Nice piece by Fred Vogelstein in Wired…

Terry Semel was pissed. The Yahoo CEO had offered to buy Google for roughly $3 billion, but the young Internet search firm wasn’t interested. Once upon a time, Google’s founders had come to Yahoo for an infusion of cash; now they were turning up their noses at what Semel believed was a perfectly reasonable offer. Worse, Semel’s lieutenants were telling him that, in fact, Google was probably worth at least $5 billion.

This was way back in the summer of 2002, two years before Google went public. An age before Google’s stock soared above $500 a share, giving the company a market value of $147 billion — right behind Chevron and just ahead of Intel.

As Semel and his top staff sat around the table in a corporate conference room named after a Ben & Jerry’s ice cream flavor (Phish Food), $5 billion sounded unacceptably high. Google’s revenue stood at a measly $240 million a year. Yahoo’s was about $837 million. And yet, with Yahoo’s stock price still hovering at a bubble-busted $7 a share, a $5 billion purchase price would essentially mean that Yahoo would have to spend its entire market value to swing the deal. It would be a merger of equals, not a purchase.

Terry Semel — a legendary Hollywood dealmaker, a guy who didn’t even use email — had not come to Silicon Valley to meekly merge with the geeky boys of Google. He had come to turn Yahoo into the next great media giant. Which might explain why the face of the famously serene CEO was slowly turning the color of Yahoo’s purple logo, exclamation point included. “Five billion dollars, 7 billion, 10 billion. I don’t know what they’re really worth — and you don’t either,” he told his staff. “There’s no fucking way we’re going to do this!”

Note for UK readers: When Americans say ‘pissed’ they do not mean ‘drunk and incapable’ but ‘cheesed off’. I write with feeling, having once been caught up in a trans-Atlantic misunderstanding of the phrase.