The Activist Investor: Boot Yahoo!'s Board

The past weekend delivered a round of shock and awe for Yahoo! (YHOO Quote) shareholders. I -- and every single shareholder I've spoken to since the news broke that Microsoft (MSFT Quote) had revoked its offer for Yahoo! -- expected a friendly deal to happen by the open of U.S. markets Monday.

Instead, we got word that a meeting at Sea-Tac airport on Saturday between Microsoft and Yahoo! had led nowhere.

According to reports, Microsoft offered $33 a share for Yahoo!, to which Yahoo! CEO Jerry Yang and Co-Founder David Filo said they wanted $38 and their board had only authorized them to agree to $37.

By pulling its offer, Microsoft was effectively saying, We've had enough of this amateur hour foot-dragging and unrealistic sense of valuation.

Cramer: A Reason to Buy Yahoo!

When the markets opened Monday morning, Yahoo! shareholders saw $13.7 billion in market capitalization eviscerated (although the stock has climbed since then on hopes that Microsoft is going to re-emerge as a suitor).

Shareholders are irate.

Although Yang and Filo deserve blame (why was David Filo at Saturday's meeting?) for this outcome, the real blame lies at the feet of the board. This whole negotiation has been botched by Yahoo! from the beginning.

Bungled Negotiations

First it was the interminable foot-dragging just to get a response from the company to Microsoft's Feb. 1 offer. Then, they approved a poison pill-like severance and retention plan to make any acquisition much more expensive for Microsoft. Next, they clung to the belief that the company was "significantly under-valued" for anything less than $41 a share, even though they'd only briefly reached that valuation once (in late 2005) since the bubble days.