Carl Icahn, Yahoo Board Split Amicably

From USA Today

Activist investor Carl Icahn has decided his work is done at Yahoo after muscling his way on to the slumping Internet company's board nearly 15 months ago.

In a resignation letter Friday, Icahn said he felt like it was time to leave Yahoo (YHOO) so he could spend more time on his investments in other companies.

"I don't believe that it is necessary at this time to have an activist on the board of Yahoo and currently my attention is focused on other matters," Icahn wrote.

Icahn, an outspoken billionaire, spent several months last year denigrating Yahoo co-founder Jerry Yang and the rest of the company's board after Yahoo turned down an opportunity to sell to Microsoft for $47.5 billion, or $33 a share.

That snub still looks like an expensive mistake, with Yahoo shares closing Friday at $17.22.

Icahn struck a truce with Yahoo to get on the board in August 2008 and he is apparently leaving on an amicable note.

In his letter, Icahn praised Yahoo's current chief executive, Carol Bartz, saying she is "doing a great job." Bartz replaced Yang as CEO nine months ago.

Icahn also applauded Yahoo's decision three months ago to hire Microsoft to provide its search results in the United States for the next decade. It's a partnership that Icahn tried to bring together while he was still seeking to get Yang fired. The proposed alliance between Yahoo and Microsoft still requires regulatory approval.

Yahoo, which is based in Sunnyvale, Calif., also had kind words for Icahn, saying it is "grateful for his active role in shaping the future" of the company.

A Yahoo spokeswoman said there are no immediate plans to fill Icahn's seat on the board. Another director, Maggie Wilderotter, plans to step aside at the end of the year.

After Wilderotter's departure, Yahoo will be left with 10 directors, including Yang. Two of other directors, John Chapple and Frank Biondi, joined the board as Icahn's allies.

Icahn remains one of Yahoo's largest shareholders with a 4.5% stake that is currently worth slightly more than $1 billion. He and his investment affiliates spent $1.8 billion accumulating a 5.5% stake last year, but whittled the holdings two months ago by selling 12.7 million shares.

His resignation letter gave no indication whether he plans to sell more of his Yahoo stock now that he has left the board.

Yahoo's fortunes have been sliding for the past three years as Google SEO widened its lead over Yahoo SEO search market and people began spending more time at other popular online hangouts such as Facebook.

Earlier this week, the company announced that its third-quarter earnings more than tripled as cost cutting helped to offset a 12% decline in revenue. The revenue erosion wasn't quite as bad as earlier this year, raising hopes that the company will fare better as the U.S. economy pulls out of its worst recession in 70 years.

Icahn Says Jerry Yang Must Be Pushed Out

Billionaire investor Carl Icahn plans to seek the ouster of Yahoo CEO Jerry Yang, should his dissident slate of directors gain control of Yahoo's board, according to a report in The Wall Street Journal.

Icahn previously has centered his comments on removing Yahoo's board of directors, of which Yang is one of nine members who are up for re-election to a one-year term, when the next annual shareholders meeting is held.

Yahoo announced later in the day that it planned to hold its annual shareholders meeting on August 1 in San Jose, Calif. The meeting was originally scheduled for July 3, but the company announced a delay when one of its board members resigned in May.

Icahn apparently is irate over newly released details from a shareholders lawsuit unsealed Monday, according to the Journal. In the amended lawsuit by two Detroit retirement funds, Yang is portrayed as the architect of a controversial employee severance program, which would be triggered if Yahoo undergoes a change in control.

The change in control applies to not only a buyout, like the one Microsoft had on the table before it withdrew its $33 a share bid for Yahoo on May 3, but also a change in control of a majority of Yahoo's board, as noted in a CNET News.com blog.

"It's no longer a mystery to me why Microsoft's offer isn't around," Icahn said in his Journal interview. "How can Yahoo keep saying they're willing to negotiate and sell the company on the one hand, while at the same time they're completely sabotaging the process without telling anyone."

Icahn noted he believes the unsealed shareholders lawsuit will aid his efforts to win a proxy fight to unseat Yahoo's board, especially given his belief that investors will fear Microsoft will not come back with a buyout bid until Yang and the current board are gone.

The Journal also reported Yahoo's board is expected to meet Tuesday.

Comments left about this story include:
Who does Carl Icahn have tapped to replace Jerry Yang? Hopefully someone with a proven history of web and internet advertising success. Susan Decker might have to be moved out. The Yahoo sales efforts and advertising programs are overpriced and weak at best. Yahoo is not delivering advertisers enough return on investment. When will Yahoo shift focus and actually help advertisers drive conversions and ROI? If Yahoo would focus on advertiser ROI and moving the sale needle for their clients, they could turn the tide and truly compete with Google. I also was expecting Jerry Yang to focus more on quality user experiences. Yahoo is no longer delivering high-quality search results and content for users. C'mon Jerry, restructure the senior management team, trim the top level, take charge, clear the company of unskilled executives that lack "internet marketing" experience and take Yahoo back to its core. Improve Yahoo from the inside out and everything will fall into place.

Financial Vultures Seek To Takeover Yahoo
Icahn Sends Open Letter to Board of Directors of Yahoo!





Carl C. Icahn
ICAHN CAPITAL LP
767 Fifth Avenue, 47th Floor
New York, NY 10153

June 6, 2008

Roy Bostock
Chairman
Yahoo! Inc.
701 First Avenue
Sunnyvale, CA 94089

Dear Roy:
While you may take issue with the content of my letter, I take issue
with your oversight of Yahoo! Again, I stand by my characterization of your
"poison pill" severance plan and I find it humorous to see you attempt to
defend it.

Roy, it is you who "misrepresents and misstates the details" of the
plan. Much like the rhetoric in many well known political campaigns, you
keep repeating misstatements in the hopes that by repeating misstatements
enough times it will convince your shareholders that these misstatements
are valid. For example, you repeated, "the plan was fully disclosed at the
time of its adoption and should be no surprise to anyone at this point."
This is simply not true. The egregious magnitude of the dollar amount cost
of the plan was never fully disclosed, nor was the email from your
compensation advisor calling the plan "nuts." While you keep repeating that
the severance plan was in the "best interests of shareholders", you neglect
to mention that the financial cost of the plan could be immense. The
documents obtained during discovery and released in the shareholder
complaint show that Yahoo! estimates the maximum change in control
severance expenses to be a staggering $2.4 billion if Microsoft bids $35
per share for Yahoo! You neglected to mention that the true cost to an
acquirer may be even higher as the perverse change in control severance
incentives may diminish the work effort of Yahoo! employees. In case you do
not understand the plan, in addition to the $2.4 billion of severance
expenses, I believe the plan will negatively impact employee behavior and
degrade the ability of an acquirer to successfully integrate the
acquisition. In the event of a change of control, the employee may decide
not to work as hard in the hopes of cashing in on a robust severance
package that awards up to two years salary and benefits, $15,000 of
outplacement expenses, and accelerated vesting of stock options and
restricted stock units. To make matters worse, it is not just the acquirer
firing the employee that can trigger the severance package but the employee
who may decide on his or her own to resign for "good reason" at any point
within two years of a change in control. It is quite obvious to me that
this plan impacts the price an acquirer would pay. Is it any wonder than an
acquirer, once fully comprehending this plan, might not wish to negotiate
any further? I again call upon you to honor your fiduciary duty to your
shareholders and rescind this "poison pill" severance plan.

You asked, "what exactly would happen to our Company if you and your
nominees were to take control of Yahoo!" I will give you my perspective on
that.



-- First, I would work to have the board replace your "poison pill"
severance plan with an acceptable alternative.

-- Second, I intend to ask our new board to hire a talented and
experienced CEO (attempting to replicate Google's success with Eric
Schmidt) to replace Jerry Yang and return Jerry to his role as "Chief
Yahoo". Indeed, it was much speculated that Jerry would serve in the
CEO role temporarily until a permanent CEO was hired after the board
asked Terry Semel to resign.

-- Third, I intend to ask our new board to inform Microsoft that unless
any alternative transaction can insure a $33 or higher stock price (of
which I am skeptical) all talks of alternative transactions are over.

-- Fourth, I will ask our new board to offer publicly to sell Yahoo! to
Microsoft in a friendly and cooperative transaction.

-- Fifth, to the extent Microsoft does not want to make a proposal, I will
ask our new board do a deal on search with Google, but only if it
contains termination provisions that would in no way impede a
subsequent acquisition by Microsoft.


Now let me ask you a couple of questions, Roy:

-- Why don't you, now that you have the opportunity, remove the "poison
pill" severance plan that I find to be ridiculous and thereby remove a
major obstacle to a Microsoft acquisition?

-- In my opinion, Microsoft does not believe you will ever sell the entire
company on a friendly basis. So why don't you stop dancing around the
subject and publicly offer to sell the company to Microsoft for $34.375
per share and promise to cooperate completely?

-- Why are you still giving hope to Microsoft that there is a possible
"alternative deal"? As long as there is the possibility of an
"alternative deal", isn't it obvious that Microsoft will not make a bid
for the whole company?


Sincerely yours,

CARL C. ICAHN

Icahn, Microsoft merger maven?

Billionaire investor Carl iCahn has a bone to pick with Yahoo's board of directors for not accepting Microsoft's buyout offer.

The notorious shareholder activist Carl Icahn formally announced that he is launching a proxy fight. He has formed a 10-member slate in an effort to unseat Yahoo's current board at the company's annual shareholder meeting on July 3.

Icahn, who stated that he has acquired roughly 59 million shares of Yahoo, has also sought antitrust clearance from the Federal Trade Commission to acquire up to another $2.5 billion in Yahoo shares.

Icahn is leaning on such high-profile tech names as Mark Cuban in his efforts to unseat Yahoo's current board at its annual shareholder meeting and to pave the way for a Microsoft-Yahoo merger. Cuban, owner of the Dallas Mavericks and chairman of HDNet, ironically sold Broadcast.com to Yahoo for $5.04 billion in 1999.

Icahn has been making his mark in the tech industry of late, most notably in the last year or so, with his actions regarding Motorola and BEA Systems. Over the past 13 years, he's logged more wins than losses in his proxy fights, according to FactSet SharkWatch.

Microsoft earlier this month walked away from its multibillion-dollar bid to buy Yahoo when the two companies failed to come to agreement over the purchase price.

Some CNET News.com readers were suspicious of Icahn's motives.

"Icahn specializes in what's best for him," one reader wrote in the TalkBack forum. "Is he in this for the long haul? Or just the short-term profit?"

On the other side of the merger manners meter, Hewlett-Packard proved that friendly blockbuster deals could still be done today.

HP plans to acquire computer services firm EDS for $13.9 billion in a deal intended to boost HP's services revenue. HP expects that the addition of EDS will more than double HP's services revenue of $16.6 billion in fiscal 2007.

But the sheer size of the deal is more than a bit daunting. The deal represents the combination of the largest number of people that the IT services sector has seen, Gartner analyst Ben Pring said, and HP faces serious challenges when it comes to integrating two vastly different companies. The track record of deals like this is "pretty spotty," Pring said, and IBM's purchase of PricewaterhouseCoopers demonstrated that the transition can be tough.

In other merger news, CBS has agreed to acquire CNET Networks, the publisher of News.com, in a deal valued at $1.8 billion. The acquisition will make CBS one of the 10 most popular Internet companies in the United States, with a combined 54 million unique users per month and about 200 million users worldwide, the companies said.

Google wants to make friends
Google has unveiled a preview of Friend Connect, a way to add social features to a Web site without programming. Meanwhile, Facebook has announced its own Facebook Connect, in which members will be able to use their Facebook identities across the Web--profile photos, names, photos, friends, groups, events, and other information. Facebook profile content, for example, could appear on other social sites, and Facebook event listings could theoretically connect with external event and invitation services.

It's a big move for Facebook. Until this point, the social network has had a reputation for keeping its cards close to its chest--even banning the account of popular blogger Robert Scoble when he used a script to export his Facebook contact list to Plaxo. But Facebook has a representative in the Data Portability Workgroup, and executives have said Facebook has wanted to bring its information outside the site eventually.

Google Friend Connect, on the other hand, employs several more-or-less standard networking technologies--OpenSocial as a foundation for richer Web applications; OpenID to handle login chores; and OAuth to let users approve the grafting of new branches onto their existing social networks.

It's yet another option in the complicated and fast-changing set of alliances and standards efforts in the social-networking domain. When Friend Connect was first announced, Google engineers explained that it would take advantage of other social-networking sites' APIs to enrich the program--including Facebook's.

However, a post on Facebook's developer blog explains that the social network has suspended Google Friend Connect's access to its API, citing a violation of its internal terms of service. Facebook contends that while its users would manually opt in to Friend Connect, they would not have control over the third-party sites that would then use Friend Connect through Google's API.

Meanwhile, Comcast is adding a social dimension to its services through the acquisition of Plaxo. Terms of the deal were not disclosed, but the purchase price is thought to be in the $150 million to $170 million range. The acquisition is a big win for Plaxo, whose Pulse social-networking service, with 1.5 million active monthly users, has been overshadowed by the likes of Facebook and MySpace.

Web surf's up on street, stars
Google is gathering 3D data along with the photographs it takes for its online Street View service, a potential boon for those of us who fantasize about flying like Superman through urban landscapes--at least virtually.

"The imaging technology includes lasers that collect 3D geometry data," the company said in a statement. However, for now, at least, the 3D information is just experimental, Google said.

Savvy observers, looking at Flickr pictures of Google Street View cars gathering images in Milan, had identified the 3D laser scanners in April. At the time, Google didn't comment, but it now has confirmed the scanners, as well as the expansion of Google Street View to Europe.

Google Maps now can also show real-estate listings, presenting pushpins that show houses for sale. To show real-estate results, click "Show search options," then select "Real Estate" from the drop-down list. The Web site then shows a list of properties for sale on the left tied to pushpins on the map on the right.

Search results can be refined by specifying price range or number of bedrooms and bathrooms. In addition, there's a text mode that will be more familiar to the classified-ad crowd. (Huh? Text mode for a mapping site? There's still a small map visible.)

But soon you will be seeing less from Google's Street View; the company has begun testing face-blurring technology, responding to privacy concerns from the search giant's all-seeing digital-camera eye. The technology uses a computer algorithm to scour Google's image database for faces, then blurs them, said John Hanke, director of Google Earth and Google Maps.

He likened the issues some have with Street View to the ones that took place when Google introduced aerial views to Google Maps. It took time for the public, regulators, and Google to get comfortable with the feature, but "it needs that debate. We see that and try to let it play out."

Meanwhile, Microsoft launched its WorldWide Telescope, a free Web-based program that allows Web surfers to explore galaxies, star systems, and distant planets. The program, which was developed by Microsoft's research arm, weds images from the Hubble Space Telescope, the Chandra X-Ray Observatory Center, the Sloan Digital Sky Survey, and others.

Microsoft said WorldWide Telescope will be made available for free as a tribute to Jim Gray, a Microsoft researcher who disappeared off the California coast while sailing last year.


By Steven Musil
CNET News.com; May 16, 2008