(YHOO - Get Report)
CEO Carol Bartz guaranteed "boatloads of value" from its brand-new search deal with
. Disappointed Yahoo! shareholders, however, want the
"boatloads of money"
she promised in May.
In a desperate measure to stem the growing power of
, Microsoft and Yahoo! finally agreed to combine forces Wednesday. The two have been dancing around the subject since 2005, yet it took Bartz just six months to ink an agreement that both her predecessors, Terry Semel and Yahoo co-founder Jerry Yang, spent years avoiding.
Unfortunately for Yahoo! shareholders, this great conciliation between the Internet powers -- following years of frustration and aggravation -- has not removed the one constant from this drawn out affair: deprivation. Yahoo! stock dropped 12% to around $15 on news of the accord as shareholders grew dismayed over the lack of an upfront payment.
Wait. Let us clarify that. We should say
those remaining shareholders that did not already throw in the towel last year when Yahoo! rejected Microsoft's $47.5 billion buyout offer
. Yahoo's market value currently stands at about $22 billion.
Bartz, nevertheless, says now is absolutely the wrong time to give up on Yahoo! and accuses the naysayers of being too ticked off to read the fine print. In return for giving its search engine over to Microsoft's Bing, Yahoo! will pocket 88% of the revenue from all ads that run alongside search requests on its site for the first five years of the deal. Yahoo! estimates the deal will boost its annual operating profit by $500 million, while saving it nearly $200 million on annual capital expenditures.
"I think the market hasn't figured out that there's not much I can do with an upfront payment," said Bartz in a Wednesday interview. "What am I going to do with it? Collect interest on it every year? That doesn't help me."
That's an eye-opener even for us. We've been at this for a long time and we've never heard a CEO speak so disdainfully about the market's collective wisdom, or being on the receiving end of a lump of cash. And we've certainly never encountered a CEO who couldn't figure out to do with a bundle of money suddenly thrown at her feet.
Bartz's bet may end up paying off in the long run. But right now her investors are clearly saying that a boatload of cash in hand is worth two in the bush.
Dumb-o-meter score: 85 -- Bartz's ship better come in. Or else she'll be walking the plank.