Yahoos could hardly expect a generous gift in a year when the company went through two rounds of layoffs; failed acquisition talks with Microsoft amidst a neverending rumor mill; countless defections — including the departure of Qi Lu, Yahoo's top search scientist, to Microsoft; and a stock that dropped into the single digits. But nothing might have actually been better than the empty gesture of giving money to other people in lieu of a gift.

Getting nothing was the problem Yahoo's settlement winners had two years ago, when Yahoo's managers forced them to work unpaid overtime to launch a new online-advertising platform called Panama — the one that was so effective that Yahoo turned to Google for help selling ads earlier this year. The suit, Salsgiver v. Yahoo, has been settled and checks have been issued, with some plaintiffs getting $10,000 to $12,000, before tax, for their troubles. (One plaintiff tells Valleywag that 75 percent of the settlement came in the form of taxable salary, with the rest paid as a penalty.)

And what did Yahoo get for its troubles? A system that launched too late and rapidly proved outmoded. The reason why Yahoo ran up overtime for Panama was an abundance of caution; it spent a long period of time testing the new system, to make sure advertisers wouldn't encounter bugs. But the announcement that Panama would be late shocked Wall Street; by the time it rolled out in 2007, Yahoo's stock had already taken a hit, and continued to slide as CEO Terry Semel quit that summer.

He was replaced by founder Jerry Yang, whose 18-month reign has proved even more disastrous. The stock tumble prompted by Panama's delays opened the door for Microsoft's $44.6 billion takeover. Yang's clumsy negotiations with Microsoft dealt another blow to morale at an already unhappy company. Panama has been replaced by another platform, APT, which also shows no signs of beating Google.

The settlement of the Salsgiver lawsuit closes the door on the Panama debacle. But the $10 million the company is said to have shelled out is only a down payment on all the bills coming due from Yahoo's long eyars of mismanagement.

Before he left, Pann rewarded his team for all of Panama's renowned successes with promotions for one and all. Now Morrissey is stuck with power-tripping incompetents, our tipster suggests, who "rarely spoke to any customer during Panama and caused disaster."

The VPs are busy trying to show who has the biggest balls and nobody is running the show. Think of it as a fight for control between the YSM [Yahoo Search Marketing] team in Burbank, the old Goto people, and similar teams in the Bay Area. Winner gets the glory. Who cares if it is crap. Microsoft's offer is a blessing. Maybe they can provide some much needed management who knows how to run a business.

Deutsche Bank analyst Jeetil Patel told clients, "One quarter does not make a trend." He's also disappointed Yahoo didn't adjust its expectations for the last few months of 2007, even after acquiring BlueLithium, an online-advertising startup, and Zimbra, a Web-based software company.

Rob Sanderson, an analyst with American Technology Research, said he's waiting for Yahoo to do more with the Right Media Exchange, as Yahoo president Sue Decker has been promising since Yahoo acquired the company in the spring.

Jordan Rohan, analyst with RBC Capital, was more optimistic. "We think the worst is behind Yahoo for now."

But remember, this is also the guy who valued me-too platform-maker MySpace at $15 billion late in 2006.

(Photo by r.s.m.b. Sees)

But don't worry, there's room for pessimism. Some suggest that one of Yahoo's biggest problems hasn't been Google, but Yahoo's obsession with Google. Now Yahoo's trained its sites on new pair of headlights to stare down — Microsoft and Facebook. What do they have that Yahoo doesn't? Developers, developers, developers.

"Our goal is to create a motivated community of developers all building uniquely compelling applications that reach hundreds of millions of Yahoo users by plugging into the most popular properties or services," Yang said, ripping pages from Mark Zuckerberg's Facebook platform launch speech.

The saddest part of it all? Yahoo failed to buy Facebook last year when the asking price was $1 billion. Now, if it wants to beat out Google and Microsoft in the race to get a piece of the Facebook action, Yahoo is going to have to pay half that price for a stake of 5 percent or less.

Search on a sports team or athlete, and you'll get the latest scores and stats from Yahoo's sports websites, an area where the competition is weak. It's not clear, however, if any of this will boost Yahoo in the score that matters to Wall Street: revenue per search.

As Silicon Alley Insider points out, Yahoo, even before this upgrade, had better search, in that users were more likely to find what they were looking for, and faster, than on Google. But Yahoo still trails in usage. SAI suggests that the problems may lay more in Yahoo's smaller search user base, and possibly less-attractive demographics (more sophisticated users, who latched on to Google early on, are sticking with the search leader out of habit). Yahoo's Panama system, while it may improve search-ad targeting, won't help matters; only getting a larger number of wealthier users will. Improving Yahoo's search may help the people who use Yahoo find things more efficiently. But it's not clear that will actually move the needle on Yahoo's business.

Meg Garlinghouse, director of Yahoo! For Good, the company's community service arm [and sister of Brad "Peanut Butter Manifesto" Garlinghouse], said some of the assembled Yahooligans were moved to tears as the crowd gave a standing ovation to those that created the Panama advertising system ...