But that’s just a sidenote to the larger issues in the suit, which charges Yahoo’s directors with breach of fiduciary duty for not just rejecting Microsoft’s proposed deal, but also for going to great lengths to make it an unappealing acquisition target. “Due to their personal interests in maintaining Yahoo’s independence and their strong antipathy to Microsoft, [Yahoo co-founders Jerry Yang and David Filo] failed to consider and respond in good faith to the acquisition offers by Microsoft to the detriment of Yahoo and its shareholders,” the complaint argues. The two “used the threat of pursuing measures that make Yahoo an unattractive acquisition target, including the prospect of Yahoo abandoning its long-term business strategy in favor of a tie-up with Google that would make a Microsoft acquisition a regulatory and litigation quagmire, as an improper means to thwart Microsoft’s advances.” Moreover, “Yang convinced the board to adopt change-in-control employee severance plans that impose tremendous costs and risk for an acquirer, throwing sand in the gears of Microsoft’s plans for a smooth integration. These highly unusual plans reward employees with rich benefits if they quit and claim a constructive termination in the aftermath of a change in control.”

The plans at issue here, which would have cost Yahoo $1.5 billion, provided 100% equity acceleration for all employees. It is “a bizarre outcome if people who stick around make off worse financially than people who are laid off,” one Yahoo VP said of the plan. The company’s compensation consultant had a better word for it: “nuts.”

What was it Yang said during his interview at D6 last week? “I will probably never be a CEO again?“

Hey, he said it, not I.

Digital Daily’s John Paczkowski is blogging from TechCrunch40 in San Francisco. Technical difficulties at the conference site prevent him from live-blogging, so he is summarizing with the following report on this keynote panel, dubbed “Humble Beginnings,” in which Sequoia Capital’s Michael Moritz (pictured far right, above) interviews Marc Andreessen (founder Netscape and Opsware, co-founder Ning), David Filo (co-founder Yahoo) and Chad Hurley (co-founder YouTube).

• Moritz asks Hurley (pictured right) to reminisce about his first business years ago in Pennsylvania. Apparently Hurley’s background is in art: He got his start when he discovered the intersection of art and business at age 5, trying to sell plywood paintings.
  (Plywood paintings? Cheaper than felt, I suppose.)



• Filo (pictured left) is asked how he got from Louisiana to California. Answer: Stanford.
  (No kidding! Half of Silicon Valley would likely answer that question the same way. Was Moritz expecting something different?)
• Andreessen (pictured below) is asked about his humble origins in Wisconsin. What brought him to California? Answer: “I wanted to get the hell out of Wisconsin,” (Half of Wisconsin would likely answer that question the
  same way. Kidding.) He adds that he was intrigued by the ideas then driving Silicon Valley.
• Filo asked about how he and Jerry Yang got the urge to bail on Stanford and venture out on their own. “When we first got started,” he replies, “we didn’t think of what we were doing as a business at all.” He notes they were forced to decide between Yahoo and a Ph.D.
• Way back in the beginning, Moritz asks, didn’t Filo and Andreessen have some sort of business relationship? Filo replies that Andreessen and Netscape folks gave early Yahoo a bit of rack space at their data center.



• Moritz then questions Andreessen (right):
  Q: At the beginning of Netscape did anyone have any sense what the
  subsequent 5 years would look like?
  A: No, of course not.
  Q: Were there key moves you made in the first 50 or 60 days that were instrumental to your success?
  A: Initially everyone thought we were going to charge for Netscape. But then we released it for free. That brought us a lot of buzz and a lot of traction as well.
• Moritz to Hurley: How did you conceive of YouTube?
  A: We wanted to solve a problem–online video. We didn’t see it as a business, either.
• Moritz: How often has business gone in a direction you never would have conceived of even in your wildest dreams?

  Filo: Well, Yahoo was one of the first businesses that had no revenue or even future prospects for revenue, so that was pretty unusual. Email, etc. were all relatively unexpected directions for Yahoo which was conceived as a directory. Apparently, every business Yahoo’s pursued has been one that Filo never would have imagined. (Good explanation for Terry Semel.)

  Andreessen: “CEOs are special people.” (Nice. Wonder if there’s an associated public-service campaign: “Hi, I’m Marc Andreessen for CEOASP— CEOs Are Special People.”)

• Moritz: Chad, were you surprised by the issues you encountered as YouTube CEO?
  A: Difficult to transition from developing the product to managing the business. Need to put the right people in place in order to survive.
  (I wonder if Hurley will save that little gem for play on famous
  business book by head of GM…)
  Moritz: Chad, do you remember a time when you worried that you’d lose the business?
  A: There was a time when we were growing far too quickly for the data centers that were hosting us. We were forced to go out and build in order to continue. There are a lot of media companies that feel threatened by us now. We just need to educate them about what we’re doing. There are a lot of media companies that feel threatened by us now. We just need to educate them about what we’re doing. (Bet Viacom CEO Philippe
  Dauman would get a good laugh out of that one.)
• Same question to Andreessen, who obviously has some meatier answers: Rambling history of OpsWare. Long story short, the market crashed, we were sitting there burning cash and so we did a “restart,” we essentially reconceived the company as a software outfit and packaged up and sold the portions that remained. Ironically, it was a great time to start a company, because it was a lousy environment and everyone else was afraid of doing it.
• Moritz poses the next question to the panelists: What are some of the worst decisions you’ve made?
  (Besides agreeing to participate in this panel?)

  Hurley: We didn’t hire fast enough.

  (BZZZT. Wrong.)

  Filo: We never understood the magnitude of the business opportunity ahead of us. We underestimated. That said, it’s not clear that if we had, things would have gone differently. We’ve made some bad short-term decisions that would have benefitted from a long-term view.

  Andreessen: He recalls a period when search engines were paying Netscape to advertise to the traffic that was coming to Netscape.com. “We viewed that as free money. But I always wonder what might have happened if we’d suddenly decided we weren’t a software company, but a content company and suddenly changed our business model.”
  (Netscape-Time Warner, obviously. Duh.)

• Another general question from Moritz: Who in tech do you admire the most these days?
  (Mike Moritz?)

  Filo: Steve Jobs. He cites Apple’s culture of innovation and design and marketing savvy.
  (Damn. Wrong again.)

  Hurley: Steve Jobs. Notes Jobs is a great speaker.

  And you, Marc? Jobs trifecta! Andreesen agrees, it’s Jobs.

  (Five dollars and my pass to this conference says everyone in the audience is silently wishing it was Jobs on stage right now, instead of these three.)

• Wrap-up question from Moritz: What’s the time you’ve enjoyed the most in your career?

  Filo cops out: “Every period, every year had its moments. You could pick any one.”
  (Precious and few are the moments we two can share, Jerry …)

  Hurley: “It’s great when you first start. It’s hard to replace the experience of that time when you didn’t quite know what would happen next.”

  Andreessen apparently opts to deliver his answer telepathically or Moritz skips him, because he’s not given a chance to reply.

• Audience Q&A:

  Tips for start-ups?
  Andreessen: 1. Have a founder who can be CEO. 2. Don’t hire too many people too quickly. Keep the team size small until you identify a product for which there is a market.
  Hurley: 1. Keep your team small. You can iterate faster. 2. Look at how you personally use your product and use that to guide your development.
  Filo: Hire passionate employees.

  Softball question to end all softball questions: What are your favorite Web sites?
  (Rotten.com? Diaper Pail Friends?)

  Filo: Sequoiacapital.com (laughter). TechCrunch.

  Hurley: Facebook.

And that’s the big finish. Off to find coffee.

Good thing then that Yahoo CEO Jerry Yang intends to dramatically improve the company’s performance and put it back on a winning path. How? A top-to-bottom, 100-day review of the company. “I intend to spend the next 100 days mapping out a game plan and working with … the team to put the right organization in place and make any necessary changes,” Yang explained. “We need to invest in areas that are most critical to our success and de-emphasize those that are underperforming or don’t match up with our priorities. There will be no sacred cows.“

There will, however, be an “ecosystem,” which Yang and Co. mentioned no less than 17 times during the course of yesterday’s earnings call. It is apparently either a euphemism for Yahoo’s business, the outfit worn by Yang in the photo above, or the self-sustaining biosphere where the company keeps Yahoo co-founder David Filo.

From Yang and Yahoo President Sue Decker:

“Yahoo is an ecosystem that involves several hundred million participants every single day.

“We plan to create value through our ecosystem.

“When I step back and think about how we can fully leverage our ecosystem, I see a world where Yahoo is a place that consumers love.

“We’re really focused on understanding how Yahoo as an ecosystem can drive value long-term.”

That’s great to hear. And it’s nice that Yahoo’s new management has a new buzzword. But, really, who cares? Crucial executives are still fleeing the Yahoo “ecosystem.” Google is still eroding it. And in the end, its most recognizable feature is still the company’s deteriorating financial performance.