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New deal with Yahoo will appoint Icahn as a director and will expand the board by two members

The battle between Icahn, Microsoft, and Yahoo's leadership has been a heated one in previous weeks.  With Icahn threatening shareholder revolt, he promised to depose Yahoo CEO and cofounder Jerry Yang and Yahoo Board Chairman Roy Bostock if his slate of candidates were elected at the annual shareholder meeting.

Faced with this grim prospect, Mr. Yang and Mr. Bostock balked, cutting a deal with Icahn that they hope will keep him happy.  Robert Kotick, the Activision Blizzard CEO, will step down from the board to make room for Icahn.  Meanwhile, the board will expand by two members, with eight members of Icahn's posse, including fellow billionaire Mark Cuban, running for the open slots.  Only one non-Icahn candidate, Jonathan Miller, the former chief of AOL, will challenge them.

With Mr. Icahn likely to have control of three of the soon-to-be 11 board positions, he finally has enough power to finally push for some of the moves he wants.  He made it clear in a statement, that while pleased with the deal, it is only a means to his ends -- selling the company's Search business to Microsoft.

Mr. Icahn stated:

I am very pleased that this settlement will allow me to work in partnership with Yahoo!s Board and management team to help the Company achieve its full potential. While I continue to believe that the sale of the whole Company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo!s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders. I believe this is a good outcome and that we will have a strong working relationship going forward. Additionally, I am happy that the board has agreed in the settlement agreement that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made.

Meanwhile, Mr. Bostock and Mr. Yang are pleased as the deal may save their necks as indicated by Mr. Icahn easing his rhetoric regarding their possible forced departure.  Mr. Bostock said, "We are gratified to have reached this agreement, which serves the best interests of all Yahoo! stockholders.  We look forward to working productively with Carl and the new members of the Board on continuing to improve the Companys performance and enhancing stockholder value. Yahoo! is a world-class company with an extremely bright future, and collaborating together, I believe we can help the Company achieve its ambitious goals."

Mr. Yang added, "This agreement will not only allow Yahoo! to put the distraction of the proxy contest behind us, it will allow the Company to continue pursuing its strategy of being the starting point for Internet users and a must buy for advertisers.  No other company in the Internet space has our unique combination of global brand, talented employees, innovative technologies and exceptional assets, attributes that will help us take advantage of the large and growing opportunity ahead of us. I look forward to working together with our new colleagues on the Board to make that happen."

It should be interesting to see how the board reacts, should Icahn push to sell the search business after his candidates are safely in place.  In the past, Mr. Bostock and Mr. Yang have been vocally opposed to splitting off this business unit, which the company was founded upon, insisting on a complete transaction or none at all, and demanding a lofty price for such a complete transaction.

If Icahn succeeds in selling the search unit, it would be eerily reminiscent of his victory with Motorola in a similar dispute.  Like with Yahoo-Microsoft, he initially approached Motorola hoping to depose the board and sell the entire company.  In the end the leadership at Motorola caved to his demands, and gave him a share in the board, allowing him to sell off a couple of the company's business units.  The compromise was a victory for Icahn, above all else, who made a tidy profit in stock.  Should the Microsoft-Yahoo deal go through, Icahn, who holds 5 percent of Yahoo's stock, should similarly see great financial rewards.

However, if there's anything the Yahoo and Microsoft drama has taught us, it is to expect the unexpected.  So until the deal is set in stone, don't be surprised to see more antics from the company, from Mr. Icahn, and from Microsoft.



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...
By BigToque on 7/21/2008 10:55:59 AM , Rating: 2
If Icahn has the intention of selling/breaking up Yahoo, how does bringing them on to the board represent doing what's best for Yahoo (which is what the board is legally responsible to do)?

It says right in the article they brought them in so some of their own brass could keep their jobs.

I suppose it could turn out positively, but I assume what's going to happen is that shareholders will take it in the ass while the CEO, presidents and other board members take home a billion dollar bonus of some kind.




RE: ...
By Murst on 7/21/2008 11:28:17 AM , Rating: 2
quote:
If Icahn has the intention of selling/breaking up Yahoo, how does bringing them on to the board represent doing what's best for Yahoo (which is what the board is legally responsible to do)?

Sorry, but that statement is just plain wrong. The board has a responsibility to do what is best for Yahoo! shareholders, not what is best for Yahoo! as a company. There's quite a significant difference there. For example, if Icahn gets his way, there's not going to be a Yahoo! anymore. How can that be the best thing for the company? But it could certainly be the best thing for the shareholders.

quote:
but I assume what's going to happen is that shareholders will take it in the ass while the CEO, presidents and other board members take home a billion dollar bonus of some kind.

Icahn is a shareholder. He will do what is best for shareholders, because that's how he makes his money. Virtually any kind of "bonus" which might be provided will most likley be insignificant compared to his 60 or 70 million shares.


RE: ...
By just4U on 7/21/2008 1:55:11 PM , Rating: 2
What does it matter? I mean Microsoft backed off from the deal and doesn't seem interested any longer. So with that line of thinking isn't this all sort of moot?


RE: ...
By Master Kenobi (blog) on 7/21/2008 2:14:30 PM , Rating: 5
Not really. Microsoft could just as easily change their tune if Yahoo offers them a sale. This way its seen as Yahoo getting on their knees and begging Microsoft to take it off their hands.


RE: ...
By kelmon on 7/21/2008 4:45:04 PM , Rating: 4
Indeed. Microsoft has an on-going problem that their search and advertising business is, frankly, going backwards rather than forwards and they need to do something if they want to compete with Google. Microsoft will still want to buy Yahoo! but only if the deal is right, not least because they'll no doubt be taking on more problems given that Yahoo! isn't exactly a bed of roses.

I suspect this story will run and run.


RE: ...
By Netscorer on 7/21/2008 3:18:19 PM , Rating: 5
quote:
...Icahn is a shareholder. He will do what is best for shareholders...


One significant qualifier that you have to add is that Icahn is shortselling the company because at his entry price he will get quite a nice bonus for a short term investment. This is not necessary a good thing for long-term investors in the company, represented by current CEO Young.
All Icahn is trying to do is get a quick buck and leave, consequences be damned. Young is trying to preserve the company because he understands that, short term difficulties nonwithtanding, Yahoo is still positioned as one of the top 5 Internet enterprises and has enormous long-term potential.


RE: ...
By Solandri on 7/21/2008 4:11:11 PM , Rating: 2
Yeah, Icahn is the jerk who gutted TWA leading to its bankruptcy and setting it up for its eventual sale to American Airlines. Most likely he's in it for the short-term profit, long-term prospects be damned.

http://en.wikipedia.org/wiki/TWA#1992_bankruptcy


RE: ...
By Murst on 7/21/2008 4:26:50 PM , Rating: 2
I'd have to disagree here. Do you really think Yahoo! is worth $45 billion? Once the dust settles, people will look @ these companies and realize that they're completely overpriced. Just take a look at the profits of Yahoo - I'd like to see how you can justify a $45 billion price tag.

People will always point out that the company has "potential". Well... if Yahoo! has all this potential, why is their marketshare constantly going down? Why are their profits going down? Why is the management leaving?

I think Yahoo! will be lucky if Icahn can get them sold at even close to $45 billion. Because if this deal falls through for them, I doubt they'll ever be able to get anywhere close to that in the future.


RE: ...
By Oregonian2 on 7/21/2008 6:18:21 PM , Rating: 2
Yup. The dot-com frenzy, with a little less vigor.


RE: ...
By mcturkey on 7/22/2008 2:02:31 AM , Rating: 2
Long term investors? Are you kidding me?

If you can convert your $20 to $30 over a period of a few months or a year, that does you a lot more long-term good than converting it over a 5-10 year period. That $30 you'll get in a few months can be reinvested to become $40 or more within a few years. Yahoo's potential is highly questionable at this point, and even if they somehow hit this ridiculous $45 mark in a decade, how much better would other, more realistic stocks be doing?

C'mon, nobody plays internet stocks for the long run. Nobody.


I dont know about this...
By firehazard on 7/21/2008 10:27:23 AM , Rating: 4
quote:
Meanwhile, Mr. Bostock and Mr. Yang are pleased as the deal may save their necks as indicated by Mr. Icahn easing his rhetoric regarding their possible forced departure.


They must not know what Icahn is know for. Remember the TWA incident?




RE: I dont know about this...
By fezzik1620 on 7/21/2008 10:59:05 AM , Rating: 4
By Master Kenobi (blog) on 7/21/2008 12:10:32 PM , Rating: 2
Happens on Wikipedia alot. Will be hours if not days before anyone notices.


RE: I dont know about this...
By AstroCreep on 7/21/2008 8:28:56 PM , Rating: 2
Really.
Why doesn't this guy just die already?


"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs














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