Henry Blodget over at Silicon Alley Insider has a good summary of Jerry Yang’s Yahoo note to the troops articulating the reasons for the rejection of Microsoft’s offer and the company’s future plans. He gives Yang an A- but I’m not sure this is the kind of rallying cry these guys need right now.

I’m wondering if Yahoo’s big failure happened many years ago when many lines of separation were drawn between technologists and most of the company management. I assume there were official lines drawn, but I’m talking more in terms of cultural differences.

For some contrarian investors bullishness about Yahoo rested on the assumption that the technologists would eventually have their day at Yahoo. The idea was that Yahoo has already created many great tools necessary to keep Yahoo competitive and interface with the broader developer community. Yahoo in theory could quickly bring far more awareness and use of Yahoo tools, effectively widening their footprint over the internet landscape. The Yahoo bulls also suggested that monetizing of traffic would improve, giving Yahoo a huge boost in profits given that historically Yahoo makes less than half as much as Google does per search.

What I’d like to know from Jerry is the plan for rapid technological empowerment at Yahoo. The kind of empowerment that keeps people working until the wee hours on projects that excite them and show great potential for company profits. ie the kind of empowerment Google’s done with their folks.

It will take a LOT more than peppy emails and a combative stance to save Yahoo. The buzz from insiders and recent defections from Yahoo suggest that even internally Yahoos are more bullish about Google than they are about own company.

So, if we assume Yahoo has got to change course in a big way would Microsoft or News Corp be the best fit? From Yahoo’s perspective it appears they would jump on any deal where News Corp was willing to pony up as much as Microsoft. In many ways this seems like a more likely winning combination than Microsoft and Yahoo which would have a lot of initial, and perhaps long term, contentiousness.

Fox Interactive is run brilliantly, and applying these management principles to Yahoo could do a world of good to the bottom line of the combined company. Yet it will be difficult for News Corp to make the case that Microsoft isn’t offering enough for Yahoo, especially when Microsoft ups the offer to about $35 per share as many think they will do soon. This would be a premium of almost 100% on Yahoo’s pre-merger-news price of about $18 per share. Although the Yahoo board may stand firm and reject the offers, Microsoft is probably going to make an offer that Yahoo shareholders can’t refuse.

Long on Yahoo