To: Jerry Yang, C.E.O., Yahoo
From: Jack Flack
Subject: Becoming the $33 Candidate

I know you didn't get much of a chance to consider the Rescue Memo I sent you just before Microsoft first withdrew. The sudden Icahn intervention and the oscillations in Redmond radically changed the situation.

But I knew it was time for some new advice when I read your cringe-inducing quote in today's Wall Street Journal story:

"I think that I can bring stability back to Yahoo, and I want to get on with building [the] company," Mr. Yang said. "I think that the destabilizing by Microsoft has become more and more intentional. I am not happy about it."

Those words reveal four dangerous assumptions:

Dangerous Assumption No. 1: All of this will blow over.

Ballmer and Icahn will go away. Your shareholders will forget they could have had $33, if not $40. You'll pick up the pieces, and get the old magic back.

Unfortunately, that would qualify as a minor miracle. Even if the rest of the world—particularly Mountain View—stood still for three years, you wouldn't stand much of a chance. Yahoo had been languishing for years, and the trauma of the past few months has been devastating. The lawsuits will pile up, and demands that you sell the company will continue, if not escalate. You'll be faced with trying to lead a slim-chance turnaround while operating as a marked man.

Dangerous Assumption No. 2: You still hold the cards.

The day your stock dropped back into the teens, it revealed what life will be like for Yahoo if the company is not acquired in full by Microsoft. That specter puts you in a position of extreme weakness.

Dangerous Assumption No. 3: You are uniquely suited to stabilize Yahoo.

Unfortunately, at this point, you are personally toting the symbolic baggage that most destabilizes your company.

Your shareholders don't trust that you have their best interests at heart. A big percentage of your key leaders have bolted. Most of your remaining Yahoos question the latest round of internal egg-scrambling. And all fingers are pointing at you, not Bostock, Decker, or even Semel.

You should understand that Microsoft is no longer trying to destabilize Yahoo; it is trying to destabilize Jerry Yang.

Dangerous Assumption No. 4: Your happiness matters.

Actually, you are widely perceived as having acted out of emotion instead of rationality. Thus, your personal feelings are probably not the biggest concern of your shareholders at this point.

Unless you change the state of play quickly, things will get worse, not better. Here's what you must do:

1. Respect the future.

Get over the past, and quit making decisions based on expired realities. You rejected $40 because you remembered the glory days. You rejected $33 because you remembered $40. Meanwhile, you accelerated the decline in value of your enterprise by installing prohibitively expensive defense mechanisms.

Now, you must instead make decisions based on the current realities, with a full appreciation for the future implications. Ask yourself, how the vote will go? If you survive that, ask yourself what the odds are that you can successfully rebuild value at a pace that will be the slightest bit satisfying to your shareholders.

As you answer those questions, you must...

2. Get very objective.

I know it's hard. But to avoid going down in history as the most tragically self-destructive titan of the tech era, you must become completely clinical in your decision-making. Otherwise, you will act out of pique, instead of doing what's actually best for you and your reputation.

Try this exercise. First, think how personal this has become for you. Now, try to imagine that it's become just as personal for Ballmer. After all, the press has skinned him about this deal almost as much as they have you. The big difference is that he's the one who now holds the cards.

3. Explicitly offer $33.

It's not enough to sit on the porch and say that you'll entertain a return visit from a suitor who is tired of being scorned. Stop fanning yourself like Scarlett, and take the action required to reframe the game: Grab Ballmer in Sun Valley and tell him you'll do the deal for $33.

If Ballmer demurs or hedges, immediately issue a short statement summarizing your offer. That will give shareholders a meaningful reason to vote for you. In effect, you will make yourself the "$33 Candidate" and relegate Icahn to being the "Beggar's-Price Candidate."

If Ballmer agrees, insist on jointly issuing a short statement within 24 hours.

4. Move on to the next thing.

Expedite the deal with graciousness, and then start clean by focusing on an idea that truly stirs your passions. Make that idea work, and the world will once again start thinking of you as a gifted innovator.

And oh, no matter how this thing plays out, do not even think of taking your old title of "Chief Yahoo." Somehow, it's just not as cute as it used to be.