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The elaborate Kabuki routine being acted out in Microsoft and Yahoo's boardrooms serves one purpose: To cloud the notion that the takeover is about money. It is, of course. Watercooler talk at Yahoo's Sunnyvale HQ is that management is pushing for $36 a share — conveniently more than halfway between Microsoft's initial $31 bid and Yahoo's $40 counter. But Jerry Yang seems opposed to a sale at any price. And he has a secret plan to reboot Yahoo.

Four months ago, Yang reassigned hundreds of employees to skunkworks projects, with the goal to make Yahoo "relevant." They're now working on a few specific projects:

  • Rethinking the Yahoo homepage
  • Consolidating Yahoo's plethora of social networks
  • Opening up Yahoo to third parties with a consistent platform similar to Facebook's
  • Revamping Yahoo's network infrastructure

Microsoft's bid came at a bad time for Yang, since some of the projects are bearing fruit and he had hoped to launch them as soon as this month. For Yang, it's a big bet — his own version of Panama, the massive project to revamp Yahoo's ad platform. Of course, that doesn't bode well for Yang's efforts, since the delays in Panama were one of the factors that depressed Yahoo's stock price, opening the door for Microsoft.

Yang may well be overoptimistic. But his enthusiasm for Yahoo's secret technology has to factor into his thinking. Will a new developer platform really make Yahoo worth $40 a share overnight? Unlikely. But Yang must believe that what Yahoo has created in the last four months is worth more than Microsoft's dealmakers counted on.