Icahn's questions attack Yahoo

Billionaire investor Carl Icahn kicked off the week with scathing questions for Yahoo, as his proxy fight heats up with roughly eight weeks to go before Yahoo's annual shareholders meeting.

In the latest salvo, Icahn presses Yahoo to answer his previous questions as to why the Internet search pioneer opted to install an expensive employee severance plan as a retention method, while neglecting to mention to its workers that Microsoft had earmarked $1.5 billion to retain employees, should it have been successful in acquiring Yahoo.

Here is Icahn's letter to Yahoo Chairman Roy Bostock:

June 9, 2008

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

Dear Roy:

After reading Yahoo!'s press release put out on Friday in response to my letter of that morning, I cannot help but wonder if you even read my letter.

Again, Yahoo! keeps repeating misstatements in the hope it will convince its shareholders that these misstatements are valid. I cannot understand why the Yahoo! board feels so strongly about its "poison pill" severance plans and why it continues to refuse to rescind it. How can you continue to repeat that your severance plan is in the best interests of shareholders and employees? Indeed, Yahoo!'s own compensation advisor called the severance plan "nuts." Is it not true, as the shareholder complaint stated, that Microsoft's CEO earmarked $1.5 billion for employee retention (a benefit you neglected to tell your employees about)? Is it not better to incentivize employees to stay in their jobs than to quit? Instead of just continuing to repeat the mantra that we have made an inaccurate interpretation of your severance plan, why do you refuse to go into detail as to why our interpretation is incorrect? Additionally, a New York paper reported this weekend that "sources close to Microsoft said the severance plan was a 'big issue' when deciding what price they could pay for Yahoo!"

In your press release from Friday, you stated again that I do not have a credible plan for Yahoo! Did you even bother to read my letter, which went into great detail on what measures I would ask the new board to take? Ironically, while you keep inquiring about my plans, it is interesting to note that Yahoo!'s board has been busy reaping great compensation benefits. Indeed, you made approximately $10,000 per week last year -- not bad for a board member. I believe most of your shareholders would be interested in seeing your time sheets -- especially in light of the fact that, in my estimation, most of your so-called "plans" over the last few years have been failures. Remember the old adage -- those who live in glass houses should not throw stones. Perhaps most importantly, under my plan, I would ask the Board to bring in a talented and experienced CEO to replace Jerry Yang and return Jerry to his role as "Chief Yahoo!" It is extremely important to note that Google hired a great operator as a CEO who helped to transform the Company into a giant at the expense of Yahoo! According to publicly available financial information, while Google's income from operations grew 59% per year over the last two years, Yahoo!'s income from operations shrank 21%. What was the board doing over this period? Where was their great "plan"? I believe a new CEO with operating experience might well have had and might still have a very salutary impact on Yahoo! I ask again what your great "plan" has been over the last few years. Why did you permit Google to leave you in the dust?

I outlined a number of questions in Friday's letter. Why don't you do me the courtesy of answering my questions as I have answered yours?

Sincerely yours,

CARL C. ICAHN

While it's not clear to what degree Yahoo will address Icahn's letter, one thing is likely certain: Yahoo will send its own salvo in response. It can't afford not to; the stakes are too high. Yahoo is hoping to woo investors to re-elect its current slate at the August 1 shareholders meeting, rather than vote in Icahn's dissident slate of directors.

[lukulius]

Yang and Bostock might be screwing the pooch here, but I have to say that Icahn sure has a lot of opinions for a guy who doesn't understand what the internet is.

I think it's pretty obvious that this guy doesn't understand Yahoo's business and all he wants is to make a quick buck.

[MMC Racing]

As well as Yahoo has done over the last few years, they don't seem to know what the internet is either.

[flippermoon]

Carl is right on, it's great he is getting involved in this even if it's for quick money. Yahoo is a joke compared to goog. Hey yahoo, ever heard of adwords editor? Why don't you create the same software? Panama is horrible compared to adwords in almost every way. Yahoo content ads just can't compete with adsense.
Yahoo clearly can't compete with goog in search or ad delivery, so either sell the company now to msft (which sucks too) but at least they have money or start REALLY listening to your customers and delivering. It's actually Yahoo that doesn't understand the economics of the internet business, judging by their results over the past couple of years. Less risk for everybody to just take MSFT's monopoly money - again Carl knows exactly what is going on.

[zbikenut]

Quick buck? how about an easy buck. Elect me to the board of directors I could use a 500,000 per year job to rubber stamp Yang and co. It is interesting that the poison pill is designed to keep the owners of the company from selling the company and ousting incompetent managers.

[mikehill33]

Yahoo! is too busy planning layoffs to bother with Carl's letter.

Sad, but given their track record of lack of fundamental business grounding, Yang and crew will sink this ship faster than a hurricane!

[Dalkorian]

It's amazing how many of you hate Yahoo so much. Icahnt has only one vision for Yahoo - a quick death at the hands of the evil empire, cashing out for max profit. We all know what M$ does to it's competition. Do you all really advocate for Google-only search on the web? Do you all really want to hand Google a monopoly in web search? M$ has already proven it can't get the job done (MSN anyone?) and Ask is really the only other game in town, but it's not exactly taking off now is it.

[throughtheglass]

What I love about this fight is how dumbed down they are making everything. Ichan knows EXACTLY why this plan was put into place. To stop EXACTLY what he is trying to do from happening. He is in a reall tough spot right now. Unless the current board removes the plan, he is f***ed in terms of what options he has.

If his clown college puppet board does get voted in, they have to figure out how to run the company for the next 2 years until the provision goes away. Who on that board can do that? Cuban? hahaha, give me a break. And what CEO wants to run a company that is just going to sold for scrap in 2 years? Not anyone that could really make a difference and drive up the share price.

And as far as a deal with Google goes, what is in it for Google? They know the business will be pulled out from under them at any time once a deal is hammered out with MS, so what is in it for them?

Sure, he can sue to get the severance plan removed, but what are his chances of winning that suit? The board was within their rights to put the plan into place.

As far as not telling the employees about the 1.5 billion. They knew. But my guess is with the current severance plan in place, many of them will make a lot more than $100,000.

I think its funny how they through a wrench into this jack@$$'s plan.

[benjaminstraight]

More of the daily drama via Yahoo.

[uohaa]

Google will hard yahoo even more in the future with youtube and facebook!