Blanket coverage everywhere this week of the Yahoo! Microsoft saga, and specifically on Yahoo!’s rejection of the offer this morning. Lots of coverage too of Yahoo!’s perceived alternatives, which include outsourcing search to Google, merging with AOL or News Corp, or being bought out by private equity funds.

At this point it’s beginning to look like Yahoo! is adopting an “anyone but Microsoft” strategy, in much the way some voters were described to be keen to vote for “anyone but Bush” in the 2004 elections. But the problem with that strategy, in politics as well as business, is that there’s no guarantee the alternatives are any better. The kind of blindness that comes from making negative decisions – not to do something rather than to do something – can lead to worse decisions than the very thing they’re trying to avoid.

No-one in their right mind believes merging with AOL is the answer (AOL Time Warner is of course itself the ultimate example of why such mega-mergers are a terrible idea), and no-one really believes News Corp is interested. Outsourcing search to Google would only provide a temporary benefit in terms of revenues but wouldn’t solve any of the long-term structural issues at Yahoo!. Perhaps the perception of giving Microsoft one in the eye is the biggest attraction to that strategy, but of course that goes back to my original premise.

The fact is, we all know Microsoft taking over Yahoo! will be a disaster in many ways – especially for employees of the acquired company. But it’s not at all clear that any of the alternatives are any better, and certainly many shareholders reasonably believe that this is their best hope of getting out of the current mess at Yahoo! with a reasonable price for their shares.

Yang & Co. have demonstrated that they’re not able to turn the business around, treading too gingerly at a time when the company needs some major changes. There is – I think – a close parallel here with Gary Forsee’s last few months at Sprint: the man who had been behind much of its success in previous years was unable to remove himself far enough from the strategy of yesterday to make the right moves for today and tomorrow. Yang is arguably too similar to Semel in this way, and of course has an even longer history with the company than Semel did. Yahoo! needs a Dan Hesse type who’s far enough removed from Yahoo!’s recent history to be able to make the tough choices and really make a difference. But all this is likely too late at this point. Microsoft’s latest salvo suggests it’s not going to back down and offer the higher price Yahoo! is suggesting it should, but leaves the door open with the following sentence, which may of course merely be threatening a more hostile approach over the heads of the board and directly to shareholders:

Microsoft reserves the right to pursue all necessary steps to ensure that Yahoo!’s shareholders are provided with the opportunity to realize the value inherent in our proposal. 

Ultimately, though, Yahoo! is fighting a losing battle in seeking alternatives where none really exist. The last hope is for Yang to make a convincing plea to shareholders, detailing his plan for turning the business around and providing clear milestones and metrics he wants to be measured by, as a way of buying more time. But he arguably already bungled that chance in the call which took place immediately before the offer was received. Much as Yang and the rest of the Yahoos might want anyone but Microsoft, it’s hard to imagine their future resting with anyone but Microsoft at this point.

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