Carl Icahn Takes on Yahoo's Board

narramissic and several others have written to point out that Carl Icahn has initiated a proxy battle with Yahoo's board of directors over their rejection of Microsoft's bid for the company in February. Icahn has purchased millions of Yahoo shares over the past week and assembled a group of nine other investors (including Mark Cuban) to persuade the board to resume talks with Microsoft. Yahoo remains unimpressed. Icahn's letter to Yahoo accuses: "It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet."

It's not completely their fault

What are the odds that the FTC would actually allow a merger like this anyway? I mean the evil power of Microsoft coupled with both of Yahoo's users could mean serious trouble.

Re:It's not completely their fault

What are the odds that the FTC would actually allow a merger like this anyway? I mean the evil power of Microsoft coupled with both of Yahoo's users could mean serious trouble.

Given Microsoft's record on acquiring companies and launching new products Google must be dancing in the streets. They've been trying to kill Yahoo for years. Microsoft should do it in less than a year.

Re:It's not completely their fault

Nuh, huh! I'm a Linux user, and for the record I have several throwaway fake email accounts on Yahoo, you insensitive clod!

Re:Why is it I know a merger won't be successful..

You have to understand the economics of the situtation to understand why this would probably be a good combination. Yahoo has a very large web audience, but has had difficulty generating advertising revenue from it, i.e. its technology isn't very good, so it isn't making as much money selling advertising as it otherwise could. Microsoft has the opposite problem, i.e. good technology that can convert traffic into advertising revenue, but it was much too late to the game, so it lacks a sufficiently large audience, and there's no reason for Yahoo or Google users to switch (even assuming Microsoft's content is as good, which is questionable).

A Microsoft/Yahoo combination (assuming it's even on the cards any longer from Microsoft's view) would allow Microsoft to replace Yahoo's ineffective technology with Microsoft's superior technology, whilst keeping Yahoo's popular content and websites. Google already has both high traffic and the technology to generate a high amount of advertising revenue from it, which is why Microsoft and Yahoo really can't compete in advertising on their own: Microsoft needs a bigger audience and Yahoo needs better technology. This is the logic behind Yahoo's approach to Google too (i.e. combining Yahoo's audiences with Google's superior advertising technology), but it's nevertheless insane from a business point of view, because in almost every area Yahoo operates, Google is its chief competitor. It really looks like a principal-agent issue, with Yahoo management more interested in securing their own power than in doing what's best for the shareholders who employ them.

If the Yahoo employees behind the company's lagging technology are less than thrilled about a Microsoft takeover, I can certainly understand why: Microsoft have no need of Yahoo's inferior technology, only its audience, so a lot of Yahoo engineers are surplus to requirements. At best these engineers will end up working on technology designed by someone else (i.e. Microsoft's current technology), and at worst they'll lose their jobs. That doesn't mean the deal doesn't make a huge amount of sense for Yahoo shareholders, and the long-run viability of Yahoo as a whole, which it does. If Yahoo continues to be run by inept management, and continues to use technology that isn't competitive with its rivals, it's only a matter of time before it fails, and then these employees will lose their jobs anyway.

What is the "good technology" from Microsoft?

"Microsoft has the opposite problem, i.e. good technology that can convert traffic into advertising revenue, but it was much too late to the game, so it lacks a sufficiently large audience..."

What is the "good technology" from Microsoft?

I just used Microsoft's Live.com to search for "aardvark". Interesting: Google returns a link to Firefox's Aaadvark add-on as the second entry. But Microsoft's live.com never lists the Firefox extension in the first 10 pages.

Can Microsoft be trusted not to be adversarial to customer interests in its search results? Apparently the answer is a big NO. Just that one random search convinced me to never use live.com.

Re:It's not completely their fault

Because for every million in cash he donates he donates 3 million in windows XP licenses.

Take a good long look at what the that foundation donates. a decent percentage of it is is windows software which costs bill G nothing to make another million copies of. He then writes off the full retail (not OEM, but retail) value of the software. As if someone was buying boxed copies of the software.

the Oil tycoons, and steel tycoons of old at least built things that the public could visit, and use. Bill G is too cheap to even do that much.

Re:It's not completely their fault

This is Slashdot, for heaven's sake - the most popular place on the Interweb where one of the world's richest men can take the billions he has personally earned as the Former CEO of one of the most successfull software companies in the world and give it away to save lives and fight HIV/AIDS and a host of other diseases that kill millions of children each year...and be called "evil".

He's called "evil" because he got his money by

• Monopoly abuse ("that's a nice little program you've got there, Stac...")
• Running competitors into the ground (no, that's not business as usual)
• Raw hypocrisy ("Open Source is Evil. Just don't look at ftp.exe.")
• Flat-out fraud ("sure, IBM, I have an OS I can sell you")

The guy's an ass who's held computing back for the last 25 years through actions that'd get you and me imprisoned, or at least run out of business.

By your logic, it doesn't matter how he got his wealth as long as he gives a little bit away. Well, nuts to that. Warren Buffett's doing pretty OK for himself and I'm unaware of any similar allegations against him.

It's OK that Bill's fake-donating money to charity, but he's still an ass.

Next up

Cue Shatner screaming "Icaaaaaaaaaaaaaaaaahn!"

haha

If Microsoft does to yahoo what it did to hotmail and other companies, google's number 1 competitor is history.

I can only imagine what would happen by taking yahoo's infrastructure off free bsd and putting it on windows.

Google might just be loving this.

Yahoo!

I had given up hope that Microsoft would fire their legendary footgun at a Microwho? deal. I hope they blow all their available cash on this.

The synergy of this opportunity rivals a .com bubble for the ability to vanquish vast quantities of value.

Now I can look forward to reading about this in the news [google.com].

I don't get it.

I can see how Yahoo would help Microsoft compete with Google. But how does Microsoft help Yahoo?

Re:I don't get it.

The M$ buy of Yahoo had nothing to do with making M$ a better company, it was all about Ballmer's survivability after his windows and office blunders as well as his bombastic boats about beating google. This was a look at the other hand buy, a whole lot of flash and noise about buying Yahoo to obscure the failures.

Simply put, in a few months the M$=B$ PR machine would rewrite history, add Yahoo market share and revenue to MSN's lack of market share and revenue and then claim all those gains for MSN as a result of Ballmer's skill, rather than simply buying those numbers in at a loss.

Translation

It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.

Translation: "I got burned buying Yahoo! shares betting MS would raise its offer, please resume talks so the share go up again and I can win my money back!"

Though luck Icahn, betting on a single stock is stupid, go back to your books and study what "idiosyncratic risk" means.

Re:Translation

Tough luck? As a major shareholder, he has voting rights. And he's using those rights to challenge Yahoo's board over their failure to seriously consider the offer. Anyone who believes that letting Microsoft walk away was going to increase shareholder value is an idiot. The $33/share offer was probably the highest value any Yahoo shareholder will ever again see for their stock.

Yahoo's board screwed up big time by trying to stay independent. Guess what? Google owns internet advertising and search. Neither Yahoo or Microsoft can really make much of a dent in it alone. Quite frankly, I'd much rather see a merger between them give Google some actual competition, because alone neither one is going anywhere. There is of course no guarantee that a combined company would actually be more competitive, but I find that more likely than Yahoo's fortunes suddenly doing a 180.

Re:Translation

Tough luck? As a major shareholder, he has voting rights. And he's using those rights to challenge Yahoo's board over their failure to seriously consider the offer. Anyone who believes that letting Microsoft walk away was going to increase shareholder value is an idiot. The $33/share offer was probably the highest value any Yahoo shareholder will ever again see for their stock.

Well first of all, the job of the yahoo! board is to maximize shareholder value for _all_ shareholders, not just Icahn. Second, since when has the conjunction of two failed strategies ever worked out? Both Yahoo! and MS have failed to win marketshare over Google and somehow the combination of both will work? I might be too old and all, but a clear trend on the web is that small start-ups are the ones that usually succeed, not huge conglomerates, so keeping Yahoo! at a decent size might give them a bigger chance to adopt to what the market wants. Microsoft has a pretty bad track record (certainly recently) at meeting consumer demand, just look at Vista, the Zune, the whole range of Windows Live! services, etc... Why would Yahoo! want to sell-out to a company that obviously has a hard time meeting consumer demands in a market that needs exactly that?

What offer?

What offer is this idiot talking about?
From TFA: "I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company"

Microsoft, on the other hand, says it is no longer interested http://www.microsoft.com/presspass/press/2008/may08/05-03letter.mspx [microsoft.com]

Re:What offer?

Of course, with Icahn really pushing this, there's no real reason for MS to come back with a stellar offer. Look at them walking in to buy yahoo for peanuts. Should be telling, if they do, icahn is embarrassed by it. If they do, and icahn's still pushing hard, start looking into whatever side deals MS might have made with icahn through proxies. Wouldn't put it past MS to offer a good deal for show, then buy yahoo for peanuts once they signed on a patsy.

Either way, if yahoo can't fight this somehow, they're done. Nobody that has a clue is going to stick around hoping MS gets this one right. If people wanted to play with MS, hotmail and others would have been an automatic winner, and this wouldn't even be an issue.

As with a previous poster, I hope this puts a nice dent in their wallet, and burns them all. Not just because MS needs a rung kicked out, but as an example to other companies that buying out the competition in order to destroy what made it competition, is a stupid idea.

When I see something like this..

I've followed the /. headlines over this lack of a deal, and have been generally surprised by the neoliberals ordaining that the yahoo board had a duty to sell the company for short-term advantage. Despite the fact that under any decent discount rate, the whole proposal represented little more than a bet.

Even if regulated accounting doesn't float your boat, the ideas of Fischer Black (eg. http://www.amazon.com/Fischer-Black-Revolutionary-Idea-Finance/dp/0471457329/ref=sr_11_1?ie=UTF8&qid=1210920867&sr=11-1 [amazon.com]
) can't be ignored. Under that light, the entire deal seems to be more involved in noise trading than any solid economic expansion.

Yahoo was...

...the big cheese until a couple of guys in a garage fucked it up for them. Yahoo failed to adapt.

Microsoft was the big cheese until they fucked it up themselves by releasing an unstable (moreso than they usually do) product. They'll probably fail to learn their lesson.

Merging a company full of fuckups with a company full of fuckups will still give you a company full of fuckups - just bigger. Even so, Google doesn't have its own OS, and that would significantly contribute to Yahoosofts's power. (I'd say Microhoo, but it sounds dirty.)

Icahn's a Pain in The Ass

Not that I would spend a great deal of effort defending Ed Zander, former CEO of Motorola, but when I was at Moto last year, Icahn seemed indignant that Motorola was sitting on some $12E+09 in cash, and was busy prancing around and bulk-mailing shareholders to vote him a seat on the board of directors, so that he could give the cash to Moto shareholders as a huge dividend (or something).

Even before Apple's iPhone came out and smacked Moto's RAZR out of the park, it was clear that Moto needed to be doing R&D for the next-gen handsets. Oh, and you might want to keep some cash around in case of a rainy day. Icahn got handed his hat. And Moto did a bunch of weird acquisitions.

These days, it's raining pretty hard at Moto. I'm sure that pile of cash is helping them through the lean times.

All of which is a roundabout way of saying: Carl Icahn is a vocal, over-exposed pain in the ass. Whenever he talks, put your hand over your wallet, and pay very careful attention to what he's doing with his own.

Schwab

Illogical conclusion

So according to this guy:

Microsoft + Yahoo = "Dynamic" ?

I think he's way off base. If Microsoft is going to be a Dynamic Duo with anyone, it would be more likely some organization that thinks like them and can compliment their business practices, such as:

Microsoft + Halliburton
Microsoft + SCO (oops, already happened)
Microsoft + Phillip Morris
Microsoft + the Mafia
Microsoft + Dow Chemical
Microsoft + Exxon Mobile ...

Addendum:

I'm not even convinced that this is a legitimate play by Icahn to make MS/Yahoo be more competitive with Google. If I'd have a billion dollars to invest, and I'd know that a merger would pump a company's stock price by 72%, I'd try to buy enough influence to make that happen. Icahn would make out like a bandit even if MS/Yahoo go down in flames the day after the deal is signed.

Re:Addendum:

Investors like Icahn ironically don't give a fuck about ethics. That is why they flock to the likes of Microsoft.

You don't know what Icahn does, do you?

He doesn't care about a merger, he wants Yahoo to pay him to fuck off. Look up "greenmail" on wikipedia.

-jcr

Re:In other news....

You really think he's that stupid?

I don't think Icahn actually believes what he is claiming. He's just claiming it so that he can make even more boatloads of cash.

The Yahoo deal would have made a lot of people like Icahn richer. They take the profits, run and do they really care what happens to Yahoo? No they don't.

If you think the deal doesn't make sense, then the people who should worry should be the people owning Microsoft shares.

The founders of Yahoo may not like their baby being destroyed in the long run, but that's what happens when you take a company public - it's no longer 100% in your hands.