should have taken the Microsoft offer. It will never see that kind of money on the table again.