Yahoo!'s New Icahn Battleship: U.S.S. Defiant (YHOO, MSFT)

Yahoo! Inc. (NASDAQ:YHOO) has filed its own proxy materials for its August 1 shareholder meeting, and it is essentially asking shareholders to follow it 100% with no concessions to activist and raider Carl Icahn.  Jerry Yang and friends are seeking a re-election of all of its directors and is not including any of the Icahn-selected director candidates.

As the company noted, "…we are executing on our strategy to create value that is gaining traction. In addition, in responding to Microsoft Corporation’s proposal to acquire the company and exploring strategic alternatives, Yahoo!’s board has been focused on one central goal: how best to maximize stockholder value."

The company is still maintaining that it is open to a transaction with Microsoft if it maximizes shareholder value.  The company is also still maintaining that it is seeing gains from Panama.  It also noted that the purchases of Right Media, BlueLithium, Zimbra, and Maven Networks have all helped advance core strategies and that it is winning new or expanded relationships to the likes of WPP, Wal-Mart, CBS, and more than 770 newspapers in its newspaper publishing consortium.  It is also still looking for its new advertising management platform called AMP! from Yahoo! to grow its ad presence.

What is perhaps most important is that this says in big bold letters, "Carl Icahn Has No Credible Plan To Create Value" and even noted further, "In our opinion, Mr. Icahn and his slate are not the right individuals to guide Yahoo! as a standalone company."

Jerry Yang and friends might be right about Carl Icahn not offering any value, and they might not be right.  It is very understandable that they wouldn’t step down just because a billionaire like Carl Icahn gets up their you what. 

In the end the company should consider some of the nominees like Mark Cuban or Frank Biondi, at least if it wants to bring in new ideas and have some checks and balances.  Don’t bet your retirement money on it though.  That suggestion may be like asking the wolves to protect the sheep from predators.  The truth is that Yahoo!’s current board doesn’t want any of Icahn’s nominees regardless of who they are.  The bad news is that Yahoo! needs more shaking up even if Icahn is overstepping his boundaries.

Before the end of summer it is likely that one of these parties will make some concessions, with the key word being "some."

Our own verdict before the trial has even started is that Microsoft (NASDAQ: MSFT) saved untold billion of dollars by not acquiring Yahoo!.  We recently compiled a list for our Special Situation newsletter subscribers of eight other software, tech, and new media companies which Microsoft could acquire for close to or roughly the same amount of cash over the next twelve to eighteen months.  The company also wouldn’t find itself in as deep of regulatory reviews with any of the companies.

Jon C. Ogg
June 9, 2008