Portfolio.com: Business Spin

Parsing Yahoo's Response to Icahn: There Seems to Be Some Misunderstanding

jflack — Thu, 15 May 2008 23:51:52 GMT

While the raw heat from BICI (billionaire investor Carl Icahn) demanded thick-gloved parsing, the detailed response from Yahoo chairman Roy Bostock requires more delicate dissection. Here goes...

Yahoo: Dear Mr. Icahn:

Translation: Do you mind if I call you "Carl?" Uh, sorry, never mind.

Yahoo: We are in receipt of your letter with regard to your intention to seek control of Yahoo!'s board of directors.

Translation: Bummer. Some of us were still hung over from the "victory" party.

Yahoo: Unfortunately, your letter reflects a significant misunderstanding of the facts about the Microsoft proposal and the diligence with which our board evaluated and responded to that proposal.

Translation: Lies! Lies! Lies!

Yahoo: A fair-minded review of the factual record leads to one conclusion:

Translation: We've already been practicing our lines for the litigation.

Yahoo: ...that Yahoo!'s ten-member board, comprised of nine independent directors along with Yahoo! CEO Jerry Yang...

Translation: We're standing together on this. At this point, it's our only option.

Yahoo: ...remains the best and most qualified group to maximize value for all Yahoo! stockholders.

Translation: ... no matter what our track record with Cuban might be.

Yahoo: Conversely, we do not believe it is in the best interests of Yahoo! stockholders to allow you and your hand-picked nominees...

Translation: The lawyers wouldn't let me use the word "toadies."

Yahoo: ...to take control of Yahoo! for the express purpose of trying to force a sale of Yahoo! to a formerly interested buyer...

Translation: We still sometimes have a hard time saying the word Mi... Mic... Micro.... I mean, the Formerly Interested Buyer.

Yahoo: ...who has publicly stated that they have moved on.

Translation: That's right. They said it in public. That means it irreversible, right?

Yahoo: Please may I remind you that there is currently no acquisition offer on the table from that company or any other party.

Translation: Please may I remind you that Ballmer has already been traumatized by changing his mind once. Do you really think you can get him to do it again?

Yahoo: That said, we have been crystal clear in our stance that we have been and remain willing to consider any proposal from any party including Microsoft if it offers our stockholders full and certain value.

Translation: We are not, ever have been, nor ever will be maniacally intransigent.

Yahoo: From the beginning of the process with Microsoft, Yahoo!'s independent directors focused on one central goal: how best to maximize stockholder value.

Translation: Personal motion never stood a chance against our cold capitalistic analytics.

Yahoo:
At all times directing this process, Yahoo!'s independent directors carefully considered Microsoft's initial unsolicited proposal, which was at the time valued at $31 per share.

Translation: But everybody said they'd go higher.

Yahoo: After considering input from its financial advisers the board unanimously concluded that Microsoft's proposal significantly undervalued Yahoo! and was, therefore, not in the best interests of the company or our stockholders.

Translation: Independent third parties -- that we hired -- confirmed our opinion.

Yahoo: While we rejected this offer publicly on February 11, 2008, we could not have been more clear in that communication and in every subsequent communication, both public and private, that we were and are willing to enter into any transaction that would maximize value for stockholders and provide them certainty of value.

Translation: We made it clear that getting Jerry over the hump would require a nutty premium.

Yahoo: The record of our efforts to engage Microsoft in meaningful discussions is unequivocal.

Translation: We documented everything to protect ourselves.

Yahoo: Following receipt of Microsoft's proposal on January 31, our board of directors has met over twenty times to review Microsoft's proposal and Yahoo!'s other strategic alternatives.

Translation: Twenty times! And I still couldn't remember the access code for the conference calls.

Yahoo: Throughout this process our board kept an open mind and an open ear.

Translation: No, the other ear did not have Jerry's tongue in it. Each of us used our other ear to listen our own lawyers about our liability.

Yahoo: Our independent directors met with several of our largest stockholders to solicit their views and to make it clear that Yahoo!'s independent board is fully committed to maximizing stockholder value. In addition, at the direction of our board, our management team met with many of our investors to provide insight into Yahoo!'s strategy and views on value.

Translation: We schmoozed the super-delegates. Most of them never dreamed Microsoft would walk.

Yahoo: Our board's openness also extended to Microsoft.

Translation: There was never anything personal about any of this.

Yahoo: Without reciting all of the contacts between us and between our advisers, the senior-most management of Yahoo! and Microsoft and the companies' respective financial advisers spoke on numerous occasions and met in person seven times.

Translation: Seven times! Several of our bankers didn't even get to go to the Masters.

Yahoo: During those meetings, Yahoo! discussed its strategic objectives in search and display advertising monetization, its perspectives on operating strategy and integration in a transaction with Microsoft, its perspectives on transaction synergies, and other non-price deal terms.

Translation: We explained how we wanted to outsource ads to Google, what protection conditions were non-negotiable, and which "synergies" were off-limits for at least three years.

Yahoo: Because certainty of closing is a critical issue, we sought to understand Microsoft's thinking with regard to the regulatory issues associated with a potential transaction.

Translation: We asked Microsoft to provide potentially pejorative statements that we knew their lawyers would forbid.

Yahoo: In fact, at the board's direction, our lawyers on March 28 asked for additional information in this regard, information which was never forthcoming.

Translation: We worried that their response had been accidentally erased by Outlook.

Yahoo: On April 15th, a meeting was held at Yahoo!'s request.

Translation: That's right, we asked them.

Yahoo:
At that meeting, which included our respective financial advisors, we made clear, once again, that we were open to a transaction with Microsoft.

Translation: We read it off a card the same way we read the forward-looking disclaimer on a road-show.

Yahoo:
During those discussions, Yahoo! made a detailed presentation of its strategic and financial plan, its thoughts on integration and its view with respect to the potential synergies that could be achieved in a transaction, essentially laying the foundation for Microsoft to understand--and respond to--our board's conclusion that Microsoft's offer substantially undervalued the company.

Translation: It was the same "more than overly optimistic financial forecasts" that you said we hid behind.

Yahoo: Following that meeting we also provided to Microsoft a list of key non-price deal terms that our board believed were critical items to be addressed in a deal to provide reasonable protections for our stockholders.

Translation: Apparently Ballmer objected to the idea of having to break into the monkey dance every time Jerry sharply clapped his hands twice.

Yahoo: Throughout this period, Microsoft continued to state that it would not raise its offer, and even suggested that it could lower it.

Translation: We didn't believe them then, but we now find it convenient to do so.

Yahoo: Despite this failure by Microsoft to respond in any substantive way to any of Yahoo!'s requests, on May 2nd, the same day we first learned of Microsoft's apparent willingness to increase its proposal to $33 (although this oral "offer" was never delivered in writing and did not include details of a cash/stock mix), our board determined to continue discussions...

Translation: Let the record show we never received a formal offer of more than $31.

Yahoo: ...instructing Jerry Yang...

Translation: He follows our every suggestion.

Yahoo: ...to indicate to Microsoft that we would be prepared to enter into a transaction that valued Yahoo! at $37 per share and that provided reasonable certainty of value and certainty of closing.

Translation: That price was our idea. Jerry was just the messenger.

Yahoo: This was communicated to Microsoft in-person at a meeting in Seattle on May 3rd. With Microsoft's offer at $33 and Yahoo!'s counter-proposal at $37, Microsoft elected, within hours, to walk away from the negotiating table and informed us that they were "moving on," having never engaged further on price or any of the key non-price deal terms.

Translation: They were supposed to say $34... and then we were supposed to say $36... and then we were all supposed to agree on $35. It was gonna be so perfect.

Yahoo: In short, Yahoo!'s board was at every point in this process prepared to enter into a transaction with Microsoft that would maximize stockholder value--and included certainty of value and closing.

Translation: In short, maximizing value by extracting a 72% premium simply wasn't good enough.

Yahoo: What Yahoo!'s independent board refused to do was to allow control of this company to be acquired for less than its full value.

Translation: "Full value" is exactly 81% more than what the market value was before the company was considered in play.

Yahoo: That brings us to today.

Translation: We've been expecting you, Mr. Bond.

Yahoo: Our business is performing well as evidenced by our first quarter results.

Translation: Disregard the twelve prior quarters.

Yahoo: As we have publicly stated, our board continues to actively and expeditiously explore strategic alternatives to maximize stockholder value.

Translation: We even offered our search business to Cuban in exchange for two first-round draft picks.

Yahoo: None of the alternatives we are considering would preclude us from entering into a transaction with Microsoft or any other party.

Translation: We know, at this point, that we can't afford to get cute.

Yahoo: We continue to believe that Yahoo!'s current board has the independence, the knowledge, and the commitment to navigate the Company through the rapidly changing Internet environment and to deliver value for Yahoo! and its stockholders.

Translation: With liberty and fraternity for all. Amen.

Yahoo: We look forward to a productive dialogue.

Translation: We're not going to let this become a monologue.

Yahoo: Very truly yours,

Translation: We've come too far to buckle now.

Yahoo: Roy Bostock, Chairman of the Board

Translation: Or simply Mr. Bostock, if you prefer.

Related Links
Yahboooooo!
Desperately Seeking Strategies
Dance of the Damned

Parsing Icahn to Yahoo: You Thought Ballmer Was Scary?

jflack — Thu, 15 May 2008 21:30:10 GMT

The Microhoo Parsing Series had seemingly come to an end. But then BICI ("billionaire investor Carl Icahn," as he seems to be ubiquitously identified) sent a sweet letter to Yahoo chairman Roy Bostock.

Most corporate statements require parsing because they are loaded with squishy euphemisms. But as the WSJ's Stephen Grocer nicely points out, Icahn's hostile notification letters instead employ firebombs intended to function as noisy beach-softeners. Fortunately, Jack Flack not only speaks traditional Corporate Babble, but also is fluent in Raider Bluster.

Here's the translation:

Icahn: Dear Mr. Bostock:

Translation: This is hostile, and there will be no tech-society first-name clubbiness. I'm from Wall Street, a place where grown men wear ties every day.

Icahn: It is clear to me that the board of directors of Yahoo has acted irrationally...

Translation: It should be clear to you that I am making this a governance matter, and each director should be frightened of the consequences of rolling over for Jerry again.

Icahn: ... and lost the faith of shareholders...

Translation: Did you see how fast Bill Miller pivoted when Ballmer pulled?

Icahn: ...and Microsoft.

Translation: People say Ballmer is "confused." Of course he's confused. Blatantly over-paying always worked before.

Icahn: It is quite obvious that Microsoft's bid of $33 per share is a superior alternative to Yahoo's prospects on a standalone basis.

Translation: The math is simple, and some of us know an opportunity when we see it.

Icahn: I am perplexed by the board's actions.

Translation: I am delighted by the board's actions. I became a "billionaire investor" exploiting the bad decisions of others.

Icahn: It is irresponsible to hide behind management's more than overly optimistic financial forecasts.

Translation: Particularly the last slide in the deck, entitled, "Insert Miracle Here."

Icahn: It is unconscionable...

Translation: And believe me, I know "unconscionable."

Icahn: ...that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer.

Translation: Get used to this. We're going to tattoo the math on your foreheads.

Icahn: I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.

Translation: I hope that happens, but I will have made my money by then, one way or another.

Icahn: During the past week, a number of shareholders have asked me...

Translation: I'm still not sure how they got my private number.

Icahn: ...to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft...

Translation: ... just before the clock ticked down to zero...

Icahn: ...something that in my opinion the current board has completely botched.

Translation: Isn't "botched" such a great word? It's even better than "bungled."

Icahn: I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies.

Translation: Sensible. I'm just trying to be sensible here.

Icahn: I have therefore taken the following actions: (1) during the last 10 days, I have purchased approximately 59 million shares and share-equivalents of Yahoo; (2) I have formed a 10-person slate which will stand for election against the current board; and (3) I have sought antitrust clearance from the Federal Trade Commission to acquire up to approximately $2.5 billion worth of Yahoo stock.

Translation: I've taken more action in 10 days than Yahoo has in 10 quarters. And yes, the share-equivalent thing should tell you how well I understand this game.

Icahn: The biographies of the members of our slate are attached to this letter.

Translation: Have you met my posse?

Icahn: A more formal notification is being delivered today to Yahoo under separate cover.

Translation: I'm going to drag a dead exclamation point behind my chariot, and deposit it at your front gate.

Icahn: While it is my understanding that you do not intend to enter into any transaction that would impede a Microsoft-Yahoo merger, I am concerned that in several recent press releases you stated that you intend to pursue certain "strategic alternatives".

Translation: If you try to create additional poison pills, we will make sure it will be under full scrutiny.

Icahn: I therefore hope and trust that if there is any question that these "strategic alternatives" might in any way impede a future Microsoft merger you will at the very least allow shareholders to opine on them before embarking on such a transaction.

Translation: We'll be passing out free torches and pitchforks for the "opining."

Icahn: I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.

Translation: And I'll be content to walk away with a $400 million gain.

Icahn: Sincerely yours,

Translation: No, you're not being punked.

Icahn: CARL C. ICAHN

Translation: Ever see the movie Wall Street? Douglas is prettier, but I'm actually real.

How to Read Fortune's "Best Advice"

jflack — Mon, 12 May 2008 15:11:11 GMT

Jack Flack is a complete sucker for Fortune's "The Best Advice I Ever Got" feature.

Seriously. Who would not want to know the best advice accomplished business biggies like Michael Bloomberg or Sam Palmisano ever got? And who wouldn't want to know what odder characters like Nelson Peltz or Eddie Lampert consider the ultimate piece of wisdom?

Even so, no good flack can resist speculating on the spin motive behind each business leader's stated choice of guidance. After all, by revealing to Fortune the most important counsel you've ever received, aren't you telling the world something deep about yourself?

Of course you are, and so you better give some thought to the spin implications. The current iteration reveals six traditional archetypes of spin found in Best Advice.

Toe the company line.
That happens when the reporter's request for an advice-nugget is forwarded to the boss, who then says, "Sure, draft something up for me to look at." Faced with that fun task, the dutiful flacks then try to dress up one or more of the company's predictable "core messages" as something a human being might actually say.
How else can you explain Ford's notoriously thoughtful Alan Mulally revealing the radical notion that your future actions should be focused on the customer? He concludes with an example.

Ecoboost, our new turbo-charging direct-injection engine technology that significantly increases fuel economy and driving performance while reducing CO₂, is being introduced across our product lineup beginning next year.

Super. But doesn't that sound suspiciously like a company talking point from the C.E.O.'s letter to shareholders or annual meeting remarks? Or even a standard company press release?

Implied message: "It's about the company. You're not going to get anything that's actually from me."

Advocate/defend your strategy.
For instance, Andrea Guerra tells us we have no reason to worry that his Luxottica has too much of its working capital tied up in an aggressive expansion into emerging markets, and Joanna Shields assures us that any money she left on the table in selling Bebo to AOL was done do so on purpose.

Send a personal message.
If you've got an important message to send to an individual, what could give it more importance than sending it publicly via Fortune's Best Advice?

Leonard Lauder makes it clear to an anonymous power-player that he still regrets writing an ugly letter, while GE Enterprise Solutions' Charlene Begley polishes up a nice, shiny apple by pointing out how smart she thinks her boss is.

Reveal a pulse.
Business bosses often use Best Advice to demonstrate that a real person — maybe even a deep or caring one — exists underneath the public personae.

Larry Page, for instance, confirms that it was sheer luck that now gives him dominant control over how most humans get their information, and Craig Newmark assures us that some engineers can be darn funny.

Meanwhile, Indra Nooyi sends a clear signal to those insiders who think she's taking the fun out of Pepsi, urging them to "assume positive intent" the way she does.

Sometimes the stories reveal more human being than probably intended. Eddy Lampert admiringly recalls his father drilling him with football as a kid, an anecdote that seems to explain a lot more about Lampert than just his investment philosophy.

Indirectly define what you are.
Pete Peterson confirms his heavyweight status by sharing his personal connection with a heavyweight from a prior generation. Implied message: "Most great masters have sat at the feet of other great masters."

Nelson Peltz, on the other hand, demonstrates the flinty single-mindedness that has made him such a beloved figure everywhere he goes. Implied message: "Money, money, money...."

Indirectly define what you're not.
Bob Iger let's us know he's not a one-dimensional suit, having grown up pondering Shakespeare.

Michael Bloomberg cautions against speaking before thinking, implying that his plodding oratory is quite intentional.

Mark Hurd says that style without substance is disastrous. Implied message: "I'm not Carly Fiorina!"

So, after probing the potential spin motivations of the current batch of Best Advice, what is Jack Flack's favorite response?

Oddly enough, the most telling advice seems to be about not putting too much value on advice that you're actually told, as Sam Palmisano says:

"Some of the best advice I ever received was unspoken."

Implied message: "Pay attention, and stop looking for sound-bite solutions in business magazines."

Parsing Yahoo's Victory Announcement: The Rabbit Will Be Coming Out of the Hat Any Day Now

jflack — Sun, 04 May 2008 03:57:48 GMT

After giving Microsoft boss Steve Ballmer's Saturday night withdrawal letter a zippy parsing, Jack Flack felt an obligation to do the same for Yahoo's response, hoping Founder Yang has read last week's Rescue Memo.

Yahoo: Roy Bostock, Chairman of Yahoo! Inc. (Nasdaq:YHOO), a leading global Internet company issued the following statement today in response to Microsoft Corporation's announcement that it has withdrawn its proposal to acquire Yahoo!:

Translation: This is from all of us, not just Jerry.

Yahoo: We remain focused on maximizing shareholder value and pursuing strategic opportunities that position Yahoo! for success and leadership in its markets.

Translation: We promise to get a deal almost as good as this one.

Yahoo: From the beginning of this process, our independent board and our management have been steadfast...

Translation: We're all in this together. All decisions were made by large groups of logical people, not one emotional founder...

Yahoo:... in our belief that Microsoft's offer undervalued the company and we are pleased that so many of our shareholders joined us in expressing that view.

Translation: ...we got Jerry to agree to sell if we could get Ballmer to do something astronomically stupid. We convinced our biggest holders it could work, and they helped us spin.

Yahoo: Yahoo! is profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market.

Translation: Things are great.

Yahoo: Our solid results for the first quarter of 2008 and increased full year 2008 operating cash flow outlook reflect the progress the company is making.

Translation: Please don't ask us about the 12 quarters before that.

Yahoo: Today, Yahoo! has: a refined strategic focus to drive enhanced volume and yield; reorganized to focus its efforts on its most promising products and services; invested in innovations designed to revolutionize display advertising and facilitate closing the competitive gap in search; and enhanced expense and resource management to support improved profitability."

Translation: Today, Yahoo! has: started doing what we should have done four years ago.

Yahoo: Jerry Yang, co-founder and chief executive officer, Yahoo! Inc. added, "I am incredibly proud of the way our team has come together over the last three months.

Translation: Nothing cures malaise like a good siege.

Yahoo: This process has underscored our unique and valuable strategic position.

Translation: This process has underscored just how easy it will be for Google to maintain a huge scale gap.

Yahoo: With the distraction of Microsoft's unsolicited proposal now behind us...

Translation: Having fought tooth and nail to prevent our shareholders from doubling their money...

Yahoo: ...we will be able to focus all of our energies on executing the most important transition in our history so that we can maximize our potential to the benefit of our shareholders, employees, partners and users."

Translation: ...we will now pull a beautiful bunny out of a hat.

Related Links
Yahboooooo!
Desperately Seeking Strategies
Dance of the Damned

Parsing Ballmer-to-Yang: See You Again Real Soon, Buddy.

jflack — Sun, 04 May 2008 01:15:14 GMT

Wow, Steve Ballmer walked.

Based on the recent posturing, Jack Flack could just smell it coming, and even offered Yahoo founder Jerry Yang a Rescue Memo in advance of Microsoft's withdrawal of its sweetened bid. Capping a war of words that was starting to feel like a good HBO series, Ballmer sent Yang what will become one of the least private letters in the history of commerce. It, of course, demands a flack's interpretation for full understanding.

Ballmer: Dear Jerry:

Translation: I'm pinning this on you personally. Not your board. Not Bill Miller. You!

Ballmer: After over three months, we have reached the conclusion of the process regarding a possible combination of Microsoft and Yahoo!.

Translation: This is the letter you've been waiting for. Try not to quiver.

Ballmer: I first want to convey my personal thanks to you, your management team, and Yahoo!'s Board of Directors for your consideration of our proposal.

Translation: I want to do a monkey dance on your neck, but instead I'm going to demonstrate civility. I want to come off as the rational one in this thing.

Ballmer: I appreciate the time and attention all of you have given to this matter, and I especially appreciate the time that you have invested personally.

Translation: Let the record show that you personally have been highly involved in the failure of this deal.

Ballmer: I feel that our discussions this week have been particularly useful, providing me for the first time with real clarity on what is and is not possible.

Translation: I didn't understand just how irrational you were until I saw it with my own eyes.

Ballmer: I am disappointed that Yahoo! has not moved towards accepting our offer.

Translation: There will be blood.

Ballmer: I first called you with our offer on January 31 because I believed that a combination of our two companies would have created real value for our respective shareholders and would have provided consumers, publishers, and advertisers with greater innovation and choice in the marketplace.

Translation: Together we had a chance. And the regulators would have approved it.

Ballmer: Our decision to offer a 62% premium at that time reflected the strength of these convictions.

Translation: SIXTY-TWO PERCENT! SIXTY-TWO PERCENT! You and your shareholders will never in your lives see SIXTY-TWO PERCENT on your own.

Ballmer: In our conversations this week, we conveyed our willingness to raise our offer to $33.00 per share, reflecting again our belief in this collective opportunity.

Translation: We swallowed our pride, assuming you would do the same.

Ballmer: This increase would have added approximately another $5 billion of value to your shareholders, compared to the current value of our initial offer. It also would have reflected a premium of over 70% compared to the price at which your stock closed on January 31.

Translation: I wanted your shareholders' lawyers to be able to paste this sentence into their complaints.

Ballmer: Yet it has proven insufficient, as your final position insisted on Microsoft paying yet another $5 billion or more, or at least another $4 per share above our $33.00 offer.

Translation: You purposely chose a threshold you knew we would not cross. We're nutty-obsessive, but not that nutty-obsessive.

Ballmer: Also, after giving this week's conversations further thought, it is clear to me that it is not sensible for Microsoft to take our offer directly to your shareholders.

Translation: The vote count was iffy. Your big shareholders assumed we wanted you so badly that we would go to at least $35.

Ballmer: This approach would necessarily involve a protracted proxy contest and eventually an exchange offer.

Translation: I'll let you be the one with the word "pyrrhic" permanently embedded in your biography.

Ballmer: Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo! undesirable as an acquisition for Microsoft.

Translation: You waved a detonator in my face, and said you'd rather destroy your creation than let me have it.

Ballmer: We regard with particular concern your apparent planning to respond to a "hostile" bid by pursuing a new arrangement that would involve or lead to the outsourcing to Google of key paid Internet search terms offered by Yahoo! today.

Translation: A phalanx of lawyers is marching out of Redmond tonight.

Ballmer: In our view, such an arrangement with the dominant search provider would make an acquisition of Yahoo! undesirable to us for a number of reasons:

Translation: We've got a great case.

Ballmer: First, it would fundamentally undermine Yahoo!'s own strategy and long-term viability by encouraging advertisers to use Google as opposed to your Panama paid search system. This would also fragment your search advertising and display advertising strategies and the ecosystem surrounding them. This would undermine the reliance on your display advertising business to fuel future growth.

Translation: Wow, you really would rather kill it than sell it.

Ballmer: Given this, it would impair Yahoo's ability to retain the talented engineers working on advertising systems that are important to our interest in a combination of our companies.

Translation: Most of them probably aren't interested in fetching the cigars and slippers of their Google counterparts.

Ballmer: In addition, it would raise a host of regulatory and legal problems that no acquirer, including Microsoft, would want to inherit. Among other things, this would consolidate market share with the already-dominant paid search provider in a manner that would reduce competition and choice in the marketplace.

Translation: We smell a great opportunity to get the Google anti-trust snowball rolling.

Ballmer: This would also effectively enable Google to set the prices for key search terms on both their and your search platforms and, in the process, raise prices charged to advertisers on Yahoo. In addition to whatever resulting legal problems, this seems unwise from a business perspective unless in fact one simply wishes to use this as a vehicle to exit the paid search business in favor of Google.

Translation: You've given up on search.

Ballmer: It could foreclose any chance of a combination with any other search provider that is not already relying on Google's search services.

Translation: Poison pills generally include poison.

Ballmer: Accordingly, your apparent plan to pursue such an arrangement in the event of a proxy contest or exchange offer leads me to the firm decision not to pursue such a path.

Translation: We've decided a "surge" doesn't make much sense.

Ballmer: Instead, I hereby formally withdraw Microsoft's proposal to acquire Yahoo!.

Translation: I hereby formally pass to you the privilege of being second-guessed forever.

Ballmer: We will move forward and will continue to innovate and grow our business at Microsoft with the talented team we have in place and potentially through strategic transactions with other business partners.

Translation: We will be courting the same players you will, and we will gladly over-pay enough to force you to do something really stupid to get a deal done.

Ballmer: I still believe even today that our offer remains the only alternative put forward that provides your stockholders full and fair value for their shares.

Translation: May the lawsuits take every nickel you have.

Ballmer: By failing to reach an agreement with us, you and your stockholders have left significant value on the table.

Translation: And we will buy you for $19 a share before the NBA play-offs are over.

Ballmer: But clearly a deal is not to be.

Translation: Until your shares crash below $15.

Ballmer: Thank you again for the time we have spent together discussing this.

Translation: I'm glad I got to see for myself the denial that was in your eyes.

Ballmer: Sincerely yours,

Translation: I'll be stalking you in the afterlife.

Steven A. Ballmer, Chief Executive Officer, Microsoft Corporation

Parsing the WSJ Special Committee: We're Not Feeling Very Special

jflack — Wed, 30 Apr 2008 17:06:07 GMT

Apparently unhappy with the fact that it is in danger of becoming one of the great punch-lines in media history, the "Special Committee" created to protect the journalistic integrity of the Murdochian WSJ let out a loud yelp yesterday. Committee chairman Tom Bray issued a statement about the resignation of WSJ ME Marcus Brauchli and provided quotes for Journal reporter Steve Stecklow's accompanying story.

Having parsed Brauchli's departure letter, Jack Flack also felt an obligation to provide a flack's interpretation of the Special Committee's statement

The Special Committee: The Special Committee, established to oversee and enforce compliance with the terms of an agreement between News Corp. and Dow Jones & Co., has had numerous queries in the wake of the resignation of Marcus Brauchli as managing editor of The Wall Street Journal.

Translation: Our spouses read the newspapers.

The Special Committee: We felt it might be helpful to lay out a chronology of events:

Translation: We lost control of the story. Here's our side.

The Special Committee: At its regular quarterly meeting in February, the Committee met alone with Marcus Brauchli, who assured us that no issues of editorial independence or integrity had arisen in the wake of the News Corp. acquisition of Dow Jones in December.

Translation: Marcus was still hoping he could survive as the middle-man.

The Special Committee: Each member of the Committee received a telephone call from Rupert Murdoch, chairman of News Corp., on Monday April 21 alerting us to the fact that Brauchli had resigned and reached an "amicable" agreement with News Corp. He asked us to join a conference call at noon the next day.

Translation: Yes, we're all journalist types, and we know the difference between "amicable" and "amiable."

The Special Committee: Murdoch and other News Corp. officials, as well as Brauchli and Brauchli's lawyers, participated in the call. All members of the Committee participated.

Translation: The Kabuki greasepaint was stunning. Absolutely stunning.

The Special Committee: We questioned the officials and Brauchli about the circumstances of the resignation.

Translation: Everyone knew their lines.

The Special Committee: Although our charter does not directly envision a process for dealing with a resignation, Committee members expressed the view that learning of the Brauchli matter after the fact failed to meet the letter and the spirit of the agreement.

Translation: Rupert had chosen to ask forgiveness, not permission.

The Special Committee: We then asked the News Corp. representatives to leave the room and questioned Brauchli separately. His answers were consistent with what had been said before. He said he had been approached two weeks earlier and told that News Corp. wanted to make a change in the managing editor. Brauchli said he felt that the owners should be able to choose their own managing editor; that it would be best if he left without acrimony; and that his action was not the result of any problem with editorial interference or attempts to impose an ideological viewpoint. He insisted that News Corp. has been "scrupulous" about the integrity of the paper. He said that if that had not been the case, he would have notified us.

Translation: We're pinning this on Marcus.

The Special Committee: The committee has not been made aware of any issues of editorial independence or integrity either before or since the telephone conference.

Translation: The staffers find grousing among themselves far safer.

The Special Committee: After News Corp. officials rejoined the meeting, the Committee expressed the view that it should have been notified before the Brauchli departure. The News Corp. officials pledged to keep the committee thoroughly informed during the process of hiring a new managing editor.

Translation: They seemed terribly, terribly embarrassed that such a lapse in communications could have happened.

The Special Committee: The Committee met subsequently and decided that there was no practical way to "unresign" Brauchli and start the process over.

Translation: That horse is out of the barn.

The Special Committee: Under the agreement, the committee has the duty and responsibility to approve or disapprove such actions.

Translation: Nobody else is taking the agreement seriously. But we have to. We're the Special Committee.

The Special Committee: The Committee intends to exercise fully its role in the approval of a successor managing editor and to take the steps necessary to prevent a repeat of the process it has just been through.

Translation: We've figured out that if we don't, we're all going to become laughing stocks. Forever.

The Special Committee: The Committee will be meeting directly with Wall Street Journal Publisher Robert Thomson and News Corp. officials in the near future to discuss these and other matters.

Translation: We'll let them know that if they abuse us again, we'll walk as a group.

The Special Committee: Thomas J. Bray, Chairman, The Special Committee

Translation: This is not the kind of "special" we had in mind.

Parsing Marcus Brauchli: My Hands Are Clean

jflack — Tue, 22 Apr 2008 21:31:21 GMT

Even though "Parsing Brauchli" sounds more like something Jamie Oliver would do, the departure letter from the Wall Street Journal managing editor demands a flack's translation.

Brauchli: To the Staff:

Translation: Hey guys, guess what?

Brauchli: A year ago, I was appointed managing editor, and we set off together on a great journey.

Translation: Man, I was so excited.

Brauchli: We faced uncertainty about our ownership, inclement conditions in our industry and consensus that change was necessary.

Translation: It was the job I always wanted... at the worst time in history.

Brauchli: And so we chose a path of transformation.

Translation: I was determined not to be "the old guard."

Brauchli: We rethought the central tenets of our approach, with the aim of making a great news organization even better.

Translation: We ditched Steiger's most conservative rules.

Brauchli: During this time of transition, we have not strayed from our mission, producing engaging journalism that illuminates and informs our world.

Translation: Our stated mission can be interpreted any way we want.

Brauchli: Our reporters, whether in Lhasa or Los Angeles, Washington or Wall Street, are courageous, resourceful and infinitely talented. Our editing, graphics and production staff, too, are brilliant, creative and deeply dedicated.

Translation: I like all of you very much. You are my friends.

Brauchli: I am proud to have been part of this exceptionally talented team.

Translation: My bio now includes "WSJ Managing Editor."

Brauchli: But now that the ownership transition has taken place, I have come to believe the new owners should have a managing editor of their choosing.

Translation: I was offered a deal.

Brauchli: So, today, I am resigning.

Translation: It's a much better deal than the one that would have been offered next.

Brauchli: I revere this institution and respect all of my colleagues, both old and new.

Translation: The deal had a detailed non-disparagement section.

Brauchli: When News Corp bought Dow Jones, together we crafted an editorial agreement designed to protect our independence.

Translation: We also sprinkled magic dust around the building to ward off evil spirits.

Brauchli: The agreement was designed to block commercial or political interference in our journalism and to ensure we adhered to our code of conduct.

Translation: It was shaped like a fig leaf.

Brauchli: Since the acquisition last December, the new management scrupulously has avoided imposing any political or business viewpoints on our coverage and rigorously has enforced the code of conduct.

Translation: Thus far, the interventions have been limited to form, not actual content.

Brauchli: I am confident that our journalistic integrity remains intact and that News Corp. is committed to a Journal that is vibrant, vital and preeminent in American journalism.

Translation: My hands are clean. "Vibrant, vital and preeminent" also describes Tide detergent.

Brauchli: Under the terms of the editorial agreement, our independence is enforced by a Special Committee.

Translation: It is fully supplied with magic dust.

Brauchli: I have met with and conveyed my thoughts to the Special Committee.

Translation: It felt really good.

Brauchli: Many thanks for your extraordinary dedication and support in this last year.

Translation: Thanks for your loyalty. You understand, don't you?

Brauchli: I have no doubt the journey we embarked on together will continue to bring Journal readers the best in journalism and you and the Journal continued success.

Translation: Our competitors are devolving just as fast as we are. Readership will grow.

Brauchli: Regards, Marcus

Translation: Let's not get too sentimental.

Microsoft Responds... In Advance

jflack — Tue, 22 Apr 2008 17:48:34 GMT

Steve Ballmer cut the timing a little close, but Jack Flack was not surprised to see the Microsoft boss declare that the first-quarter performance numbers that Yahoo will announce later today will not influence his company's bid.

Speaking at a Microsoft promotional event in Morocco, Ballmer told Reuters, "I wish Yahoo all the success with its results, but it doesn't affect the value of Yahoo to Microsoft."

What's the business spin implication? Previous news reports had speculated that a strong showing would prompt a sweetened offer. By making that point clear through a major wire service before Yahoo issues its release, Ballmer ensured the coverage of Yahoo's earnings will now likely include his dismissive comment, instead of speculating further on whether Microsoft will raise its offer.

(After all, does anybody believe that Yahoo will announce anything other than sterling numbers, even if Jerry Yang has to sell his family silver?)

Instead, the Yahoo coverage will now likely point to the Saturday deadline Microsoft has set for response to its $31-per-share offer.

How Jeff Immelt Can Save General Electric

mstein — Mon, 21 Apr 2008 21:54:13 GMT

To: Jeffrey Immelt
From: Jack Flack
Subject: Free to Be Jeff's G.E.

Few C.E.O.'s understand business spin as well as you do. But after last week's fun, I can't resist offering three observations and three recommendations.

Let's start the observations.... Read more

Blockbuster to Circuit City: Why Can't We Be Friends?

jflack — Mon, 14 Apr 2008 08:42:41 GMT

Circuit City boss Phil Schoonover has long served as the lumbering prey of activist investor Mark Wattles. But in the wee hours this morning, Schoonover had a nice note tacked to his door by a different predator. It seems Blockbuster's Jim Keyes didn't like the fact that earlier conversations with Schoonover did not produce a deal.

With rumors swirling that Circuit City had hired Goldman to shop the company, Keyes decided to move, and his letter certainly benefits from translation.

Keyes: Dear Phil:

Translation: We already know each other personally. And yes, I know Schoonover rhymes with "Soon-over," but I'm not going to mention that.

Keyes: Since early December, we have had a number of conversations regarding the potential combination of our businesses.

Translation: Because those conversations have not produced the outcome I wanted, I'm now making those conversations public.

Keyes: As a follow-up to those discussions, I would like to formally reiterate our interest in pursuing an acquisition of Circuit City.

Translation: We want this deal bad enough to go hostile.

Keyes: The purpose of this letter is to ensure that there is no ambiguity and to outline our proposal.

Translation: The purpose of this letter is to inform your shareholders that they have deal. We understand they're not a happy bunch.

Keyes: Our vision for the "new" Blockbuster is to be the most convenient source for media entertainment.

Translation: We're not just exploiting a mismanaged asset in a down economy. We actually have a business concept. In fact, it's a full-fledged "vision."

Keyes: We have undertaken a series of strategic initiatives including enhancement of our core rental business; a transition from solely rental to a concentration on consumer retail; and development of the fast-growing digital download market.

Translation: Our core business is dying, so we're changing our core business. That's not rocket-science, but it's harder to excecute than it looks.

Keyes: We are pleased that these strategic initiatives have begun to improve our financial results and anticipate further improvement going forward.

Translation: It's working... sorta.

Keyes: The combination of Blockbuster and Circuit City will result in an $18 billion retail enterprise uniquely positioned for the convergence of media content and electronic devices.

Translation: You have been getting killed by the big boxes. This deal will enable you to offer something different from Wal-Mart, Target and, yes, Best Buy... hopefully for at least for 18 months.

Keyes: We would seek to differentiate products in both Blockbuster and Circuit City stores by offering exclusive content and content-enabled devices.

Translation: Our combined size would allow us to do exclusive licensing deals. Otherwise, we're both stuck in businesses that are increasingly commoditized.

Keyes: Both companies would benefit from complementary products, marketing, management strengths, technology and distribution and the resulting synergies would significantly improve consolidated financial performance.

Translation: While you've been gutting the capability out of your organization, we've kept most of ours. It's very complementary. (Thanks for already firing everyone, so we won't have to.)

Keyes: Overall, I strongly believe that a combination of Blockbuster and Circuit City would deliver significant value to our respective shareholders, enhance the overall customer experience, and energize our employees.

Translation:This is probably your last chance to walk out on your own, claiming victory.

Keyes: Based on our review of publicly available information, we are confident that we can provide a substantial premium to your shareholders with an all cash offer in the range of $6.00 to $8.00 per share...

Translation: OK, so your shareholders were actually dreaming about $8 to $10, but we assume they'll settle for doubling the current value of their holdings.

Keyes: ...subject to due diligence.

Translation: Nothing personal, but we've noticed that distressed companies sometimes over-stretch the numbers.

Keyes: We are also willing to pursue alternative structures which would enable Circuit City shareholders to receive stock and participate in what we believe would be an exciting future for the combined enterprise.

Translation: And we'll throw in a dozen free copies of Finding Nemo.

Keyes: Given current debt market conditions, we believe most of the cash necessary would be generated through the issuance of additional Blockbuster equity, most probably in a rights offering to our existing shareholders.

Translation: We're not exactly dealing from a position of strength ourselves. But at least we're playing offense.

Keyes: We believe they, and the market, will recognize the merits of this transaction...

Translation: We believe they, and the market, will take the money and run.

Keyes: ...and we are confident that we can raise the required equity.

Translation: We've talked with bankers, and they didn't laugh.

Keyes: The borrowing capacity of the combined business would provide the remaining cash proceeds.

Translation: Ok, so we'll have to leverage this thing a bit to make it work.

Keyes: Time is of the essence and we are focused on minimizing the risk of business disruption.

Translation: Isn't Wattles still leaning against your front door?

Keyes: We are prepared to commence a very short due diligence process immediately...

Translation: Our due-diligence team checked in to the Residence Inn down the street from your headquarters over the weekend. Fortunately, they found a good bar nearby where they could watch the Masters.

Keyes: ...on the basis of exclusivity, with the intention of entering into a definitive agreement shortly thereafter.

Translation: We know you've got Goldman looking for alternative buyers. Do you really want to risk screwing up this deal?

Keyes: Attached, as an appendix to this letter, you will find a concise list of the most critical due diligence items which we would need to review in order to confirm our final offer.

Translation: Our due-diligence team is enjoying the free continental breakfast at the Residence Inn. They've already been to the gym and read the papers.

Keyes: We have reviewed this potential transaction with our board of directors, and it is with their full support that we make this request to move forward.

Translation: It's great having a supportive board. Isn't Wattles replacing yours?

Keyes: Given the importance of this opportunity to Blockbuster and the strong desire to complete it as soon as possible, we would be grateful for your response no later than 5:00 PM CST on February 21, 2008.

Translation: We made the deadline clear.

Keyes: Again, I thank you for the time you have spent discussing this opportunity with me.

Translation: I am disclosing the fact that you and I had direct conversations so that your shareholders know that you saw enough merit in this deal to engage personally.

Keyes: I am prepared to discuss the details of this proposal at your earliest convenience,,,

Translation: I've got a conference call on Wednesday afternoon, and a couple of performance reviews on Thursday. But for you, I can move them.

Keyes: ...and believe that we will be able to quickly come to a mutually beneficial agreement.

Translation: We don't want this to turn into a goat-rope, like MicroHoo.

Keyes: I look forward to working together on this exciting opportunity.

Translation: Face the cameras, smile, hold the handshake and consider this the most elegant exit imaginable for you.

Keyes: Very truly yours,

Translation: This is the final chance to maintain the appearance of civility.

Keyes: Jim Keyes, Chairman and Chief Executive Officer, Blockbuster Inc.

Translation: Yes, I am as edgy as they say.

Portfolio.com: Business Spin

Parsing Yahoo's Response to Icahn: There Seems to Be Some Misunderstanding

Parsing Icahn to Yahoo: You Thought Ballmer Was Scary?

How to Read Fortune's "Best Advice"

Toe the company line.

Advocate/defend your strategy.

Send a personal message.

Reveal a pulse.

Indirectly define what you are.

Indirectly define what you're not.