While the food fight between Yahoo and Carl Icahn escalates--and while I'm at it, don't forget Microsoft--both the House and Senate Judiciary committees are getting ready to hold hearings on the proposed Yahoo-Google tie-up. In advance of this primo photo op for the hired help, I had a chance to review the prepared testimony of David Drummond, Google's chief legal officer. Give the guy credit for putting together a crisp presentation. Among the highlights:
• If Uncle Sam green-lights this deal, Google won't wind up taking nearly total control of the search market.
• The deal is good for users and advertisers.
• Google is not going to wind up with more search traffic.
It's hard to say all that and keep a straight face, but Drummond's a good lawyer and I'm sure he'll give a convincing presentation. Drummond knows he better bring his A game because he's going up against far sharper minds than the grandstanders who turned the 2006 China-Internet hearings into a veritable circus.
Drummond's central argument will be that Yahoo remains a viable rival. That's where the debate will ensue. How is more concentration of power--i.e. even greater dependence on a single company--supposed to benefit online advertisers? Just to show humor is in no short supply, Microsoft will play that card for all its worth. The biggest software monopoly in history can rightly argue that Google accounts for about three-fourths of search advertising revenue (and roughly the same number of search queries) in the world. Add Yahoo's roughly 20 percent and that translates into POWER. Microsoft knows something about that. But I digress.
Microsoft should also hammer hard on another point: the Yahoo-Google arrangement is structured so that Yahoo earns more money when Google earns more money. Because it will share in Google's revenue, what's Yahoo's incentive for competing against its partner? Google has a briefcase full of counterarguments to offer, but it's going to be a tough sell. Especially considering the change in the political constellation of forces. After nearly eight years letting corporate America have its way, Uncle Sam has piled up a fairly lousy economic track record. And now Congress is being asked to remain mum on Google-Yahoo? Don't bet on it.
Warren Cowan, chief executive of the U.K.-based search engine company Greenlight, spammed reporters Monday with his thoughts. But consider what he has to say:
"As far as the advertisers go, I don't see this as a good thing for the online advertising industry. We speak to major advertisers every day, and what they want is better returns, more distribution and less dependency on one provider. Likewise search agencies want to be able to diversify their clients spends and reduce risk too, and this deal doesn't deliver these to anybody. Whilst a Microsoft/Yahoo deal would have reduced the number of people in the market, it would have done much more to balance the options open to advertisers."
Should be fun tomorrow.
Stepping up his one-man PR offensive, activist investor Carl Icahn described as "completely disingenuous" Yahoo's contention that disagreements over price torpedoed acquisition talks with Microsoft.
Resistance is futile: My kung fu is stronger than your kung fu
Icahn, a veteran negotiator, broke an uncharacteristically long silence by talking to the media this week to rally anti-Yahoo opinion. Yesterday it was The Wall Street Journal, today it was CNBC.
"Sue Decker says today 'We're doing everything we can but the price isn't high enough.' It's not high enough because of (a proposed severance) package," Icahn said in an interview on the CNBC program, Fast Company. "And it's a bit worse than you're alluding to because one of the things that Microsoft, I would imagine, needs here is the workforce. And how do you then go in and tell them (Microsoft's) paying $45 billion but we're incentivizing this workforce that you want to leave? I mean, it's sort of--it's sort of incomprehensible what they're doing here."
The proposed Yahoo severance plan, which comes out to roughly $1.60 a share, was seized upon by critics who said it presented an obstacle to any potential deal with Microsoft. In a letter he sent today to Yahoo Chairman Roy Bostock, Icahn demanded that the board rescind the severance plan, which he described as "the largest impediment to a Microsoft deal." Icahn said that decision would free up approximately $2.4 billion and possibly even more that could be added to the bid.
In the meantime, Icahn used his CNBC appearance to deride Yahoo's management as lacking accountability. On Monday, he again urged the dismissal of Yang, who Icahn said stood in the way of a fruitful negotiation with Microsoft. In mid-May, he filed a proxy slate to unseat Yahoo's board.
"I tell you I've rarely seen (a management team) where the company has gone to such lengths to entrench themselves and it's a sad commentary."
At the same time, Icahn remained unenthusiastic about any of the alternative deals being bruited about between Yahoo and Microsoft in lieu of an outright acquisition.
"Sometimes, you have to have patience," Icahn said. "But I believe if it's not this month--it'll be six months from now. But it's crazy for the company now to do this alternative deal and give the store away because obviously, an alternative deal is a poison pill. Because once you've done an alternative deal and given search to Microsoft, you don't need Microsoft to buy you anymore. So, that would be a poison pill."
Icahn also said a partial sale would leave Yang and the current board in charge, which he said "would be terrible for shareholders."
More rumblings in the ongoing Yahoo-Microsoft saga, with Carl Icahn calling for Yahoo CEO Jerry Yang's head. Meanwhile, the board has set its annual shareholders meeting for August 1. And just to keep things extra interesting, Sue Decker, the No. 2 exec at Yahoo, got up at a public forum to say that yes, we still are talking to Microsoft. Check out my interview with CNET News.com reporter Dawn Kawamoto, who deconstructs the latest chess moves.
Had it not been for Jerry Yang and Tim Koogle, Mark Cuban would be just another middle-aged rich guy. Not George Soros-rich, but with enough shekels in the bank to spend a life of leisure.
Hey guys, I'm baaaack
In 1999, he sold Broadcast.com to Yahoo for the princely sum of $5.04 billion in stock (and then was smarter than the average bear by cashing out before the bubble burst). Up until then, Cuban was working with the proceeds from his 1990 sale of MicroSolutions, a computer reseller, for $6 million. Not bad, but not enough to buy a professional basketball team.
Now Cuban is part of the 10-person slate that Carl Icahn is proposing to take over Yahoo's board. Talk about a smack in the head! Of course, Cuban's a sharp tack and knows the ins and outs of the Internet business better than most. Still, maybe it's just me, but talk about biting the hand that feeds you. Yeah, I know, it's business, not personal.
Jerry Yang was able to rope-a-dope Steve Ballmer. But he's never had to square off against a royal pain in the ass like Carl Icahn.
This afternoon, Icahn, a billionaire with a God complex--or is that repetitive?--wrote a new chapter in this deliciously goofy Microhoo saga when he launched plans for a proxy contest to challenge Yahoo's famously feckless board of directors with his own handpicked nominees.
Talk about jumping out of the frying pan into the fire.
The problem for Yang is that he's over-matched. We're talking about a geek going up against one of the most brilliant, cold-hearted bastards this side of T. Boone Pickens (and I meant that as a compliment.) Icahn basically wrote the book on greenmail when he was squeezing sundry CEO testicles as a corporate raider in the 1980s. An abbreviated list of corporations he's had his way with include Trans World Airlines, B.F. Goodrich, Phillips Petroleum, US Steel, Texaco, Goodrich-Uniroyal, RJR Nabisco, General Motors--and more recently--Time-Warner.
Yo Jerry, I can take down Gordon Gekko with one hand tied behind my back
(Credit: The Icahn Report)In a recent profile, Fortune labeled Icahn "The Hottest Investor in America." Aside from the typically Madison Avenue hyperbole, the description is apt. Icahn, who has a brilliant knack for uncovering undervalued companies, has an important ally in this looming proxy fight: the timing's all in his favor.
After infuriating investors by walking away from the sure payday that Ballmer put on the table, Yahoo doesn't have any options (And no, neither Google nor Time Warner is going to play white knight with a surprise buyout bid.) Yang may be true to his word about having a long-term rescue plan, but that's not helping Wall Street's bad mood. Whatever the truth, Yang was portrayed during the Microsoft negotiations as a passive-aggressive ditherer who queered a good thing. A bit harsh, perhaps, but a lot of paper profits when Microsoft withdrew its offer.
In a perfect world, Yahoo's fate would be placed in the hands of technologists, win, lose, or draw. Let the best ideas flourish and to the victors go the spoils and all of that. In the real world, though, finance capitalism trumps all. If he doesn't already realize it, Yang will soon: Now he's up against the Big Dog.
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