Will Open Source World Welcome Microsoft-Yahoo Combo?

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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Mon Apr 28, 2008 12:07 pm

Yahoo lets Microsoft's deadline pass; takeover drama enters new phase

Yahoo let Microsoft's deadline for a response to its $40 billion-plus offer for the Sunnyvale Internet company pass without a word Saturday, putting the ball back in Microsoft's court.

Now, the stage is set for what could be a dramatic week.

Most analysts expect Microsoft to take its offer directly to shareholders at Yahoo's annual meeting by proposing its own slate of directors for Yahoo's board and letting stock owners decide then whether they want to accept Microsoft's offer.

But there are other possibilities: Microsoft could withdraw its offer,, at least for the time being, figuring it could always come back at Yahoo later. Or it could extend the deadline hoping to still hammer out a deal. And finally, Yahoo could announce it has a deal with another partner.

"We'll see what next week brings," Microsoft Chief Financial Officer Christopher Lidell said Friday.

If there's no move from Yahoo, Lidell said, the company can either go directly to Yahoo shareholders or "walk away."

The passing of the deadline prolongs a standoff that began Feb. 1 with Microsoft's offer of $44.6 billion, or $31 a share, and Yahoo insisting it was worth far more. But the value of the half-cash, half-stock deal has actually fallen since it was first announced, as shares of both companies have declined. Yahoo shares closed Friday at $26.80; Microsoft's at $29.83, down from $30.50 the day the deal was announced.

Meeting Delayed

Yahoo has been scrambling without much success to find alternatives to a Microsoft deal, after postponing its annual meeting to give itself more time to weigh its options.

It has not set a date for the annual meeting and has until mid-July to hold one under the law in Delaware, where the company is incorporated. The deadline for nominating outside directors is now an unspecified date sometime later this year but before the meeting.

At this point, the issue is largely price. Yahoo is holding out for considerably more, and Microsoft has been holding firm at $31 a share.

Industry observers expect a deal to be struck, possibly for as much as $34 a share, but it's possible that the issue won't be resolved until the summer and Yahoo's annual meeting.

Bernstein Research analyst Jeffrey Lindsay predicted in a note Friday that the acquisition would be over before the end of July at a "slightly improved price."

"It will be a good, old-fashioned proxy fight," Lindsay said in an interview, using the term for a battle for control of a corporate board. "At any time up to then, Yahoo can throw in the towel and negotiate."

Microsoft has been growing impatient. The company's chief executive, Steve Ballmer, complained in a letter to Yahoo's board April 5 that despite "some limited interaction" between the companies, "there has been no meaningful negotiation to conclude an agreement."

Waiting game

And Lidell said Thursday that Yahoo appeared to have "unrealistic expectations of value."

As the next step, Microsoft would file to nominate its slate of directors. Yahoo will accept nominations up to 10 days after it announces its next annual meeting.

Yahoo spent weeks after Microsoft's offer trying to come up with alternatives to the deal with Microsoft. Though its board and top executives explored possible deals with Google, America Online and Time Warner and News Corp., little concrete came of it. Yahoo did announce a test in which Google would handle Yahoo's search advertising on a limited basis, but otherwise no other options have panned out.

Meanwhile, many Yahoo shareholders favored a sale at $31 or more.

Each company has been showing signs of age as the newer, nimbler Google dominates the lucrative business for Internet search advertising and begins to move into the area where Yahoo is strong: Internet display ads.

After years in denial, insiders say, Microsoft realized it had to catch up with Google before Google became the next Microsoft - so entrenched that no competitor could dislodge it.

The Internet advertising market "is increasingly dominated by one player," Ballmer observed when he announced the offer for Yahoo on Feb. 1.

Both companies have been overtaken by Google, which had a better way of reaping revenue from ads placed on its search results pages. It rapidly outstripped Yahoo in online search advertising.

Slumping stock price

Yahoo has slumped badly in the past couple years. The day before Microsoft announced its offer, Yahoo closed at $19.18 a share - half what it sold for two years earlier.

Microsoft has projected $1 billion in cost savings from combining the companies' two Internet operations. Analyst Sandeep Aggarwal of Collins Stewart in San Francisco, assigning a 90 percent probability that Microsoft will acquire Yahoo, said he thinks Microsoft will absorb "a large portion" of Yahoo's employees.

In any case, such a deal would remove a storied corporate headquarters from Silicon Valley and end an entrepreneurial saga that began in 1994 when two Stanford University graduate students created the search and Web directory technology that made Yahoo an Internet giant.

The students, Jerry Yang and David Filo, soon were attracting hundreds of thousands of visitors. They incorporated the following year and began charging for advertising on Yahoo's Web site.
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Wed Apr 30, 2008 7:43 pm

A hush falls over Microsoft-Yahoo deal
NOT A WORD SINCE DEADLINE PASSED; THEIR SHARES FALL AS DOUBTS SURFACE

Microsoft Chief Executive Steve Ballmer is trying a new tactic in his battle to take over Yahoo: Silence.

On Saturday, a deadline for Yahoo to accept Microsoft's $31-a-share offer passed without comment. There was no word Sunday or Monday, either.

A source close to the deal said the two companies did not meet over the weekend and are not negotiating. "It was a very quiet weekend," the source said.

How long the silence will last is unclear; Microsoft has indicated it could announce its next move this week.

Monday, investors began to sell on fears that the deal will not happen quickly and may not happen at all.

Microsoft fell 2.8 percent to close at $28.99 on Monday, and Yahoo fell 1.4 percent to close at $26.43. Meanwhile, Google rose 1.5 percent to close at $552.12.

Friday, Microsoft Chief Financial Officer Chris Liddell told Microsoft employees that the company would either take its offer directly to Yahoo shareholders or walk away if Yahoo did not respond.

Jeffrey Lindsay, an analyst with Bernstein Research, said he doubts Microsoft will walk away. "I don't think they'll play games," Lindsay said. "They respect the large shareholders too much for that. I think they'll stick to their guns and hold at $31 or an equivalent offer.

"They won't want to be seen to be backing out of what they've committed to," he said, adding that he expects Microsoft this week "to go to a proxy fight and start putting
it to the shareholders."

Yahoo has twice rejected Microsoft's offer, which was originally valued at $44.6 billion, saying it undervalues the Sunnyvale Internet company.

Analysts believe Yahoo's shares could drop sharply if Microsoft withdraws its bid, exposing Yahoo to shareholder lawsuits. Yahoo was trading around $19 before Microsoft made its Feb. 1 offer.

"Yahoo's board is walking on the knife's edge right now," said Anthony Sabino, professor of law and business at St. John's University.

Microsoft could try to take control of Yahoo's board, which is up for re-election at the next annual meeting, but such a move could cause the conflict to drag out for months.

Yahoo is required by law to hold its meeting by July 12. Nominations for the board are due 10 days after the date of the meeting is announced.

In the meantime, George Askew, an analyst with Stifel Nicolaus, is advising clients to buy Google. "We believe Google will widen its lead in search advertising and Internet innovation while the future of Microsoft and Yahoo remains uncertain," Askew wrote in a research note Monday.

http://www.siliconvalley.com/ci_9092462?nclick_check=1
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby JeanInMontana » Thu May 01, 2008 11:34 am

Soooo What's it all mean??
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Thu May 01, 2008 3:39 pm

MS will own Yahoo. Sooner or later.
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby JeanInMontana » Sat May 03, 2008 9:12 am

Well I think M$ will try to own the world sooner or later.
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Sat May 03, 2008 7:50 pm

Ha, ha. I jinxed it :rotf:

Microsoft Withdraws Its Bid for Yahoo

Published: May 4, 2008

Microsoft said Saturday that it was abandoning its blockbuster bid to acquire Yahoo after the two companies could not agree on a price.

The breakdown in the talks followed a meeting on Saturday morning in Seattle between Microsoft’s chief executive, Steven A. Ballmer, and Yahoo’s chief and co-founder, Jerry Yang, according to a person briefed on the discussions.

At the meeting, which also included Yahoo’s other co-founder, David Filo, and Kevin Johnson of Microsoft, Mr. Ballmer increased Microsoft’s offer to $33 a share, but Mr. Yang said Yahoo would not sell for less than $37 a share, this person said.

Microsoft’s decision to walk away is the latest chapter in a three-month-old standoff that began when Microsoft made an unsolicited offer to acquire Yahoo in an effort to compete more effectively with Google in Web search, advertising and services.

Yahoo rejected Microsoft’s offer repeatedly, saying it undervalued the company. Microsoft at times threatened to lower its offer, originally valued at $44.6 billion, or $31 a share.

In a letter to Mr. Yang that Microsoft released Saturday evening, Mr. Ballmer said that it would not make sense for Microsoft to pursue a lengthy proxy fight. "Our discussions with you have led us to conclude that, in the interim, you would take steps that would make Yahoo undesirable as an acquisition for Microsoft," he wrote.

Mr. Ballmer said in a separate statement that Microsoft would continue to pursue its online efforts on its own.

"We have a talented team in place and a compelling plan to grow our business through innovative new services and strategic transactions with other business partners," he said. "While Yahoo would have accelerated our strategy, I am confident that we can continue to move forward toward our goals."

A Yahoo spokesman said the company had no immediate comment on Microsoft's move.

Microsoft's decision to abandon its bid is likely to raise questions among investors about the judgment of both Microsoft and Yahoo.

When Microsoft first made its bid, it said Yahoo was an important part of its strategy to take on Google. Its choice to withdraw, after threatening a proxy contest if a friendly deal could not be reached, may prompt its shareholders to doubt its resolve. At the same time, some Microsoft shareholders, many of whom felt that Microsoft should never have bid for Yahoo, may be relieved, and Microsoft's shares could rise on Monday.

But the breakdown in the talks is likely to send Yahoo's shares plunging and generate uncertainty among investors about the company's management. Yahoo has been exploring alternatives to Microsoft's bid, including a search advertising partnership with Google, which could lift its profits and perhaps its stock price, analysts say.

http://www.nytimes.com/2008/05/04/techn ... ft.html?hp
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Sun May 04, 2008 8:37 am

Withdrawal, or new ploy in the battle for Yahoo?

NEW YORK: Is Microsoft really going to walk away from the biggest deal of the software giant's 33-year history?

In his negotiations with Yahoo, Microsoft's chief executive, Steve Ballmer, regularly talked tough. Now, by dropping a sweetened, $47.5 billion bid for the company, he may be adopting the toughest tactic of all.

In recent weeks, many analysts had expected Microsoft to escalate the fight by starting a hostile takeover bid. But in a recent meeting with Microsoft employees, Ballmer seemed to suggest that a proxy fight was a relatively unpalatable option. "There's a lot of downsides and some upsides associated with that," he said.

A statement explaining Microsoft's decision to pull back emphasized the downsides.

"Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo has not moved toward accepting our offer," Ballmer said. "After careful consideration, we believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal."

One seemingly inevitable effect of Microsoft's move is that Yahoo's stock will take a steep plunge Monday morning.

Many Yahoo shareholders have sought relief from the drubbing that the company's stock has taken in the markets. By the time Microsoft made public its unsolicited offer on Feb. 1, Yahoo's shares were trading around $19. Microsoft's revised bid - worth about $33 a share, up from the previous offer of $29.40 a share - promised a nearly 74 percent premium.

Yahoo's board reportedly wanted $37 a share.

In a statement, Yahoo maintained that it was "profitable, growing, and executing well on its strategic plan to capture the large opportunities in the relatively young online advertising market." It pointed to its recent quarterly earnings, which beat analysts' expectations by a little bit.

As it fought to keep Microsoft at bay, Yahoo explored other ways of trying to lift its stock price, including a partnership in search advertising with its larger rival, Google. Yahoo has also discussed possible mergers with the AOL unit of Time Warner and the MySpace unit of News Corp., though the MySpace talks have not been active of late.

But those alternatives would also come with possible strings attached. A deal with Google would be likely to attract regulatory scrutiny because of Google's leading position in online search and advertising. AOL and Yahoo, meanwhile, have many overlapping businesses and technologies.

In the absence of any other clear path for Yahoo to pursue, analysts predicted a quick drop in the company's share price Monday.

Henry Blodget, the former Wall Street analyst who now writes for Silicon Valley Insider, estimated that Yahoo's shares might fall to the low $20s, potentially a 30 percent drop from the closing price of $28.67 on Friday.

"Wow," Walter Price, a senior portfolio manager at RCM, told Reuters. "I'm shocked Yahoo wasn't more reasonable. The stock will probably go down at least $5 on Monday."

Laura Martin, an analyst at Soleil Securities, told Bloomberg News that she estimated that Yahoo shares would fall by $8, or 28 percent.

Martin also had harsh words for the "unbelievable" actions of Yahoo's management. "This is management putting its employees and its job security ahead of current Yahoo shareholders' interest," she told the news service. She also told Reuters that she expected several shareholder lawsuits to be filed against the company on Monday.

For Microsoft, the decision to withdraw the offer also raises significant questions. Ballmer has been under great pressure to do something to strengthen the company's online business to compete with Google. Failure to strike a deal with Yahoo may be seen by some investors as a major management blunder, and shareholders could raise questions about his leadership.

Perhaps Ballmer really felt that he could not in good conscience raise Microsoft's offer substantially without doing harm to his company. But even back when Microsoft first publicly unveiled its bid, analysts said the company could afford to pay as much as $35 a share.

But this may not be the last move. If Yahoo's shares fall significantly, the company will be under intense pressure to act, and may choose to resume talks.

http://www.iht.com/articles/2008/05/04/ ... s/deal.php
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Mon May 05, 2008 8:03 am

After Deal Dies, Yahoo Weighs Its Next Move

FRANCISCO — How low will Yahoo’s stock go on Monday? And how long will it stay there?

hese questions are high in the minds of Yahoo shareholders, and probably its management, as the company considers its options after Microsoft’s decision to withdraw its offer to buy Yahoo for $33 a share, or approximately $47.5 billion.

Much will depend on Yahoo’s next moves, which could include a partnership with its chief competitor, Google.

People close to Yahoo said that the chief executive, Jerry Yang, and his team, who told Microsoft they would not sell for less than $37 a share, greeted Microsoft’s decision as a victory. High-fives were exchanged Saturday afternoon when they learned Microsoft was backing down.

Yet some Yahoo shareholders, large and small, have indicated that they favored a deal at around $34 to $35 a share. Even those who were holding out for a higher price said a merger with Microsoft made strategic sense.

“I don’t believe that Jerry Yang as a founder, as someone who is emotionally attached to the company, was really looking out for my interest as a shareholder,” said Darren Chervitz, co-manager of the Jacob Internet Fund, which owns about 150,000 shares of Yahoo. “I don’t think anything Yahoo puts out there is going to be comparable with what Microsoft was offering.”

The entire board backed Mr. Yang’s desire to reject Microsoft’s offer, said a person involved in the negotiations who was not authorized to speak publicly about the matter. But unhappiness with Mr. Yang could spread through the company’s ranks.

http://www.nytimes.com/2008/05/05/techn ... ref=slogin
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Tue May 06, 2008 9:55 am

Yahoo faces uproar from some shareholders

Yahoo faced a shareholders' rebellion Monday as the stock market punished the pioneering Internet company for its weekend rejection of Microsoft's $47.5 billion bid.

One hedge fund manager said he was encouraging investors to vote against Yahoo's board members at the next annual meeting, which the company announced late Monday would occur on July 3.

"I haven't spoken to one Yahoo shareholder who is happy," said Eric Jackson of Ironfire Capital, a small, activist hedge fund. Jackson said the dozen investors he'd spoken to were "upset, frustrated, and wanting to know what they can do."

The Web pioneer's stock closed down 15 percent, or $4.30, to $24.37 a share, a significant loss but higher than the bargain-basement level of $19.18 it reached the day before Microsoft announced its offer.

Following a decision that shocked many in the investment community, the Sunnyvale-based Internet company faced an uncertain future. Yahoo chief executive Jerry Yang promised to make its Web sites more useful to users, more effective for advertisers and more friendly for software developers; others weren't so sure.

Yahoo chairman Roy Bostock issued a statement Saturday that thanked "so many of our shareholders" for joining Yahoo's board in believing Microsoft's offer undervalued the company.

But one institutional investment manager noted that shareholders didn't make the decision.

"Jerry has not given the shareholders a vote in this," said Larry Haverty of Gabelli Fund's GAMCO Investors. "The shareholders never got a chance to say whether $33 was a good price or not, and people, including myself, are very skeptical about the forecasts he's put out."

Haverty said that had Gabelli been given a chance to take $33 "we probably would have, particularly if some of it was in Microsoft stock." Gabelli owns 1.2 million shares in each company.

There was still the possibility that the two companies would reconcile their differences and join forces, though Yahoo's reaction to the collapse of the deal made that seem unlikely. Citi Investment Research put a 15 percent probability on that happening.

Haverty, for instance, said that Yahoo's new stock price reflects its fair value, rather than a bet by investors that Yahoo won't change its mind and accept Microsoft's bid. But, he said, it is unlikely that Microsoft is "going away forever." He thinks Yahoo's shares are fairly valued now.

The long-term prospects for Yahoo are worse than ever, said securities lawyer Anthony Sabino. The company has turned down a lucrative offer and remains in play, he said.

In any resumption of negotiations, Sabino said, Microsoft's chief executive Steve Ballmer could "play the spurned lover who storms away; and it is going to take a lot to get him back to the table."

Microsoft withdrew its final offer of $33 a share, or roughly $47.5 billion, late Saturday after a flurry of last minute negotiations failed to produce a compromise price. Microsoft's original offer was $31 a share. Microsoft's Ballmer wrote in a letter to Yang that Yahoo wanted $4 a share more - in other words, $37.

"The spotlight will be on us - just as it has been for the past three months," Yang said in an e-mail to staff. The company will prove its worth "by executing against the strategies and priorities we already have in place, and by continuing to deliver indispensable experiences for our communities of users, advertisers, publishers and developers," he wrote.

Others were either saying "show me," displeased that the firm turned its back on an offer that would have given shareholders a 70 percent premium over Yahoo's Jan. 31 share price.

"For you, me, and the common investor the best thing to do is stay out of the way," said Jeff Embersits of Shareholder Value Management.

http://www.siliconvalley.com/ci_9157552?nclick_check=1
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby JeanInMontana » Tue May 06, 2008 1:30 pm

I have to say I actually gained a bit of respect for Yahoo for not caving in.
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Tue May 06, 2008 6:35 pm

Yeah, but I think it's going to bite them in the ass. :(
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby JeanInMontana » Wed May 07, 2008 9:40 am

Maybe.
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Wed May 14, 2008 12:07 pm

Investor Icahn may seek control of Yahoo's board
By Elise Ackerman
Mercury News

Yahoo's shares shot up Tuesday after a billionaire activist investor with a history of closing controversial corporate deals let it be known he is poised to launch a fight for control of the Internet icon.

Carl Icahn, who was instrumental in Oracle's takeover of BEA Systems, has been buying Yahoo stock since Microsoft withdrew its offer May 3.

According to the Wall Street Journal, Icahn owns about 50 million Yahoo shares, or about 4 percent of the company. Icahn declined to speak directly with reporters about his stake, which was first reported by CNBC.

News reports that Icahn was considering backing a dissident slate of nominees to the Sunnyvale company's board of directors drove Yahoo's shares up more than 5 percent, as investors bet Icahn would be able to broker a new deal with Microsoft. Yahoo's shares closed at $26.56 in regular trading Tuesday.
The news comes just weeks after negotiations by Microsoft and Yahoo faltered on price, after a protracted dance that started with the Redmond, Wash., software giant's unsolicited offer Feb. 1 for $31 a share.

In recent days, Yahoo's shares have slumped as low as $22.97 as shareholders, disappointed with the way management handled negotiations with Microsoft, dumped their holdings. During the last six trading days, 676 million shares, a number equal to almost half of all Yahoo's outstanding shares, changed hands.

In a rare move, major shareholders publicly scolded Yahoo's board for bungling Microsoft's last offer of $33 a share and said they would have been happy with a slightly better price - for example, $34. Still, none of the shareholders stepped forward to lead a proxy fight to replace Yahoo's 10-person board of directors. The deadline for nominations is Thursday.

Icahn's success

"People are looking to Icahn to take up the battle," said John Orrico, president of the Arbitrage Fund, a mutual fund that invests in corporate reorganizations.

Earlier this year, Icahn was instrumental in persuading BEA Systems, a San Jose software maker, to accept an offer to be bought by Oracle for $8.5 billion. In March, he pressured Motorola to split into two companies.

Even when Icahn fails to move management, he sometimes makes money. In 2006, Icahn unsuccessfully pushed for the breakup of Time Warner.

"It's a little bit of he who laughs last," Icahn said in a recent interview with "60 Minutes" addressing his activism as a Time Warner shareholder. "I mean, well, you know, maybe I made a mistake, but I made $300 million on it. So is that so bad?"

Wall Street veterans warn that Time Warner could be a lesson for Yahoo shareholders who hope to profit from Icahn's involvement.

"Icahn is the smartest poker player on Wall Street," said Gary Lutin, an investment banker who advises shareholders on corporate control. "That means he's going to win, but it doesn't mean that everybody else at the table will."

Microsoft 'has moved on'

So far, Microsoft has not given any indication it would be willing to negotiate with a new board of directors, even if Icahn prevailed in a proxy fight. When asked about the possibility of working with Icahn, a source close to Microsoft said, "The company has moved on."

Nevertheless, a number of Yahoo shareholders continue to believe Microsoft's interest can be revived. "Yahoo knows they have to do this deal; that is why the stock has been so resilient," said an investor who owns more than a million shares.

"There is a lot of hope among shareholders that there will be a deal," said Eric Jackson, an investor who helped rally a shareholder protest at last year's annual meeting.

Jackson said many investors want a dissident slate to come forward, but are reluctant to sponsor a proxy battle themselves because of the high cost, the uncertainty and the fear of being identified as activists rather than conservative money managers.


http://www.siliconvalley.com/ci_9253609?nclick_check=1
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Thu May 15, 2008 2:22 pm

Icahn launches proxy battle for Yahoo
By Elise Ackerman
Mercury News

Billionaire investor Carl Icahn launched a battle for control of Yahoo in a scathing letter sent early this morning to Roy Bostock, the chairman of Yahoo's board of directors.

Icahn's letter, which provides the names of 10 people, including himself, who are running to replace Bostock and other directors, accused Yahoo's management of acting irresponsibly when it rejected a$47.5 billion offer from Microsoft earlier this month.

Other nominees include Frank Biondi, the former chief executive of Viacom, Mark Cuban, owner of the Dallas Mavericks, and Robert Shaye, co-chairman and co-CEO of New Line Cinema.

"It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft," the letter stated. "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."

Icahn said the a new board would attempt to negotiate a successful merger with Microsoft. "I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form adynamic company and more importantly would be a force strong enough to compete with Google on the Internet."

During the last 10 days, Icahn said he has purchased the equivalent of 59 million shares, currently worth $1.6 billion. He said he has asked the Federal Trade Commission to clear the purchase of up to $2.5 billion worth of stock.

http://www.siliconvalley.com/ci_9268407?nclick_check=1
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Fri May 16, 2008 2:26 pm

Yahoo, Icahn in fierce fight over who knows best
ACTIVIST INVESTOR PUSHING FOR DEAL WITH MICROSOFT
By Elise Ackerman
Mercury News

Yahoo fired back Thursday at activist investor Carl Icahn, claiming he misunderstood the talks the company had with Microsoft and that Yahoo's board, not Icahn, was looking out for shareholders.

The letter from Yahoo Chairman Roy Bostock came hours after Icahn unveiled his proposed candidates to replace the board and take control of the Sunnyvale company.

While maintaining that the company is open to any deal that would provide shareholders "full and certain value," Bostock wrote, "A fair-minded review of the factual record leads to one conclusion: that Yahoo's 10-member board remains the best and most qualified group to maximize value for all Yahoo stockholders."

Icahn's proposed slate, announced Thursday morning, is made up of former corporate executives, financiers and a law professor who is a respected advocate for shareholder rights.

"It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft," he wrote in a letter to Bostock. "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."

Icahn said a new board would attempt to negotiate a successful merger with Microsoft. "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."

During the past 10 days, Icahn said, he has purchased the equivalent of 59 million shares, currently worth $1.6 billion. He said he has asked the Federal Trade Commission to clear the purchase of an additional $900 million worth of stock, which would give him a 6.7 percent stake in the company.

Votes for the board of directors will be tallied after the annual shareholders meeting July 3.

In addition to Icahn himself, the nominees include Lucian Bebchuk, a professor at Harvard Law School; Frank Biondi Jr., the former chief executive of Viacom; John Chapple, former chief executive of Nextel Partners; Mark Cuban, owner of the Dallas Mavericks; Adam Dell, a venture capitalist; Keith Meister, vice chairman of Icahn Enterprises; Ed Meyer, former chief executive of the Grey Global Group; Brian S. Posner, a private investor; and Robert Shaye, co-chairman and co-CEO of New Line Cinema.

At least two of the members of the slate - Chapple and Meyer - were also reportedly approached by Microsoft when it was considering launching its own proxy fight.

"It does raise the question: Is this a way to keep a back door open to contact with Microsoft?" said Claudia Allen, a corporate-governance attorney at Neal, Gerber & Eisenberg.

Microsoft ultimately decided not to try to push through a hostile transaction and withdrew its bid for $47.5 billion May 3. It declined to comment on Icahn's letter.

B. Espen Eckbo, founding director of the Center for Corporate Governance at the Tuck School of Business at Dartmouth College, said by trying to replace the entire board Icahn has chosen a tactic that carries the highest risk, but also the biggest reward.

The election of a new board would give him far more control of Yahoo than simply winning one or two seats. Yet so-called proxy battles, even small ones, are notoriously difficult to win. A veteran of corporate battles ranging over three decades, Icahn has lost his share of boardroom struggles, including a recent attempt to split up Time Warner.

Still, Icahn is one of the most feared adversaries on Wall Street. "He has a number of advantages," Eckbo said. "No. 1, he is Carl Icahn, and he is good at this stuff."

Peter Falvey, managing director of Revolution Partners, a Boston-based investment bank, said there is a chance that Yahoo's board will chose to avoid a nasty proxy fight. "In some ways this could give them a fig leaf to go back to Microsoft," he said.

Investors are currently betting on a deal. Yahoo's stock has climbed about 10 percent on news that Icahn planned to push for new negotiations.

"We believe this deal will likely happen," said Sandeep Aggarwal, an analyst with Colins Stewart. "Microsoft really does not have a plan B without Yahoo." On Monday, Aggarwal upgraded Yahoo to a "hold" rating.

Meanwhile, Yahoo is describing Microsoft as "a formerly interested buyer who has publicly stated that they have moved on."

But in his letter to Icahn, Bostock emphasized Yahoo's willingness to do a deal with Microsoft at the right price, and noted that Yahoo's board met 20 times to consider the proposal and that Yahoo's senior-most management met in person with Microsoft seven times.

"The record of our efforts to engage Microsoft in meaningful discussions is unequivocal," Bostock wrote.

"Please may I remind you that there is currently no acquisition offer on the table from that company or any other party. That said, we have been crystal clear in our stance that we have been and remain willing to consider any proposal from any party including Microsoft if it offers our stockholders full and certain value."

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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Mon May 19, 2008 12:04 pm

Microsoft takes new approach with Yahoo
TALKS RESUME, BUT ON AD DEAL, NOT AN OUTRIGHT ACQUISITION
By Elise Ackerman and Brandon Bailey
Mercury News

Yahoo and Microsoft have resumed talks in the wake of a shareholder rebellion launched by billionaire investor Carl Icahn, but this time the discussions are focusing on a deal short of outright acquisition.

Neither company would confirm the details Sunday, but there were reports that Microsoft was proposing an arrangement focused only on Yahoo's search advertising business.

Microsoft announced the discussions in a brief statement around midday Sunday. Yahoo issued its own statement late in the evening; it said Yahoo's board would evaluate any alternatives "including any Microsoft proposal," but added: "Yahoo! has confirmed with Microsoft that it is not interested in pursuing an acquisition of all of Yahoo! at this time."

Last week, Icahn launched an effort to oust Yahoo's board and replace it with his own slate of directors who would favor a Microsoft takeover. Microsoft had earlier walked away from a $47.5 billion offer to buy Yahoo, after the Sunnyvale search firm's chief executive, Jerry Yang, rejected the deal.

As recently as Friday, Microsoft executives were saying publicly that the company had "moved on" from the idea of buying Yahoo. But in its Sunday statement, Microsoft said it's now contemplating a different kind of transaction.

"Microsoft is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!" the statement said.

"Microsoft is not proposing to make a new bid to acquire all of Yahoo! at this time," the statement continued, "but reserves the right to reconsider that alternative, depending on future developments or discussions that may take place with Yahoo! or discussions with shareholders of Yahoo! or Microsoft or with other third parties."
The Redmond, Wash.-based software giant had wanted to acquire Yahoo in order to compete more directly with Google. Yahoo is currently ranked second in the lucrative Internet search advertising business, behind Google, with Microsoft a distant third.

Partnership

Citing unnamed sources, the New York Times reported Sunday that Microsoft is now proposing a partnership or joint venture for search-related advertising.

Such an arrangement could leave Yahoo free to continue operating other aspects of its advertising, content pages, e-mail service and other types of business.

Yahoo recently tested a similar arrangement with Google, in which Yahoo displayed Google ads on its popular Web properties and shared revenue from those ads with Google. Microsoft CEO Steve Ballmer had reacted to that test with dismay, citing it as one of his reasons for terminating negotiations with Yahoo's board.

Google had no comment on Microsoft's announcement Sunday.

It wouldn't be the first time that Microsoft has raised the idea of a partnership or purchase focused only on Yahoo's search business. Former Yahoo Chief Executive Terry Semel confirmed publicly two years ago that Microsoft had proposed buying a stake in Yahoo's search operation.

At the time, Semel was widely quoted as saying, "I will not sell a piece of search. It is like selling your right arm while keeping your left. It does not make any sense."

But one analyst said an agreement that focused on Yahoo's search advertising could make sense now.

"It actually could be a clever move," said Jeffrey Lindsay, an analyst at Sanford C. Bernstein. "It could be a face-saving way out for both sides."

Reuters reported that Microsoft had not discussed the idea with Icahn, whose office did not immediately respond to a request for comment.

"The issue is whether he'd be prepared to back off now," Lindsay said of Icahn.

Some major Yahoo shareholders have criticized Yang's handling of the recent Microsoft proposal. Darren Chervitz, co-manager of the Jacob Internet fund, said he welcomed the latest news.

"What it does that's good is: It says to investors that Microsoft is still interested in Yahoo," said Chervitz, who has recently been trimming his position in Yahoo shares.

'Needs more scale'

"The idea that Microsoft had moved on is what I never bought," Chervitz added. "Nothing has changed about the competitive landscape. Google is still the No. 1 competitor and to effectively attack Google, Microsoft needs more scale."

Whether the new proposal would be good for Yahoo shareholders "depends entirely on how much Microsoft would be willing to pay for Yahoo's search assets," said Lindsay.

He said the value of those assets is not what they are currently worth to Yahoo, but "what they would be worth if Google were operating them" - which could be as much as an additional $1 billion a year.

In its statement, Microsoft cautioned: "There of course can be no assurance that any transaction will result from these discussions."

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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Tue May 20, 2008 1:18 pm

Many ways to slice Yahoo, Microsoft deal
IDEAS INCLUDE BUYING SEARCH AD UNIT OR TEAMING UP
By Brandon Bailey
Mercury News

Still hoping to jump-start its own Internet ad business, Microsoft has floated several ideas for combining forces with Yahoo, ranging from a revenue-sharing partnership to buying Yahoo's search advertising operation, a source familiar with the situation said Monday.

While Yahoo executives have balked at selling their entire company to Microsoft, analysts said Monday that Yahoo may feel continued pressure to negotiate some kind of partnership or deal.

Yahoo's future may depend on reaching a strategic decision to sell or outsource some of its advertising business, analyst George Askew of Stifel Nicolaus wrote in a note to investors Monday.

Selling the all-important search advertising component of its business could leave Yahoo's future uncertain, but Askew said the alternative would be a messy proxy campaign by billionaire investor Carl Icahn, who has vowed to oust Yahoo's board and force a sale of the whole company.

Microsoft, meanwhile, has made it clear that it intends to build its search advertising business - whether through acquisitions, partnerships or both, said analyst Rob Sanderson of American Technology Research.

"Their strategic imperative is to scale up," Sanderson said of Microsoft. "I don't think they're married to only one way to do that."

Before dropping their $47.5 billion offer to buy Yahoo earlier this month, Microsoft executives had said the acquisition would help them compete more directly with Google, which currently dominates the lucrative search advertising market. Yahoo ranks second and Microsoft a distant third.

In a brief statement Sunday, Microsoft announced it was proposing a new arrangement with Yahoo that would not be an outright acquisition of the company. Yahoo said late Sunday that its board would give any proposal due consideration. Both companies have declined to elaborate.

Despite news reports Monday that Microsoft was pushing to buy Yahoo's search advertising business, a person familiar with the situation said Microsoft has floated a range of ideas, without submitting any formal proposal to date.

Yahoo recently tested a joint arrangement with Google, in which Yahoo displayed Google ads and shared the revenue with Google. Some analysts suggested Microsoft might seek a similar arrangement - in which Microsoft would sell ads on Yahoo's site and share the revenue - if only to keep arch-rival Google at a distance.

Even a partnership agreement could lead to an eventual acquisition, some analysts said.

"We believe that a core issue for Microsoft is to acquire Yahoo on friendly terms," Ben Schachter, an Internet analyst for UBS Securities, said in a note to investors Monday. "A near-term deal could act as an intermediate step that would go a long way toward testing the waters."

But analyst Sandeep Aggarwal of Collins Stewart said Microsoft more likely wants to buy Yahoo's search advertising business, which he valued at $21 billion. Failing that, Aggarwal wrote in a note to investors, Microsoft might seek to negotiate a partnership, rather than swallow the whole company.

Yahoo has other business assets, including an e-mail service and various content platforms, that Microsoft may not want, Aggarwal said.

Icahn, meanwhile, gave no sign Monday of backing away from his push to replace the current Yahoo board with directors who will support a sale.

The activist investor, who owns 10 million shares of Yahoo stock, launched a campaign last week to unseat Yahoo's board at its July 3 meeting. He criticized the company's leadership for not striking a deal with Microsoft earlier this month.

"Ultimately, he wants to make the most money possible," said analyst Eugene Munster of Piper Jaffray, "and the way he makes the most money possible is by a full acquisition."

While Icahn made no public statement on Monday, the Reuters news service reported that a "person familiar with his thinking" said Icahn won't be satisfied with anything less than an outright sale to Microsoft.

Without discussing specifics of any Yahoo proposal, a top Microsoft executive reiterated this week that his company's ultimate goal is building its Internet ad business.

"Regardless of the outcome of any new discussions, it is important that we continue to move forward to strengthen our online services business," Kevin Johnson, Microsoft's president for platforms and services, said in an e-mail to employees Sunday.

Microsoft executives will discuss their strategy and unveil some new innovations in search technology during a conference on Internet advertising that the company is sponsoring in Redmond this week, Johnson said.

http://www.siliconvalley.com/ci_9319448?nclick_check=1
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Wed Jun 04, 2008 12:12 pm

Yang, Icahn faceoff looms

YAHOO SETS AUG. 1 ANNUAL MEETING
By Brandon Baileyand Elise Ackerman
Mercury News

Yahoo Chief Executive Jerry Yang and billionaire investor Carl Icahn moved closer to a showdown Tuesday, as the company set an Aug. 1 date for what could be a contentious annual meeting, while Icahn said he will fire Yang if Ichan wins a proxy battle for control of the company.

Icahn wants to see Microsoft buy the Sunnyvale search company, which Yang co-founded in 1994. In an interview with the Wall Street Journal on Tuesday, Icahn charged that newly revealed documents from a shareholder lawsuit show Yang sabotaged a Microsoft acquisition bid and subsequently lost credibility with Microsoft executives.

Yahoo responded with a brief statement defending its actions and asserting that Icahn was ignoring or mischaracterizing the facts.

But Icahn, who built a fortune over the past 30 years by investing in public companies and pushing for drastic actions to increase the value of his stock, made it clear that he has no intention of easing the pressure on Yahoo's board.

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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Thu Jun 05, 2008 10:37 am

Icahn, Yahoo trade punches
BOTH SIDES TRYING TO WIN BACKING OF SHAREHOLDERS
By Elise Ackerman
Mercury News

Yahoo Chairman Roy Bostock accused billionaire investor Carl Icahn in a biting letter released Wednesday evening of having no "credible plan" for the Sunnyvale company, as the two sides intensified their battle for control of the Internet icon.

Earlier in the day, Icahn released a letter demanding Yahoo rescind a severance plan he described as "the largest impediment to the Microsoft deal."

Both Bostock and Icahn are trying to win the backing of shareholders before an election for the board of directors is held at the annual meeting Aug. 1 at the San Jose Fairmont Hotel.

Bostock said Icahn's letter "seriously misrepresents and manipulates the facts" regarding the severance plan and Yahoo's negotiations with Microsoft.

Notably, you accuse us of turning down a $40 per share offer and 'sabotaging' a $33 per share offer," Bostock wrote. "Again, this is patently untrue. Yahoo's Board of Directors has at all times been focused on maximizing shareholder value."

Bostock said Yahoo had reached out to Microsoft and met with representatives of the company "many times" in the past several weeks.

"During this period, their message to us and to the markets has been and remains that they are not interested in pursuing a full acquisition of Yahoo."

Microsoft withdrew its bid May 3. Icahn has been trying to persuade Microsoft and Yahoo to resume negotiations by nominating a slate to replace Yahoo's board.

In his Wednesday letter to Bostock, Icahn suggested the two sides could easily reach a deal if the "poison pill severance plan" was rescinded, because it would free up more than $2 billion, which could be added to the bid.

"It is time for you to stop misleading your shareholders with respect to Microsoft," he wrote.

But what if Microsoft does not want to buy Yahoo?

"Conspicuously absent from your letter is any credible plan for Yahoo other than a repetition of your insistence that the company should sell itself to Microsoft," Bostock countered. "Indeed, your stated view that 'the only way to salvage Yahoo in the long if not short run is to merge with Microsoft' demonstrates that you have no other plan and causes one to wonder what exactly would happen to our company if you and your nominees were to take control of Yahoo."

Separately, Reuters reported that Microsoft and Yahoo are closing in on a deal that involves Microsoft buying Yahoo's search business and taking a minority stake in its media assets. Under this scenario, Yahoo would sell its stakes in Asian Internet companies.

http://www.siliconvalley.com/ci_9486460
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby JeanInMontana » Thu Jun 05, 2008 1:09 pm

"Conspicuously absent from your letter is any credible plan for Yahoo other than a repetition of your insistence that the company should sell itself to Microsoft," Bostock countered. "Indeed, your stated view that 'the only way to salvage Yahoo in the long if not short run is to merge with Microsoft' demonstrates that you have no other plan and causes one to wonder what exactly would happen to our company if you and your nominees were to take control of Yahoo."


Roy, I think I have an answer that is plausible as to what will happen to Yahoo. It will be M$Hoo and all those deals you cut for force installing your toolbar will bring more income to M$. Your employees that your trying to look out for after this sale don't mean squat to M$ and gee, this proves it doncha know.

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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Fri Jun 06, 2008 12:45 pm

Cassidy: Yahoo proxy fight lacks HP drama
PROXY BATTLE LOSING STEAM
By Mike Cassidy
Mercury News Columnist

I've been gloomy, glum. The zip has gone out of my zest. The yippee, I'm afraid, has gone out of my Yahoo.

This so-called proxy battle - this Yahoo, Microsoft, Google, Carl Icahn dance - just isn't cutting it. And I've recently realized why. It's not HP and Compaq.

That was a proxy battle. Ah, back in 2002, the rich and famous in the valley knew how to put on a show. The battle for the hearts, minds and wallets of Hewlett-Packard's shareholders turned into Silicon Valley's own "Melrose Place."

There were SV A-listers, espionage (before it became fashionable at HP), vote-buying charges. There were heirs and a civil trial in Delaware that was anything but civil.

With HP I was obsessed. But Yahoo? Ho-hum.

At least the Yahoo drama is making an effort. The basics: Microsoft Chief Executive Steve Ballmer offered to buy Yahoo for $47.5 billion - a huge premium. Chief Yahoo Jerry Yang turned him down, leaving some shareholders fuming, some shareholders suing and Icahn drooling.

The financier says he can't wait to get a new board elected so he could can Yang. He says Yang tried a little skulduggery, cooking up a severance plan that would cost Microsoft plenty if the companies merged and all the Yahoos quit. Nasty-grams back and forth ensued.

Meantime, Ballmer is watching with sweet bemusement and sending high-school-like signals that, hey, maybe Yahoo and Microsoft can still be friends - with benefits.

The showdown, such as it is, is set for Aug. 1, when Yahoo holds its annual shareholders meeting at the San Jose Fairmont. At least the surroundings will be luxurious.

On the plus side, you have Ballmer and Yang - the yin and, well, Yang of high tech. The ballistic Ballmer is known when making a point to jump around like the late Chris Farley doing his best down-by-the-river evangelist. The younger Yang is reserved, but obviously no more likely to blink. And what about Carl "The Icon" Icahn, a real bomb-thrower who is all about one thing: money. You want sentiment? Save it for someone who cares.

Still, as much as we'd like it, the Yahoo story just doesn't have the heft of its HP proxy predecessor.

The HP drama featured Carly Fiorina, a rock-star CEO who - like Madonna, Cher and Prince - could get by on her first name only. She was supported by Larry Sonsini, the consigliere to high-tech heavy hitters, a man who emanates power the way some men give off sweat.

On the other side was Walter Hewlett, the once reserved son of HP's co-founder, who emerged as the key soldier in the battle to save his family's good name - or at least the company that carried it. Here was undisputed Silicon Valley royalty fighting for the soul of its seminal company. He and his forces argued that oblivious outsiders were out to wreck a sacred institution in a dubious pursuit of profits.

Fiorina's forces labeled Hewlett "a musician and academic" and the company leaked reports that Hewlett, an HP board member, had missed key meetings regarding Compaq.

Also leaked, though not by the company, was a voice mail message left by Fiorina on the phone of HP executive Bob Wayman in which Fiorina said that in order to win over some big investors, company officials might have "to do something extraordinary . . . to bring 'em over the line."

Like any great American story, this one ended in court. The trial climaxed with hours of steely testimony from Fiorina. She and other Compaq executives testified about how company managers routinely sandbagged them on projections and how the threat of layoffs is an excellent motivator.

It had dirty laundry.

The Yahoo drama? More like starched shirts.

Which could change. Maybe Icahn is just warming up. And Aug. 1 is a long way off.

Hey, a guy can always hope.

http://www.siliconvalley.com/opinion/ci_9499302
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Tue Jun 10, 2008 11:06 am

Ballots go out in Yahoo fight
$12 MILLION TO FIGHT ICAHN
By Elise Ackerman
Mercury News

The polls opened Monday for Yahoo shareholders as the company mailed out ballots for the upcoming board election that could determine whether Yahoo remains an independent company.

The ballots, known as "proxy cards," were accompanied by yet another pair of caustic letters penned by Yahoo's leaders and activist investor Carl Icahn, who is campaigning to replace Yahoo's board and sell the company to Microsoft.

Yahoo and Icahn have been sparring publicly since Icahn nominated an alternative slate for Yahoo's nine-member board of directors last month. On Monday, Yahoo said it planned to spend up to $12 million fighting Icahn.

Company materials invited shareholders to vote "24 hours a day, 7 days a week" via a Web site, www.cesvote.com, a toll-free number or by regular mail. Anyone holding Yahoo shares as of the close of business on June 3 is eligible to vote.

A preliminary tally will be announced at the annual meeting Aug. 1. Final results will be published along with Yahoo's financial results for the quarter ending Sept. 30, 2008. IVS Associates, a voting services company, has been hired to act as inspector of elections, the company said.

In a letter to shareholders, Chief Executive Jerry Yang and board Chairman Roy Bostock urged investors to ignore Icahn. "Mr. Icahn has no credible plan except to sell the company to Microsoft - despite the fact that Microsoft has publicly indicated that it has no current interest in such a transaction," Yang and Bostock wrote.

Microsoft withdrew a bid to buy Yahoo for $33 a share May 3 after Yahoo rebuffed the offer.

And in case investors missed the point, the proxy materials instructed them "NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY THE ICAHN ENTITIES.

"Even if you have previously signed a proxy card sent by the Icahn Entities, you have the right to change your vote by using the enclosed WHITE proxy card," the material continued.

Icahn quickly fired back, accusing Bostock of reaping rich financial benefits from Yahoo and reiterating his opposition to a severance plan, adopted by Yahoo's board Feb. 12, that provided employees up to two years of salary and accelerated vesting of their stock options if there was "a change in control of the company" and they were fired without "cause" or quit for a "good reason."

In the proxy materials, Yahoo disclosed that "a change of control" would include a situation in which one person or a group acquired more than 40 percent of the company's outstanding shares or if five or more of Icahn's nominees were elected.

Eric Jackson, president of Ironfire Capital, said he and a group of 150 people controlling about 3.2 million shares, are voting for Icahn. "It's a situation where the current board, in my view, hasn't done anything to warrant re-election," he said.

Yahoo is currently facing shareholder lawsuits in California and Delaware over the board's handling of Microsoft's bid.

http://www.siliconvalley.com/ci_9537929?nclick_check=1
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby JeanInMontana » Wed Jun 11, 2008 3:52 pm

0.0 this will be good.
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Wed Jun 11, 2008 4:18 pm

We can only hope there is some sex scandal and maybe some violence in this fight. Or, maybe I can hope. Anyways.....
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Re: Will Open Source World Welcome Microsoft-Yahoo Combo?

Postby rockingmtranch » Fri Jun 13, 2008 10:45 am

Yahoo, Google strike a deal
CEO YANG SPURNS LATEST OFFER FROM MICROSOFT; STOCK PRICE FALLS 10%
By Elise Ackerman and Brandon Bailey
Mercury News

Yahoo announced Thursday afternoon it had turned down an offer from Microsoft to buy its search business and heralded a 10-year advertising partnership with Google, ending a high-stakes takeover saga that has stretched more than four months.

"Clearly, it's time to move on," said Yahoo Chief Executive Jerry Yang, who touted the alliance with Google as the best outcome for shareholders. But investors were less confident, sending the company's shares down 10 percent even before details of the partnership were announced.

Said Martin Pyykkonen, an analyst with Global Crown Capital: "For Yahoo shareholders, nothing is going to come close to Microsoft's original offer."

But Yang - who has been heavily criticized for spurning Microsoft's courtship - said in a conference call with analysts that Microsoft's most recent proposal fell short.

"Such a transaction would not be consistent with company's view of convergence of search and display marketplaces and would leave the company without an independent search business that we view as critical to our strategic future," he said.

Yang said Yahoo expects to boost operating income by as much as $450 million a year - or 25 percent - by displaying Google ads alongside Yahoo's search results and on other Yahoo Web properties.

He emphasized that the arrangement with Google was not exclusive. "It means Yahoo can display paid search lists from Yahoo, Google or for that matter any other third party," he said.

'Reseller' of ads

"On the surface there are parts of the deal that sound pretty good," Pyykkonen said. "But what they are basically saying is they are going to be a reseller of Google ads."

Microsoft first offered to buy Yahoo for $31 a share Feb. 1, but later raised its bid to $33 a share. Microsoft withdrew the offer May 3 after Yahoo continued to insist that it was worth more.

Talks between the two companies reopened after major shareholders criticized Yahoo for bungling the negotiations and billionaire investor Carl Icahn launched a proxy battle to take control of Yahoo at its annual meeting Aug. 1.

Icahn did not respond to a request for comment.

According to a source familiar with the situation, the new talks led to an offer from Microsoft to buy a 16 percent stake in Yahoo for about $8 billion, or $35 a share. As part of the deal, Microsoft would acquire Yahoo's search advertising businesses, assuming all costs and returning "favorable economics" back to Yahoo in excess of $1 billion.

Another source disputed those specific details while confirming that a partial acquisition was discussed.

At a meeting Sunday, Yahoo executives asked Microsoft for assurance that it was no longer interested in acquiring the entire company for $33 a share. When Microsoft reiterated that it would not renew its bid, Yahoo decided an alliance with Google would be more valuable.

The deal with Google includes a penalty for Microsoft should it renew its pursuit of Yahoo. Specifically, Yahoo would have to pay a fee of $250 million if the deal was terminated as the result of a change in control of Yahoo that occurred within 24 months.

Antitrust questions

Antitrust experts said the non-exclusive arrangement between Yahoo and Google appeared to be crafted to stand up to regulatory scrutiny.

Yang said the companies have voluntarily agreed to delay implementation of the deal for up to 3 1/2 months while it is reviewed by the U.S. Justice Department.

Soon after the deal was announced, U.S. Sen. Herb Kohl, D-Wis., said it would be reviewed by the Senate's antitrust subcommittee, of which he is the chairman.

Barak Orbach, a law professor at the University of Arizona, said there are reasons to be concerned from an antitrust perspective. And if Yahoo becomes dependent on revenue from Google, he warned, "Google can kill you. Why would Google be interested in keeping you alive?"

But Glen Manishin, a partner with Duane Morris, said he thought the deal would increase competition because advertisers would be able to get roughly the same service from Yahoo or Google.

Bert Foer, president of the American Antitrust Institute, said he would be concerned that any Yahoo-Google alliance could reduce the number of "independent platforms" in the advertising market.

But he said regulators also have to consider, "What is the viability of Yahoo in the absence of some sort of deal? I don't know the answer to that."

http://www.siliconvalley.com/ci_9573355?nclick_check=1
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