What Yahoo! Must Do Next

NEW YORK (TheStreet) -- On Monday in Real Money, I suggested that readers go long Yahoo!(YHOO) stock or short-term calls betting on a deal with Alibaba being announced by today. Instead, the deal got announced yesterday.

Yahoo! is getting $4.3 billion after taxes and will return $3.65 billion to its shareholders (including $650 million or so that it recently spent on stock purchases in the last few months).

This is unquestionably good news for the stock and the company. Many journalists had wrongly concluded that, with the 8-K released several weeks ago asserting that new CEO Marissa Mayer was reserving the right to spend the cash in any way she saw fit, Yahoo! was about to go on a big shopping spree.

This doesn't seem to be the right interpretation at all. Instead, more likely what happened is that Yahoo's lawyers were overly nervous that they had to err on the side of putting out a whole new release, if Yahoo! only spent 85% of its proceeds on buybacks instead of 100%.

The whole 8-K was a big tempest in a teapot.

The stock moved up a little bit yesterday on the news but not significantly. Why?

I think the big problem is that Yahoo! said it'd return the cash to shareholders buy not how or when it would. It needs to.