Hindsight is easy. If you look back at the two decades before 1998, it was basically Microsoft, Intel (and to a lesser extent Oracle) buying (hopefully) or crushing every single engineering-centric company out there. They used good ol' monopoly power and FUD, which is pretty far from an engineering culture. Borland, Lotus, Apple, etc. IBM had successfully made a transition to a service company and the conventional wisdom was that that was all that saved them from being crushed in turn. Jerry Yang was just following the conventional wisdom.

EDIT: Most importantly they had just witnessed the spectacle of Netscape, a company that seemed unstoppable, just completely buried by MS.