This press release is unbelievable. Trying to spin this agreement as something positive is pretty amazing. Especially this part:
The agreement will enhance Yahoo!'s ability to achieve its goal to grow operating cash flow significantly, while at the same time providing flexibility to continue to invest in ongoing initiatives such as algorithmic search innovation and search and display advertising platforms. It gives Yahoo! complete flexibility to continue to use its Panama paid search results.
This makes zero sense. Yahoo, in theory, is doing this to make more money (up to $800M according to the release), but instead of choosing a clear strategy and, say, focusing on their other properties/assets (e.g., communications) they may still keep on investing on their advertising platforms. Meanwhile Google benefits from the added scale/data of the ads they serve. Yahoo is choosing the worst of all worlds.
Had this been a good agreement, you would expect their stock price to react positively (given the "unexpected" new cash coming in). However the market clearly sees that this is a negative. If Yahoo keeps this agreement long term, their ad strategy is dead and the company won't even reap the full benefit of a well-thought out and focused strategy. If Yahoo decides this was a bad idea in the not too distant future (what I think will happen), they will have impaired some of their assets, lost their credibility and strengthened their primary competitor. It's a lose/lose situation. Whoever is running this company is seriously messing things up.
As I wrote a few weeks ago. Whatever the outcome of this whole mess, Google is the winner.
Oh, and one more thing... there is a $250M termination fee (subject to some reductions) in case the agreement is terminated as a result of a change in control. Amazing! Carl Icahn must be going nuts right now. I wonder if he will come out stronger than ever and really shake things up or will just see this as a lost cause and give up. I am betting on the latter, but the former would be great to see.