A review of Yahoo's strategic options

• Shareholders. This is a pretty obvious factor to consider but it's surprisingly difficult to evaluate. If Yahoo goes with the highest bidder, shareholders need to consider the bid differently depending on whether it's for cash or stock. A cash bid should be analyzed based on the after-tax proceeds whereas a stock bid involves making forecasts about future cash flows which will determine the value of those shares in the future.
• Employees. In a high tech company, employees are the ones who create the future. So the board needs to consider which of the options will leave the combined company with the best employees to compete in the markets that it's targeting for future growth. It's difficult to compare quickly the quality of the teams that would result from the various options. But that's why they get paid the big bucks.
• Customers. Ultimately, it's all about which option will create the most value for customers. And the combined company is likely to have different sets of customers with different needs. Advertisers will be looking for which technologies give them the greatest return on their advertising investment. Web users will prefer the option that gives them the most useful content.

Not enough is yet known about the options to assess them along these lines. My hunch is that the Microsoft-News Corp. option would lead to a raised bid, resulting in the best outcome for Yahoo shareholders. But I question whether the integration of these businesses could be managed effectively -- this could lead to employee losses and opportunity for Google to take market share by exploiting the internal confusion.

I expect more details to emerge in the next few weeks. But now the game is on. I hope Yahoo's board picks the deal that makes shareholders, employees and customers better off.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.