– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

The fate of Yahoo Inc has become intertwined in the public’s imagination with the success or failure of its dealings with Microsoft Corp in recent years.

That’s despite the fact that as much as 70 percent of the value investors put on Yahoo’s depressed shares are tied up in its international assets or cash holdings — factors that have nothing to do with Microsoft.

Yahoo’s operations trade for just $5 to $6 per share out of its current $15 share price, once you exclude its Asian investments and the value of its cash. Its hidden assets in Japan and Chinese affiliates — Yahoo Japan Corp and China’s Alibaba Group — alone are worth around $6 to $7 per share.

The trouble is that Yahoo needs to find a way to cash out of its increasingly rocky relationship with Alibaba Group, in which it holds a 39 percent stake after it pulled back from operating its own business in China in 2005.

Yahoo’s best chance here may come next year if Alibaba succeeds with a second IPO of its Taobao.com consumer ecommerce site, building on the success of the 2007 IPO of Alibaba.com, now valued at more than US$13 billion on the Hong Kong exchange.

Truth be told, Yahoo’s huge success in building the biggest U.S. Internet media destination never translated very well overseas, despite the early foray into Asia that left it with lucrative assets in Japan and China. These passive investments came to substitute for a global operating strategy.

But that’s changing now, as Yahoo once again has begun investing in international operations it can fully control.

In its latest such push, Yahoo said on Tuesday that it would buy Maktoob.com, the largest Internet media site for the Arab world, with an estimated 16.5 million users. Terms were not disclosed.

Yahoo’s international stronghold is Asia, where it had 172 million unique users in the month of June, according to industry estimates. It is the top player in Japan through its stake in Softbank-controlled Yahoo Japan, and is dominant in Taiwan and Hong Kong as well.

In India, Yahoo has the most visited home page and is the most popular provider of e-mail, instant messaging and online news to consumers. In a country mad on the sport, Yahoo operates the most popular site for cricket fans. Yahoo had 23 million unique monthly users in India in June, according to market researcher comScore.

But Yahoo stock gets little to no stock market credit for these international operations. Converting market share into meaningful financial results will take years. First, Yahoo must develop its patchwork of leading properties in places like the Philippines and Vietnam and Latin America into a global franchise. And it’s hard to see how Yahoo can regain lost ground in Europe’s more developed Internet markets.

Until now, the trap for Yahoo has been that much of its international value remains latent, locked up in investments in Japan and China rather than in operating businesses it controls. That is changing, slowly.

This leaves Yahoo at the mercy of an eventual rebound in U.S. advertising markets. For the foreseeable future, any significant rebound in Yahoo’s share price depends on conjecture over the still unknown potential of getting into bed with Microsoft.

– At the time of publication Eric Auchard did not own any direct investments in securities mentioned in this article, with the exception of a token Yahoo share. He may be an owner indirectly as an investor in a fund. –

LONDON, Aug 3 (Reuters) - The resignation of Google CEO Eric Schmidt from Apple's board should come as no surprise to anyone with an inkling of what corporate governance means.

But then Silicon Valley's idea of corporate boards has long consisted of cozy, interlocking directorships which would be considered collusion in most other industries.

Google's CEO is not leaving Apple's board voluntarily. He is only stepping down in response to the increased government scrutiny of obvious potential conflicts of interest between the two companies.

Yet regulators shouldn't be content with Schmidt's departure. The truth is that Apple and Google have been heading into the same markets for years. A veritable chain of overlapping business ties remain in place even if the most obvious formal link is now broken.

The chairman of Apple's board, former Genentech CEO Art Levinson, remains on Google's board. Another Google board member, Ann Mather, is the former chief financial officer of Steve Jobs' former animation company, Pixar Studios.

Paul Otellini, the CEO of Intel Corp, Apple's main chip supplier, also sits on Google's board. Al Gore remains on Apple's board, but in his new turn as venture capitalist he has many business ties to Google and its founders. Gore is a partner of Google board member John Doerr at legendary Silicon Valley VC firm Kleiner Perkins.

For months, the U.S. Federal Trade Commission has been examining Schmidt's participation on the boards of the tech world's two most dynamic companies. Last week, the Federal Communications Commission said it was looking into Apple's decision to reject a Google phone application to run on the iPhone.

Google's CEO says he has consistently recused himself from Apple board discussion of the iPhone. There's no reason not to take him at his word. But that's largely a distraction from the bigger issues at stake here,

Schmidt need not have participated actively in iPhone discussions. By taking part in discussions of the rest of Apple's strategy, Schmidt was in a position to steer Google's own strategies around the Apple juggernaut. Rivals need not cooperate directly to divvy up markets.

Anyone following the industry knows that Apple and Google have been moving in similar directions since well before Schmidt joined Apple's board three years ago. As computers become more like phones and the Internet becomes more mobile, the competition has become only more obvious.

By August 2006, both companies were hard at work on their plans to enter the mobile phone market. In September 2005, Apple made its first failed foray into the market with a joint development effort with Motorola that led to the introduction of the Motorola ROKR iTunes phone.

A month before -- and a year before Schmidt joined Apple's board -- Google had acquired mobile device start-up Android, forming the genesis of its own push into mobile phone markets.

Six months after Schmidt became a director, Apple unveiled its ground-breaking iPhone, in January 2007. Fevered speculation mounted throughout 2007 that Google was working on its own so-called GPhone.

In November of that year, Google introduced its Android software for mobile phone development. In September of 2008, the first Android-powered phone built by Taiwan phone maker HTC for T-Mobile was introduced.

So far, Apple has been content to attack the high-end of the smartphone market. Google is aiming at the mid-priced phone market and new mini-notebook computers with Android. But the conceit that the two companies aren't competitors is wearing thin.

Reforming corporate boards has never been easy in Silicon Valley. Recall the boardroom battles that cost former Hewlett-Packard CEO Carly Fiorina her job. They pitted H-P's old guard against corporate governance advocates who were Fiorina's allies. The decline of Yahoo is another obvious example of failed board governance.

Independent corporate governance is an afterthought in the go-go corporate culture of Silicon Valley, where entrepreneurs backed by venture capitalists launch start-ups. Even years after an IPO, the founders and their VC backers typically keep disproportionate control over "their company."

Investors bear no small part of the blame. Most care only in retrospect, once rocket-fueled growth subsides and the shares of former high-tech stars fall back to Earth.

For now, both Apple and Google shares are moving higher, as the tradition of weak corporate governance looks set to survive a while longer.

(Photo: Reuters/Kimberly White)

– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Microsoft Corp’s new Web search service Bing is a far cry from the general-purpose tool the company must build or buy to compete effectively with rival Google Inc.

Microsoft would do far better helping users find the emails, documents and Web pages that users of Outlook, Office and Internet Explorer rely on every day.

But competitive restrictions appear to prevent the desktop software giant from doing what it knows best. Microsoft operates its business under oversight from U.S. regulators after it settled antitrust charges in 2002 that it abused its market dominance in personal computer operating systems.

Barring that, Microsoft needs to come to terms with Yahoo over Web search. A deal has eluded them for 16 months but Yahoo remains Microsoft’s best chance for competing with Google on the consumer Internet.

Microsoft offered to pay up to $47.5 billion for Yahoo early last year but was rebuffed by Yahoo’s former leadership. They have been in talks in recent months but no deal has emerged.

Rather than trying to be all things to all people, Microsoft’s latest reboot of its Internet strategy helps consumer dig deeply and find what they are after quicker, but only in a selected set of categories.
Type in the name of an automobile and Bing assumes the user is thinking about buying or repairing a car. For example, the left frame of the search results page for “hyundai sonata” links to reviews, repairs, used cars, dealers, videos, images and reference manuals. A search for “diabetes” turns up health-related categories.

Many of the features Bing incorporates have been tried by smaller Web search providers and failed to make a dent in Google’s share of the audience for Web search: Ask.com or specialist sites like Spock.com for people search or StumbleUpon for videos, to name a few.

Microsoft needed to restart its search strategy somewhere, and had to focus. Offering a search service that works well in some categories, not others, is no option.

Changing consumer habits is hard enough when you are competing with Google, the generic verb for Web search. No one is going to switch willingly from Google unless Microsoft can demonstrate clear improvements in how Bing works.

The demonstration a Microsoft executive gave me showed Bing can help Web users make decisions quicker by anticipating what kind of information they are searching for when they look for travel terms or autos, sports, health, retail or event names. The service goes lives for U.S. users starting on June 1.

It offers a great way to comparison shop for airline tickets that I’ll certainly use when I travel. Many of the improvements Bing offers are designed to help Web shoppers. That’s a lucrative area that will help Microsoft sell advertising, but is only one of the reasons that people use Web search tools.

Microsoft needs to make headway on the consumer Internet because its ability to expand in areas it already dominates is subject to regulatory challenges from competitors small and large that stand in its way.

It is not voguish to say so in hip technology circles — I may lose some Twitter fans here — but resurrecting competition in the desktop computer market has resulted in unfortunate consequences for consumers.

In dozens of little ways, Microsoft seems reluctant or prevented from adopting widely accepted technologies that make the Web easier to use elsewhere.

In recent years, Microsoft has acquired a string of companies that can help it improve search for business users. Chief Executive Steve Ballmer he’s prepared to take years and invest billions to make headway in the consumer Internet market.

What Microsoft has shown with its initial release of Bing is that it needs Yahoo search more than ever.

– Eric Auchard does not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. –

– Leslie Harris is the president and CEO of the Center for Democracy and Technology in Washington, DC. The views expressed are her own. —

In the wake of troubling reports as recently as last year that Western companies were assisting China with Internet censorship and the unmasking of cyber-dissidents, governments around the world seemed poised to regulate the conduct of Internet companies. Lawmakers appear to have stepped back from those efforts, but the challenges of advancing global Internet freedom remain.

The Global Online Freedom Act, drafted in the U.S. Congress, would have made it a crime for Internet companies to turn over personal information to governments in cases where that information could be used to punish dissent. The bill produced a firestorm of controversy. Human rights groups campaigned for swift passage, while the tech industry scrambled to stop the bill, which they viewed as a global eviction order from many difficult but emerging markets. At the same time, several members of the European Parliament proposed a European version of the measure, taking the accompanying controversy global.

Now policymakers seem far less certain that global Internet freedom will be served by imposing harsh mandates on Internet companies that provide crucial services to customers in repressive regimes. The bill has not been reintroduced in the U.S. Congress this year, and earlier this month, a top European regulator, European Union Telecommunications Commissioner Viviane Reding, dismissed the notion of Europe passing its own Global Internet Freedom Act, saying that she was not convinced that “hard law” was the best way to address the issue.

For Internet executives who feared that hard-line regulatory mandates might force them out of many countries, Reding’s comments came as welcome relief. But celebration is premature. Threats to Internet freedom are growing and lawmakers’ concerns about industry’s role remain rightly high.  Those who choose to misconstrue Reding’s remarks as a free pass on this important issue do so at their peril.

Now is the time that Internet and technology companies must step up and take on the very challenges that the Global Internet Freedom Act was intended to address in order to ensure that their services and technologies do not become tools for surveillance and oppression.

Lest companies argue that the problem is too big and complex for any one company to make a difference, there is a responsible way forward. Late last year, a diverse coalition of leading information and communications companies, major human rights organizations, academics, investors and technology leaders launched the Global Network Initiative, which seeks to provide a framework to help information and telecommunications companies chart an ethical and accountable path forward through the growing demands from countries to take actions that infringe on the freedom of expression and privacy rights of their users.

Equally important, the initiative promotes collective action to uphold the rule of law and the adoption of public policies that protect and respect freedom of expression and privacy on the global network. Three technology giants – Google, Microsoft and Yahoo! – have shown critical leadership by committing to the Global Network Initiative. Now, others in the industry need to step up and make that commitment as well.

Companies that join the initiative will find its requirements both rigorous and fair. Signatories will have two years to implement a range of commitments including conducting human rights risk assessments, training employees, increasing transparency with users and employing a high degree of push back when government restrictions or demands appear to be inconsistent with fundamental rights. Members also commit to encouraging their joint venture and business partners to abide by the same principles.

The collective goal is not to provide the definitive rulebook for companies doing business in hundreds of countries with countless different legal regimes. Rather, the initiative provides a framework that allows companies to stand up for their customers, wherever they are in the world, and to draw support from a powerful community of business leaders and human rights advocates.

Now is a critical moment for this initiative. As regulators shift their focus away from immediate legislative action, the test for the Internet industry will be the extent to which it commits itself to addressing the challenge on its own. The Global Network Initiative provides a path toward responsible action. But its value depends in part on expanding participation from the companies in the sector and building a global identity.

One thing is certain: the challenge of upholding global Internet freedom is not going away. The next time a foreign government uses American Internet technology to spy on citizens, censor democratic materials or otherwise oppress users, the world will ask what the Internet industry is doing to address the problem.

Ignoring the issue was never a viable alternative. The world is on notice about these practices, and the next attempt to legislate the issue is always just around the corner. Companies that participate in the Global Network Initiative will be prepared to do the right thing regardless of whether or not there is a legal mandate to do so. At the end of the day, this is about leadership on a fundamental issue of human rights that will not go away.

– Eric Auchard is a Reuters columnist. The opinions expressed are his own –

Jerry Yang’s elevation to chief executive at Yahoo Inc after a long period of decline at the Web pioneer had the air of a fairy tale where the noble prince grows up and restores his kingdom’s faded glory.

But Yang has worn his leadership like an ill-fitting coat since coming to power last year, appearing reluctant to make the dramatic restructuring moves analysts and investors have long considered vital to get Yahoo to reaccelerate its growth.

Yang made no concessions to the growing chorus of angry investors and media pundits calling for his ouster at a Web industry conference in London this week.

Avoiding questions about Microsoft’s recent rebuff to renewed merger talks between the two, Yang posed for photos in front of dancing singers in oddly chosen surgical costumes singing “Staying Alive,” the never-surrender disco anthem.

It was the kind of goofy humor cultivated by a company that turned a yodel into one of the biggest brands in Internet media but lately has seen little go its way as it attempts a turnaround in the midst of a 15-month-long downturn in online advertising.

In his speech to the Internet Advertising Bureau, Yang reiterated plans to boost Yahoo’s audience and drive more advertising sales. But his underlying message was of deeper and deeper gloom for his company and the Web industry.

The slide into global recession looks likely to delay the adoption of advertising on mobile phones and on the latest generation of Internet televisions, Yang told the conference. It’s an open question whether advertisers will keep spending on Web search advertising if consumers stop buying, he added.

“Yang is basically capitulating unless he can articulate a strategy for how to survive the next two years,” said Jeffrey Lindsay, an Internet analyst with brokerage Sanford C. Bernstein in New York.

As leader, Yang, who recently turned 40, has failed to spark the kind of turnaround that companies like Apple Inc, Dell Inc, and Starbucks Inc saw to greater or lesser degrees once their legendary founders or early leaders returned to the top job.

Unlike Steve Jobs who used NeXT Computer, his intervening company, to test out many of the hardware and software ideas he later implemented in his triumphal return to Apple, Jerry never really stepped outside the company he founded 14 years ago.

Given a second shot at power, Jobs and Michael Dell focused relentlessly on operating efficiency, something Yang appears reluctant to do on the scale demanded by rapid industry change, voracious competition, and a falling economy.

“I don’t think Yahoo has made the kind of drastic restructuring it needs to win investor confidence back,” said Dona Roche-Terry, a managing partner at executive recruiter CT Partners in London. She formerly ran Heidrick & Struggles’ North American telecommunications recruiting practice.

The economy has admittedly given Yang no breaks. As the top supplier of online brand advertising — accounting for almost half its sales — Yahoo has suffered more than rival Google Inc as advertisers slash spending on corporate marketing campaigns. This is because Google focuses largely on Web search advertising seen as more effective for advertisers to locate new customers.

Yang has lost credibility with investors after he scotched Microsoft’s bid to acquire his down-on-its-luck company earlier this year. Yahoo shares trade just above $10, less than a third of Microsoft’s best offer six months ago for Yahoo of $33.

For much of the year, Yahoo has traded at the mercy of whatever kindness or cruelty Microsoft’s outspoken CEO Steve Ballmer bestowed on the hobbled company.

At hints of renewed interest the stock rockets 10 or 20 percent in a matter of days. When Microsoft’s interest appears to cool, the shares tank again. It is now at 5-1/2 year lows.

It’s hard to imagine a Yahoo without Jerry Yang.

Critics underestimate the stabilizing role Yang could play in helping seal a deal with Microsoft, were it to renew its offer. The upheaval created by pushing aside Yang in favor of a new Yahoo leader would likely delay Microsoft and Yahoo getting back to business. Besides, as a 3.8 percent owner of Yahoo, Yang will remain a player in any major transaction.

Most Wall Street analysts think it is only a matter of time before Microsoft and Yahoo start talking again about a deal for some or all of the company — albeit at a far lower price, reflecting sharp market declines.

Lindsay believes we have entered an awkward waiting period before Microsoft renews its pursuit.
His theory is that Microsoft is waiting until early in 2009 for the new U.S. presidential administration and regulatory regime of Barack Obama before braving the fight to win passage for such a mega-merger from competition authorities.

Microsoft is no longer likely to pursue a public offer but will approach the Yahoo board to negotiate a private offer.

The plucky company Jerry started with co-founder David Filo 14 years ago as a navigational guide to “cool sites” on the Web would then become another brand in a stable that includes Windows, Office, Xbox and Zune.

Competitive pressures to consolidate established players in order to compete with the growing market dominance of Google have overrun the sentimental notion that a young prince would grow into a wise king in a land called Silicon Valley.

– At the time of publication Eric Auchard owned a token share of Yahoo purchased ahead of the company’s 2008 annual meeting. He did not own direct investments in any other securities mentioned in this article. He may be an owner indirectly as an investor in various funds. –

 By Colin Maclay, Acting Executive Director, and Caroline Nolan, Research Associate, Berkman Center for Internet & Society at Harvard University

More than one billion people are online, with three times that amount connected via mobile devices, just one indication of how integrated digital technologies are with lives and livelihoods around the globe. While governments have for the most part encouraged these developments, they are increasingly aware of technology’s capacity to disrupt existing power structures and accordingly ambivalent. As governments seek to control information and online activities, private actors – information and communication technology (ICT) firms in particular – are increasingly called upon to assist in those efforts.

Many of us mistakenly assume that Internet governance doesn’t touch us, and maybe it doesn’t – what expression is allowed on the Net and whether your personal information is shared with law enforcement is often governed less by law and more by practice. As Jonathan Zittrain and John Palfrey have long argued, companies providing technology services are important Internet points of control  and are under great pressure to comply with local laws and practices, which can be at odds with international standards, corporate values, and social norms.

Facets of these corporate dilemmas have been explored by the OpenNet Initiative, the Citizen Lab, Chilling Effects, and other keen observers like Rebecca Mackinnon, but we are just beginning to understand the scope of this rapidly evolving problem.  Most of us remain more familiar with a few infamous incidents in certain countries than with the real challenges arising with less fanfare across the world. The emergent nature of global technologies, business models, and government responses makes these complex problems particularly difficult for law to address effectively , at least in the near term.  These networked, distributed issues require a dynamic approach, capable of evolving and scaling alongside the problem, and ideally ahead of it.

Launching this week, the Global Network Initiative is a multi-stakeholder effort – grounded in a set of guiding principles, supported by implementation guidelines, and a governance, accountability and learning framework  – that establishes a robust, responsive platform for participating companies, NGOs, investors, academics, and others to work together to protect and advance the rights to free expression and privacy in the ICT sector worldwide. The launch represents the empowerment of a coalition that can support companies as they resist governments that seek to enlist them in acts of censorship and surveillance in violation of international standards.

This ground-breaking approach was developed with Google, Microsoft, Yahoo!,  Human Rights Watch,  Committee to Protect Journalists, Research Center for Information Law at University of St. Gallen, Switzerland FIR, School of Information at University of California-Berkeley, Calvert, F&C Investments  and other organizations – hopefully, with many others introducing still greater diversity to come. Our varied views and experiences can be challenging, they push - and allow – us to consider the problem and approaches to it across multiple dimensions, ultimately helping us to balance aspiration and reality (or near term progress with long-term success) in a way that no one sector would likely achieve.

The actions of (and expectations for) companies will evolve over time. Early commitments center on responsible decision-making, specifically developing the capacity to anticipate and address concerns relating to privacy and expression.  Among other steps, companies will form cross-functional leadership teams and train employees; conduct human rights impact assessments before entering new geographical or service markets, developing associated strategies to mitigate those risks; and encourage participation in GNI by relevant partners.

Company relations with law enforcement can be complex, due to obligations to support both legitimate law enforcement aims and commitments to protect user rights (which is also clearly a business interest).  Under GNI guidelines, companies will request written documentation explaining the legal basis for government restrictions; will seek to minimize the impact of any such restrictions; and will challenge governments when faced with requests that appear inconsistent with domestic law or international human rights standards.

These activities will be verified through an accountability and learning framework, in which outside monitors will explore what is working and what is not, ensuring that companies are making progress on their commitments, and developing remediation where they are not.  Companies’ public reporting will foster greater transparency with users and the wider public.

Beyond these internal commitments (which companies are already introducing), we are optimistic about the Initiative’s capacity for collective action that can have a transformative effect on government behavior and lasting impact. 

As a university research center, the Berkman Center will focus on building the GNI’s underlying foundation – its capacity for learning and research and information sharing – developing strategies to identify, understand, and address the threats to and opportunities for privacy and free expression.

We are in the early stages of a long road but are fortunate to have recognized that these are network issues: they emerge from and are characterized by the distributed nature of ICTs. Effective solutions should be built upon the same platform, with efforts that are independent yet coordinated; responses that are tried, evaluated and refined over time; and lessons that are shared and adapted; and all the while, striving for transparency. The Global Network Initiative connects our contention that the digital world not only gives rise to new challenges, but also allows the formation of new institutions that respond effectively to them.