Icahn and Ballmer plot Yahoo overthrow

On June 27, Microsoft Chairman Bill Gates said he didn't think that his company and Yahoo would make a deal, adding that Microsoft CEO Steve Ballmer will find "plenty of other opportunities.

Not so fast. As Yahoo's quarterly earnings come up on July 22 (see Kara Swisher's take on the upcoming financial results) and the shareholder meeting on August 1, Carl Icahn and Steve Ballmer are teaming up to remake Yahoo's board of directors and shelve Yahoo CEO Jerry Yang. In a letter to Yahoo shareholders, Icahn said:

Steve (Ballmer) made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo, such as either a transaction to purchase the 'Search' function, with large financial guarantees or, in the alternative, purchasing the whole company."

Microsoft issued a letter today confirming Icahn's remarks about Microsoft's renewed interest in a transaction with Yahoo:

While, of course, there can be no assurance of a future transaction, we will be prepared to enter into discussions immediately after Yahoo's shareholder meeting, if a new board is elected.

Now the fate of Yahoo is clearly in the hands of shareholders. They can give Icahn a few seats on the board but not enough control to force massive changes or they can hand over the company to him and Microsoft, knowing that a transaction for $33 to $35 per share for the search business or the entire company will be consummated over the next six months.

As I have said before, Microhoo has always been about the money, and less about a shared strategy and cultural fit. Yahoo's board thought that Yahoo was worth $37 per share, and Microsoft wasn't going to negotiate against itself, with no other buyers in sight.

During an interview at the D6 conference, Yang said:

I understand the situation people are feeling, but at the same time we did not walk away from that proposal, Microsoft did. We are willing to do a deal under the right terms. It wasn't clear to me they wanted to finish the deal. I can't go revisit and take or not take it. I understand our obligation to stockholders from conversations with a number of them. The focus for us is how do we recognize more value for the company soon and position Yahoo to be much more successful in the long term. If there is a way to do it, we'll talk about other alternatives, but we aren't going to do something short term.

Yang has some regrets that Microsoft walked away from negotiations in May. He may prefer an independent Yahoo, but reality is setting in, and now he is probably wishing he and his board had played less difficult to get.

Update: Yahoo issued a testy statement regarding the Icahn-Ballmer "apparent effort to force Yahoo! into selling to Microsoft its Search business at a price to be determined in a future 'negotiation' between Mr. Icahn's directors and Microsoft's management."

In the statement, Yahoo invited Microsoft to make a proposal immediately and for Icahn to reveal his plan for Yahoo beyond teeing up Microsoft to make a deal. I doubt Jerry Yang and company are going to receive any kind of proposal until the shuffle at the upcoming shareholder meeting takes place.

[lmasanti]

quote:
"On June 27, Microsoft Chairman Bill Gates said he didn't think that his company and Yahoo would make a deal, adding that Microsoft CEO Steve Ballmer will find "plenty of other opportunities.""

Do you still beleive any saying from Microsoft?

[anoyed]

I feel sorry for Yahoo. Yang may or may not need to be ousted but anything Microsoft gets control of will die on the vine as usual. For all its faults I don't want to see Yahoo end up as yet another failed and abandoned project of Microsoft's.

[Kwasiowusu]

Oh nonsense. Microsoft bought Hotmail in December 1999, when Hotmail had just 10 million users. Today, hotmail has over 400 million users, and is the largest email service on the planet. but hey, don't let the facts interefere with your mindless anti-Microsoft rants.

[Penguinisto]

Yep - MSFT bought Hotmail... and promptly had nothing but trouble and expense in converting it from its FreeBSD roots into an NT farm. Meanwhile, out of the "400 million" users, I can guarantee you that all but a slim margin of those "users" are spam puppets at best. As someone who actually deals with SMTP and web issues on a daily basis, I've simply shut off any inbound or outbound mail to or from hotmail.com (among a few others) - I've seen not even a negligible loss of customers - just growth. I've seen no loss of viable traffic, and indeed - I've gained an appreciable amount of peace and quiet in the mail spool as a result (e.g. it's mostly legit traffic now, not the spam-fest it once was).

[Kwasiowusu]

where do you come off with this garbage? Microsoft had "trouble" converting Hotmail from the crap FreeDSD to Windows? So what? Every major massive software and operating system change that has been attempted, has had glitches. This change from FreeBSD has already teken place over 8 years ago, and since then Hotmail has been running like w well oiled engine. I use hotmail throughout the day, 366 days a year. If you open source crazies are still crying over Hotmail going with the nmost popluer sever operating system on the planet, windows, you'd better get over it, and get a life for a change.

[Penguinisto]

ROTFL! touchy, touchy, kiddo... just sayin' that, as evidenced by the massive troubles MSFT had w/ Hotmail, MSFT will likely face massive troubles with shifting over Yahoo's server farms (and likely far more trouble, considering the size and scope of Yahoo). And "well oiled machine" is not exactly what one would call Hotmail, which is still a great big spam-producing cesspool no matter what OS runs its servers. ;)

[Vegaman_Dan]

Wow. Yang is now claiming he wanted to sell out to Microsoft but is disappointed that they walked away. I suppose it's possible he forgot all those speeches and press releases stating he had no intention of ever selling to Microsoft. But as the article states- the shareholders will decide. In the mean time, I think Yang should be updating his resume.... but perhaps leave his time at Yahoo out as that is a major embarassment on his part.

[Penguinisto]

Yang merely wants to get a good price for it (and has said as much) - so what if it's more than MSFT was initially willing to pay? You wanna buy a big company, be prepared to pay a large sum. Personally, Icahn and Ballmer are on a fool's errand - even if they manage to buy it, YHOO won't have any marketshare worth saving once the attrition, massive cash amounts, and teething troubles of combining the two are done. Also, Icahn is playing Ballmer for an idiot - Icahn is only after a big payday, nothing more. Ballmer won't get anything of use out of Yahoo, and indeed, will likely be in for a huge and rude shock when Yahoo users run off in droves to Google (after all, if Yahoo customers wanted to use MSN, they would have done so already, given that MSN is the frickin' default on Windows installs).

[Kwasiowusu]

Yang wanted to moon, and he's not gonna get it. Anyone can claain that their company is worth one trillion dollars. That doesn't make it so. Just last year, all these analyste drank oogle kool Aide and cliamed that Google will be worth $1000 a share this year. Instead google is down over 305 from its 52 week high, and is now worth half that figure. as for Yahoo users running off to google, its not gonna happen. Yahoo Finance, and Yahoo sports and yahoo groups and yahoo messenger and practically everything Yahoo has(apart from search), totally trump by far anything Google has. If yahoo usewrs werwe going to run to google, they would have done so since Microsoft made its offer for yahoo 5 months ago.

[Penguinisto]

"as for Yahoo users running off to google, its not gonna happen." Sure thing, big guy... like Google (among many others) somehow doesn't have the same services, and that Yahoo's services somehow won't degrade once most of its staff runs for the hills. This segues into the main reason why Yahoo users haven't bolted yet - as long as nothing changes, they'll stay. You and I both know that MSFT won't let that happen - they'll jam up the works as soon as they deem it practical to do so.

[Kwasiowusu]

Yahoo users are no are no more going to stop using yahoo, same as Hotmail users never stopped using yahoo when Microsoft took over, and instead, Hotmail users went up by a massive over 40 times since Microsoft took over.
Why on earth would anyone stop using Yahoo messenger just because Microsoft took over yahoo, when all their instant mesenger friends are on yahoo messenger? Who the heck uses Google instant messenger anyways?I don't know even one persom who does. And why the heck would yaho finance users, stop using Yahoo finance (which is by far better than google finance), just because yahoo finance is now owned by Microsoft? Contray to your anti-microsoft wishlist dreamland, consumers are not that stupid. They will use what works for them. They don't care who owns it. But hey, keep dreaming.

[Penguinisto]

"same as Hotmail users never stopped using yahoo when Microsoft took over..." Err, they left en-masse once MSFT pulled that stupid "Passport" stunt. The reason the numbers don't reflect that loss is because while legit users moved out, spam puppets moved in (and didn't seem to care at all about the paltry measures MSFT put into place).----------------- Most competent web social and forum sites specifically refuse to allow Hotmail accounts with which to register. Ever wonder why that is? Also, IM's are a strawman argument, because they have been rendered mostly moot (IOW, 2001 called and they want their killer app back ;) ).

[Kwasiowusu]

Yeah Hotmail users left en masse, did they?...Is that is why Hotmail has a massive over 400 million email uers today, as compared to just 10 million users when Microsoft bought Hotmail in December 1999. Just keep coming up with your lies and fiction dude, but let me know when you wake up from demalnad and come back to real life, will ya?

[Kwasiowusu]

FACT: Hotmail is by far the biggest email service on the planet, and it was Microsoft that made it that way, giving it massive growth from a tiny 10 million installed base when Microsoft bought it.Meanwhile, no one in his right mind is going to give up using excellent yahoo services like Yahoo messenger, and Yahoo Finance, and go use the crap google instant mesenger, and the adominable google finance, just because yahoo mesenger or yahoo finance are now owned by Microsoft. Consumers are not as supid as the Microsoft hating google fanatics are.

[notesrules]

The way Microsoft is moving forward with its on/off decisions to purchase all or some of Yahoo and now saying it would be interested in talking to Yahoo again if Yahoo's board was changed sounds extraordinarily manipulative. Being convicted of being a monopolist, isn't Microsoft playing with fire by manipulating Yahoo and Yahoo shareholders?

[J. Blow]

Gates retired.