Yahoo's Holiday Bonus: A Lawsuit Settled

If you thought Google's "dogfood" holiday gift was chintzy, check out what Yahoo employees got: $50. To donate to charity. Some others, though, are stuffing their stockings with a $10 million legal settlement.

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 Panama has been replaced by another platform, APT, which also shows no signs of beating Google.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.