There's a hilariously detailed 50+ page internal style guide at Yahoo explaining exactly what you can and can't do to the logo. These kinds of decisions go all the way to the top at Yahoo! (exclamation mark obligatory), which says a lot about the company.
What's awesome about that is that red was heavily tied into their brand identity and purple came from nowhere and really un-does a lot of the brand equity they have built up.
Internally, Yahoo has always had purple and yellow as a theme. The legend is that they were the cheapest colors at the store when Jerry and Filo were setting up the office. Personally, I don't buy this; probably the real explanation is that they deliberately chose eye-watering colors like every other startup in the mid-90s.
They also say that the online Yahoo logo was made red because there wasn't a good shade of purple on old Windows 3.1 computers. Remember those days?
In recent years, Yahoo has been dominated by more cheerleaders and corporate climbers than do-ers, and purpleness has become an obsession. It's purple purple purple everything there. Proof: the move to rebrand Yahoo as purple, a color which users had never associated with the company before.
