More Yahoo Drama as Icahn Bears Down

The story around Silicon Valley was that Jerry Yang was seen high-fiveing other Yahoo execs the day that Microsoft pulled its $47.5 billion buyout offer.

I wonder if they're cheering now? With the announcement Wednesday that billionaire investor Carl Icahn is launching a proxy war to take over the company, it looks like Yahoo is about to host its own Predator's Ball over the next few months.

With his purchase of 59 million shares — $1.6 billion worth — of Yahoo stock, it appears that Icahn is going to earn a place at the directors' table at the company's Sunnyvale headquarters … and once inside, it's going to be hard to stop him.

Meanwhile, if you are Yang and company, you have to be wondering who else is out there watching and licking his chops: Malone? Redstone? You've already flung yourself into the arms of Google, hoping that your younger, better-looking counterpart actually wants you, instead of merely trying to make trouble for your equally aged, and now deeply frustrated suitor.

That Microsoft offer is probably starting to look pretty good right now … just like it always has to Yahoo's shareholders. And the company's response to Icahn's notice — that it "reflects a significant misunderstanding about the facts of the Microsoft offer" — isn't going to cut it with those shareholders.

When those shareholders look at Yahoo's current stock price, $27, and subtract the amount they suspect is due to the market's expectations of an inevitable buy-out, one suspects they are more likely to agree with Icahn's words that "the board of directors of Yahoo has acted irrationally," and that, "It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72 percent premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer."

An interesting question is just why Yahoo management let it come to this — especially since the most likely scenario now is for a hostile takeover, dismemberment of the company, and an eternal blot on their own reputations. In fact, the search for an explanation to this bizarre behavior has become something of a virtual parlor game on various high tech Web sites.

The least likely possibility is that there really was something hidden in the Microsoft bid that made the deal impossible — and that if finally brought to light would make us all slap our foreheads and say, "Well, no wonder Yahoo turned them down."

But what exactly would that be? Did Steve Ballmer suddenly turn into Larry Ellison and whisper into Yang's ear that he intended to fire every Yahoo employee the instant the ink was signed? To which Icahn would probably reply, so what? At least the shareholders (and most of the employees) would walk away with a healthy bonus, instead of wandering the decks of a slowly sinking ship.

Another possibility, mostly claimed by old Valleyites, is that Yahoo, like every other tech survivor of the early '90s, is crazy-obsessed with Microsoft — and would rather die than surrender to the Evil Empire of the North. But this is 2008, and neither Microsoft nor Yahoo is the same company it was. Plus, it is hard to believe that Icahn and thousands of pensioner shareholders are currently sobbing over Yahoo's moral predicament in refusing this shotgun wedding with its worst enemy.

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