Who knew? Yahoo finally grew a pair

The ongoing epistolary smackdown between Yahoo and Carl Icahn reached a new low on Thursday, with the latest missive sent by the company to its shareholders.

The letter seeks to convince holders of Yahoo stock that the company is in good hands, and management is wise and deliberate and looking out for its best interest.

There's a great line in the film The Untouchables, when Sean Connery bluntly informs an under-armed assailant that you don't bring a knife to a gunfight. It looks as if the mild-mannered Yahooers finally picked up on that bit of folk wisdom.

Jerry Yang: Carl, let me teach you a thing or two about computers

(Credit: Dan Farber/CNET News)

Here are some of the choice excerpts, along with my requisite two cents.

• "Mr. Icahn has made it clear that his only objective is to sell part or all of Yahoo to Microsoft. That fact, combined with his lack of an operating plan going forward, means that he will have no leverage to negotiate a fair deal with Microsoft. He has set himself up for failure."

Translation: Icahn's a short-termer with no idea what he wants to do--other than make a quick buck. And since Icahn has no idea how to manage Yahoo's business, he's got a snowball's chance of making a good deal, since Microsoft will have all the leverage in any prospective negotiation.

Carl Icahn: Flip-flopper extraordinaire? Yahoo says so

•  "Mr. Icahn will be calling the shots, if his slate wins, and yet Mr. Icahn himself told The Wall Street Journal last fall: "Technology hasn't really been one of the things I've focused on too much before" and "It's hard to understand these technology companies." That's why you need a knowledgeable, experienced, and independent board to represent your interests vis-a-vis Microsoft."

Kudos to the PR muckety-muck who convinced management to go for the jugular. This is so much more delish than the usual pabulum churned out by the spinmeisters. The above paragraph is a polite way of calling Icahn a technical illiterate who has, at best, a shallow understanding of how an Internet business ought to run. They should have gone the extra step and dissed him as a greenmailer without a clue.

•  "How can Yahoo stockholders trust Mr. Icahn to deliver what he claims he can deliver when his actions have been so contradictory--and when all he has delivered so far is a risky proposal of questionable value from his new friends at Microsoft?"

He couldn't make up his mind about whether Yahoo would be better off being sold in toto or in part to Microsoft. Later on, he suggests that Yahoo dump Microsoft's search-only offer and instead pursue the Google alternative, which Yahoo was already negotiating, thank you very much. The guy blows with the wind. Do you really want to trust your company to a flip-flopper?

•  "Certainly, Microsoft is a well-respected and successful company, and we have been clear that we are fully prepared to do a deal with them. But Microsoft's flip-flops and inconsistencies over the past five months are so stupefying that one can only conclude that Microsoft was never fully committed to acquiring Yahoo, either, because:"

•  "Microsoft can't decide what is and isn't strategically important to its online business;"

or

•  "Microsoft is more interested in destabilizing a key competitor so that it can either enhance its competitive position or buy our highly valuable search business--and the enormously desirable intellectual property associated with it--at a bargain basement price."

And Steve Ballmer thought he was going to scrape by without at least (dis)honorable mention? Think again. A lot has been made of the strategic predicament faced by Yahoo because of poor execution in the market. How about Microsoft's poor execution as a negotiating partner?

Jerry Yang and Roy Bostock either believe Microsoft's brain trust is incompetent when it comes to M&A--or simply malevolent. There is a school of thought which believes that Microsoft's real aim is to drag this out in order to embarrass and weaken Yahoo to the point where fed-up shareholders can't take it any longer and scream for a deal at any price. I don't believe in conspiracy theories, so I'm left puzzled by the spectacular incompetence of Ballmer's minions in pursuing a deal with Yahoo.

Kara Swisher of The Wall Street Journal's All Things Digital had it right when she noted last week that now everyone concerned in this months-long melodrama hates each other even more than before.

Congratulations, guys. This is even more fun than A-Rod and Madonna. Can't wait to see what tomorrow might bring.

[rocketjam--2008]

IMO, they pretty much nailed it as far as Icahn's concerned. He's only interested in making a quick buck and could give a **** about the ultimate fate of Yahoo, its employees or its users.

[chrgeorgeson]

Funny thing about that line from the Untouchables is that Sean Connery gets killed right after that.
The thing we have to ask ourselves is Yahoo! in the wrong because it would have been a better move for the shareholders? In my opinion yes! That's the problem with being a public company your shareholders come before everything.
I agree with Ichan on some parts but it's still wrong from a public shareholders perspective.

[nyswen21]

Actually, that line from the Untouchables happens before Connery even agrees to help Eliot Ness. And he doesn't die until after basically helping Ness bring down Capone.

[rocketjam--2008]

Conventional wisdom seems to be that the best thing for shareholders is a quick buck NOW, not a long-term plan for return on investment. However, shareholders may ultimately get the most value by Yahoo pursuing a different strategy than selling to MS.

For instance: http://gigaom.com/2008/07/16/what-getting-buzzed-says-about-yahoo/

[Renegade Knight]

You are right about wall street wisdom, but it's not real wisdom.

GM is the "wall street" company run by wall streets conventional wisdom.
Toyota is the company run with actual business wisdom. Ironicly the same wisdom taught to me in biz school here in the USA. Either wall street ignores everthing taught, or they went to different schools.

[RainCaster]

IMO, the question to ask deals with who is better suited to run the company. While the current board did an admirable job a decade ago, they have done little of late. Compare tis to the growth record of Mr. Icahn, then make up your mind over who will deliver the best value for shareholders. Gutting the company might actually be better for us shareholders, even if it means that Jerry and The Board must head down to the unemployment line.

[camdef]

It's more worrisome that Google now has clear road, after this failed merger, to monopolize online search. Sadly, one more monopolist, who probably learned from Microsoft's faux pas as a monopolist to preserve longer an aura of "do no evil" crap. I have a political problem with the monopoly, and an aestetic one with the quality of their technological innovations.

[michaelo1966]

Ichan is an opportunist who knows nothing about the business, but Yang is similarly an ethics-challenged corporate executive apparently putting the well being of himself and his cronies above his fiduciary responsibilities as chief executive of a public company.

[Renegade Knight]

Hmmm...

Dismantle a company in favor of Microsoft who hasn't had any luck moving their own stock upwards in recent history or stick to the basics which is why Microsoft wants to buy Yahoo to begin with?

I'd say Yang has it iright. Microsoft isn't a growth company insofar as it's stock.

[jamalystic]

Flip-flopping again! Well with Obama and Mccain accusing each other of being the Flip-flopper extraordinarie, it's no surprise then that Mirosoft and Yahoo are using the same slang. At least this story has lively the summer proceedings for us and let's just wait till August 1for the shareholders's meeting: Microsoft's Online Future: Forecast Hazy(http://www.internetevolution.com/author.asp?section_id=466&doc_id=152918&F_src=flftwo)

[john55440]

From Day One, Yang's actions made it clear that he would *never* negotiate *any* deal with Microsoft. Ballmer's negotiating skills, or lack therof, were never tested, because of Yang's refusal to enter into any genuine negotiations.

Yang should have negotiated a deal with Microsoft before Icahn got involved. He could have got a very favorable deal, that would have greatly enhanced Yahoo!'s shareholder value.

[Renegade Knight]

True value in business isn't making a buck on 30 bucks one time. It's repeating it time and gain. Selling out is a one time deal. Sticking in business (Yahoo makes money after all) and growing what you know how to do that Microsoft values but can't seem to do itself that leads to repeat profits and long term success.

[wango2007]

Yahoo is still the bad guy in all this. The Yang-O-Maniac passed on a sweet deal in the first place and threw the whole process into confusion. Ichan and MS are not wrong in trying to come up with alternatives to move the process along. Obviously Yang and the Yahoo board are clueless and will not do anything expect protect themselves with a posion pill as they have.

Yang thinks he is some kind of wheeler-dealer, but he's really being a fool, especially hurting stockholders, and users who will have a better Yahoo experience under MS.

Yang needs to take the money, leave Yahoo to the big boys, and do a private Oohay startup where he can play at being the big man.

[Dalkorian]

Wow. You just blindly shill for M$ everywhere you go, don't you. Let me guess, you're actually stupid enough to think that selling Yahoo to M$ will somehow improve Yahoo. The reality (history) says something very different ... Yahoo + M$ = Google monopoly. Why? M$ will destroy Yahoo as they have done to all acquired competitors and will release yet another failed, bloated, and vulnerable product that will chase people to Google. If M$ had a clue as to how to build a decent search engine, wouldn't they have done so by now?

[YankeePoodle]

Dalkorian,

You are the one blinded by hate. Do you think Msft would spend 50Billion just to kill a dead-horse? Stop analyzing with your d*ck.

[RompStar_420]

I am not aware of any law that says you have to sell your company to someone who approaches it. I mean, if they sell their profitable function area, they are not going to be left with my, might as well close down Yahoo after the sale.

Microsoft - can't be trusted - look at their history since they started to operate, all Jill behavior.

[Sugiarto Setiabudi]

There is wrong berween Carl Icahn and Steve Ballmer in colloborating secret seal of illegal hostile taking over control of Yahoo.
Carl Icahn and Steve Ballmer should be held personally liable in abusing securities market for their "ill will " and unethical motive in short term financial interest.
Their acts together will undermine market integrity and public trust.

[Sugiarto Setiabudi]

Carl Icahn and Steve Ballmer should be held personally liable in abusing securities market.

[Tui Pohutukawa]

Why are some people so keen on Yahoo selling out to MSFT? It would mean certain death to Yahoo. What's the attraction in that?

[torrentlvr]

I agree with rocketjam... Icahn ... True life Gordon Gecko. Take your 'Greed is Good' somewhere else Carl.