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.

A source close to the company tells SAI that Yahoo has finalized its list of layoffs and will announce them during its fourth quarter earnings call tomorrow. Tough to say what sort of effect they’ll have at this point, given the shape Yahoo’s in these days. Certainly, CEO Jerry Yang has to do something. Since he took over, Yahoo shares have lost more than 22%, trading at $21 at this writing.

“We won’t know the financial implications until the layoffs get announced,” says Steve Weinstein, an analyst with Pacific Crest Securities. “But if it doesn’t, the expectation will grow exceedingly. This is a stock that was at $40 [two years ago]. You’re seeing investor frustration. Yahoo has to find ways to regain momentum.”

Or maybe, as Bubblegeneration’s Umair Haque suggests, it should just throw in the towel. “Yahoo’s problem is DNA,” writes Haque. “Yahoo, you’ve held back thousands of very talented people for the last five years and prevented them from making the fullest use of their talents and insights. … You guys all let Terry Semel make the third fundamental error of strategy–to mistake deal-making for strategy. In the process, you sold out a deeper set of principles; you forgot that the job of a revolutionary is never to sell out, and the point of a strategy is fundamentally to create new value. … The fundamental assumptions behind your thinking are deeply in error, and so your strategy is in massive decay. So please, don’t put up a fight–let these guys go build the cool start-ups and pioneer the radical innovation you’ve stifled and suffocated for the last half-decade.”

Which, as you’ll see below (and in our companion video), is pretty much how it turned out. What follows is Digital Daily’s abridged guide to the year in tech news–a fond reminiscence of what was, and our First Annual Year-End List For Year-End List Haters.

1. Yahoo Shareholders Reject Plan to Tie Executive Compensation to Company’s Crappy Performance
   Well, what do you know: Yahoo’s annual shareholder meeting didn’t conclude with CEO Terry Semel’s head piked on the exclamation point of the Yahoo sign outside company headquarters.

2. I Know It Was You, Fredo. You Broke My Heart. You Broke My Heart!
   Apparently, Fred Anderson is the “Fredo” of the Apple options backdating family.

3. We’ve Asked John Williams to Do a Special Performance of the Theme From “The Poseidon Adventure” for Our Q4 Results
   Who’s programming Microsoft’s on-hold music, Apple’s Phil Schiller? Waiting for the company’s third-quarter earnings call to begin yesterday, those listening in were treated to an instrumental piano version of Celine Dion’s “My Heart Will Go On.” From “Titanic,” the disaster movie.

4. I’m Proud to Say Our New “Soylent Green” iPod Is Made of 100% Biodegradable Greenpeace Activists!
   If you’re going to try to smear Apple for reckless environmental practices, you best have some hard epidemiological and toxicological data on hand, because goofy Photoshop treatments of the company’s marketing materials just can’t stand up to a blow from the Apple PR machine.

5. And Online Display Impressions Soared as More Americans Checked Their AOL Accounts for Old Times’ Sake
   To hear tell from Time Warner executives, the company’s better-than-expected earnings for the first quarter owed quite a bit to gains in online-advertising market share by its AOL Internet division.

6. Web 2.0 Audience in Mirror May Be Smaller Than It Appears
   How ironic is it that Web 2.0–the “participatory Web”–has far fewer participants than its architects would have us believe?

7. And for My Next Trick, I’ll Turn Myself Into a Complete Jackass
   If you’re going to demand that YouTube remove a video to which you object under the Digital Millennium Copyright Act, it’s probably wise to make sure that you actually understand the DMCA.

8. War Is Peace. Freedom Is Slavery. Ignorance Is Strength. DRM Is DCE.
   You can’t put frosting on manure, but HBO’s Chief Technology Officer Bob Zitter isn’t above trying.

9. We’re Naming It the Motorola STNKR, After Our Q1 Earnings …
   Carl Icahn was right. Motorola really is desperate for a new product. How else to explain a patent the company was awarded last month for a “communication device having a scent-release feature and method thereof.”

10. The Frienemy of My Frienemy Is My Enemiend
    If Microsoft is planning an acquisition in the online marketing and advertising space, it better act fast, because if it waits much longer there won’t be anything left to acquire.

11. How Would Monsieur Ellison Like His BEA Served? Mixed in a Bucket With Oracle’s Other Acquisitions?
    Looks like we may be in for another PeopleSoft-esque takeover drama …

12. I’m Just Biding My Time Here Until I Can Quit and Study Whale Feces Full Time
    Given the chance, how would you alter the course of your career? Well, if you worked at Microsoft’s Security Response Center, you might consider taking a job as an Olympic drug tester, a gravity research subject, or a “whale-feces researcher.”

13. Much Like Energy, BS Cannot Be Created or Destroyed, It Can Only Be Changed From One Form to Another
    If Steorn’s perpetual motion effort is anything like its e-commerce venture (and by all accounts things do seem to be going that way), the only thing in its future is insolvency.

14. From Now On, We’ll Be Known as Nlsn/NtRtings
    Looks like vowels won’t be the only accoutrements to be tossed aside in the rise of Web 2.0. The venerable page view is to be abandoned as well.

15. The Defendant Stands Accused of Copyright Infringement, Breach of Contract and Misappropriation of Dumb Luck
    According to popular legend Facebook founder Mark Zuckerberg once kept two versions of his business card in his wallet–one with the title CEO, the other with “I’M CEO . . . BITCH.”

16. Well, Here Come YouTube’s Video ID Tools. Guess That Means Godot Will Be Here Any Minute Now
    Google’s apparently finished “educating users about copyright law” and has moved on to the far more important business of making sure not to run afoul of it.

17. Look at It This Way: Now That Yahoo’s an ‘Ecosystem,’ the EPA Can Finally Declare It a Superfund Site
    “Our financial performance is not what we would like to see long-term.” This, from Blake Jorgensen, Yahoo’s chief financial officer who, just six weeks into the job, is already well versed in the company’s fiscal truisms.

18. Gates to Google: My Lyrical Technique Will Leave Your Body Weak
    Much as Microsoft Chairman Bill Gates fancies himself untroubled by Google’s incursions into his software empire, they clearly do chafe him a bit.

19. Newest Yahoo Mail Feature: BCC Beijing
    Sure, Yahoo signed China’s “Public Pledge on Self-Discipline for the Chinese Internet Industry,” a voluntary agreement to monitor and restrict information deemed “harmful” by Beijing, but did it have to take it quite so seriously?

20. Apple: Wham, Bam, Thank You Fanboi
    “I feel like a $200 whore.” That was one iPhone early adopter’s crass assessment of his feelings of self-worth, after Apple unexpectedly cut the price of the device by a third–just two months after it arrived at market.

21. In the Unlikely Event of a Water Landing, Sergey’s California King May Be Used as a Flotation Device
    With its onboard hammocks, full-size sofas and California King beds, it’s a wonder Google’s “party plane” has room for scientific instrumentation befitting the National Aeronautics and Space Administration, but apparently it does.

22. Act Now and Get a Downgrade to the OS You Really Want, ABSOLUTELY FREE!
    It’s looking more and more like the pent-up demand for Windows Vista we’ve heard so much about this past year is really just pent-up demand for Windows XP.

23. Dude, I Work for Friggin Forbes Magazine. Have You Heard of It?
    The year-long guessing game is over. New York Times reporter Brad Stone has outed Daniel Lyons, a senior editor at Forbes magazine, as the author of the Secret Diary of Steve Jobs, the satirical blog lampooning Apple’s iconic CEO (See? Told you it wasn’t me).

24. If Facebook’s Worth $15 Billion, Then My Stupid Idea’s Got to Be Good for $10 Mil
    Apparently the vainglory from which Facebook CEO Mark Zuckerberg appears to suffer is communicable and spreading rapidly throughout the social network’s developer community.

25. A Billion Here, a Billion There, and Pretty Soon You’re Talking Real Bollocks
    MySpace is worth $65 billion in the same way that Facebook is worth $15 billion–hypothetically.

26. “Apple Has Destroyed the Music Business”–Not That We Didn’t Try Our Best
    Many, many years ago, when the digital-music business consisted of little else besides Napster and the Recording Industry Association of America’s lawsuits against it, Apple proved that there was indeed a decent business to be had in selling music online for $1 per song.

27. It’s Not an Unpaid Endorsement, It’s a “Social Ad”
    Facebook’s Social Ads aren’t endorsements, they’re a “representation” of user activity.

28. Obama Announces “No Tech Policy Left Behind” Plan
    If Google’s mission is to organize the world’s information and make it universally accessible and useful, then Democratic presidential candidate Barack Obama’s is to do the same to its tech-policy issues.

29. Sounds More Like the “Zune of Reading” to Me
    If Jeff Bezos truly hopes to create “the iPod of reading,” observers say he’s going to have to do a hell of a lot better than Amazon’s new Kindle e-book reader.

30. Fiascobook
    What Facebook CEO Mark Zuckerberg lacks in foresight, he certainly makes up for in disingenuous hair-shirt remorse.

Greg Coleman, executive vice president of global sales, will leave Yahoo in February. His responsibilities will be assumed by executive VP Hilary Schneider, who’s been tapped to lead the company’s new sales division, called Global Partner Solutions. “As many of you know, Greg Coleman has been actively engaged in leading the integration of Yahoo!’s search and display ad sales teams and communicating the benefits of our more integrated capabilities to our major clients, who have been very receptive to this holistic approach,” Yahoo President Sue Decker wrote in the memo. “This integration is now well underway, and his leadership and expertise have helped enormously to effect a smooth transition. He and I have discussed for some time the need to further integrate Yahoo!’s capabilities in order to better support the needs of our key customer groups.

“Therefore, with the decision to create this new Global Partner Solutions unit under Hilary’s leadership, we mutually agreed that Greg would leave Yahoo! to pursue other opportunities. We are fortunate that he will continue to assist us in this transition through February, closely advising the team. We deeply appreciate Greg’s contributions to Yahoo! over the past six and a half years, a period in which our advertising revenues have increased from $600 million a year to more than $6 billion, with substantial growth not only in the U.S. but in Europe, Asia and key emerging markets around the world. We wish him the best of luck in the years ahead.”

Which, as loosely translated by BoomTown’s Kara Swisher, means: “OK, we’re not going to smack you publicly like we did ex-ad sales exec Wenda Millard, even after she made us piles of ad money over the years, as you did, as long as you go quietly and don’t disparage us after you go.”

The Googles of the world, they are the Custer of the modern world. We are the Sioux nation. They will lose this war if they go to war. The notion that the new kids on the block have taken over is a false notion.”

–Time Warner CEO Dick Parsons, May 9, 2007

Lousy historical analogies aside, Time Warner CEO Dick Parsons’s ill-conceived comment on the current media landscape was in some ways an apt one. After all, one could say that Time Warner has long been an organization with “too many chiefs and not enough Indians.” Too many working parts, too, according to some who’d like to see the company sell off a few, before Google and Co. commandeers its primary advertising supply and forces it onto a reservation on the south bank of the Missouri.

In a note to clients this morning, Pali Research analyst Richard Greenfield said that the time has come to break Time Warner apart. “It is time for the complexity of Time Warner to come to an end,” Greenfield wrote, suggesting the company consider divesting itself of ts publishing segment or AOL, which Greenfield describes as “unfixed.” “We believe the board and management have had long enough and must act over the next 12 months to radically reshape Time Warner–with its upcoming board (late July) likely to begin laying the groundwork for change,” he continued. “The synergy between Time Warner’s divisions is limited at best; sometimes even creating the risk of destroying value at one division to help another.”

Interesting, eh? Maybe Carl Icahn, the billionaire financier who unsuccessfully tried to force a breakup of Time Warner last year, didn’t misread shareholder sentiment so much as act on it prematurely. Makes you wonder what the topic of conversation was when Parsons and his top deputy, Jeff Bewkes, lunched with Yahoo chairman and former CEO Terry Semel at Allen & Co.’s Sun Valley media and technology conference last week.

It’s a savvy acquisition for Yahoo, one that delivers a pre-existing and very local audience to Yahoo Sports, which is battling it out with ESPN.com and other rivals for the desirable college-sports-fan demographic. And of course, it helps that Rivals.com is actually making money–about $22 million or so a year. That said, it’s not really the sort of major acquisition (read: Facebook) that might make up for the two big bungled acquisition chances–YouTube and DoubleClick–that allowed Google to take such a commanding business lead.

Why? Perhaps investors realized that in the midst of Monday’s orgy of high-fives and back slaps, they’d completely ignored Yahoo’s downbeat earnings commentary (the company said Monday that 2007 revenue will be 2% to 4% lower than originally forecast). Perhaps they realized that incoming CEO Jerry Yang isn’t necessarily known for his business acumen. Or, perhaps, they realized that, even without a separation agreement, Semel may end up being the one who comes out ahead in all this, simply by getting the hell out.

Whacked by his own crew. I guess Jerry Yang has some stones after all. Question is, does he have the management discipline to run an outfit like Yahoo? Consensus seems to be no, but he’ll have to do until the company finds a candidate who does. “They had to do something,” Charlene Li, an analyst at Forrester Research, told News.com. “There was an attitude of ‘anyone but Terry’ at this point.”

Over at Valleywag, Nick Denton was even more forthright in his assessment of the Yahoo co-founder as once and future CEO. “Jerry Yang, pleasant though he is, can’t be anything but a stopgap,” he wrote. “Sure, there are heartening precedents for the triumphant return of a chief exec. Steve Jobs came back to Apple, a charismatic entrepreneur, seasoned by reverses, to turn around the company. But Jerry Yang is no Steve Jobs.”

No, he isn’t. And it’s possible Yahoo may well rue the day it put him back in charge. “A few weeks ago Jerry Yang was the invisible guy,” said venture capitalist Paul Kedrosky. “Last week at the Yahoo annual Terry Semel inexplicably started pitching the idea of Yang as Yahoo CTO. And this week, he’s the CEO. Quite the change, and not one that’s likely to sit well with Wall Street the more people ponder it.”

Depends on how long it takes for folks to remember Yang’s role in Yahoo’s acquisitions of Broadcast.com and GeoCities, I suppose. In any event, few observers seem particularly excited to see Yang driving the company (OK, maybe one.) Said Scott Kessler, analyst at Standard & Poor’s, “I’m not so sure that this ‘new management’ really is very new and capable of significant and necessary changes.” And that’s the real point here, because nothing ever really changes at Yahoo–even when it seems to.

“This move, as with all things Yahoo of late, is typical–a lot of very dramatic things happen all the time, but nothing actually seems to change dramatically,” said Swisher. “Will Semel’s departure really set off a spate of excited innovation within the company, or will it further exhaust the troops by coming off as more deck-chair movement?”

That’s a difficult question to answer when Yahoo’s new strategy seems to hinge on a trip in the Wayback Machine. “Time will tell if this is good for Yahoo. But what strikes me is that there doesn’t seem like there will be any radical changes,” said Derek Brown, an analyst with Cantor Fitzgerald. “As I see it, to the extent that Yahoo is facing challenges today, Yang and [Yahoo President Sue] Decker were on board when the elements were put in place that got Yahoo to the point where it is today.”

I resigned. I know everyone will think I was pushed.”

–Former Yahoo CEO Terry Semel, June 18, 2007

In the face of withering criticism–of his leadership, his efforts to compete with Google and his supersized pay package–Yahoo CEO Semel said today that he was stepping down to assume a nonexecutive advisory role at the company.

In a statement, Semel, who will be succeeded by Yahoo co-founder Jerry Yang, said his resignation was his choice. “The board and I have long talked about the importance of ensuring a smooth succession in Yahoo’s senior leadership,” he said. “As we discussed my future goals and plans, I was clear in telling the board of my desire to take a step back sooner rather than later.”

Apparently, the board responded in kind.

UPDATE: Clearly, Semel is worth more to Yahoo investors dead than alive. The company’s shares spiked 6 percent in after hours trading.

UPDATE: There is an … orgy of Semel coverage over at Valleywag, which seems to have prepared for the former Yahoo CEO’s resignation the way the media prepped for the deaths of Ronald Reagan, Bob Hope and other notables.

Despite complaints over Yahoo’s lousy performance and a widely publicized campaign to oust Semel and the majority of the company’s directors, the company’s shareholders rejected a plan to tie compensation for senior executives to the company’s performance and approved the company’s slate of directors.

That said, the meeting couldn’t have been an easy one for Semel or the board. Yahoo’s directors were approved by a roughly 66% vote. An endorsement, yes, but not a ringing one.

No wonder two independent proxy-advisory firms are urging Yahoo shareholders to vote against the re-election of the company directors responsible for Semel’s compensation. “It appears that CEO Semel is rewarded when times are good … and when times are bad,” said Institutional Shareholder Services.

Especially when times are bad. According to PROXY Governance, Semel’s pay package is 926% above the median paid to CEOs at peer companies. And if you think that’s outrageous, consider this: the $71 million Semel banked in 2006 is much reduced from the $230.6 million he earned in 2005. But Yahoo doesn’t see a problem with it. “Under Terry’s leadership, the company has a clear strategy to create stockholder value, and the company is well positioned to capitalize on the substantial growth opportunities ahead for the Internet,” said Yahoo spokeswoman Helena Maus. “It is also worth noting that Terry does not receive any perks, pensions or other retirement benefits, severance benefits, or any other deferred compensation.” Right … because adding a country-club membership or a car allowance to that $71 million would be a little too crass, huh.

“He’s tremendously overpaid,” said compensation expert Graef Crystal. “If this was an IQ series (ranking), his first name would be Albert (Einstein). He’s off the map.”