Carl Icahn, the 46th richest man in the world has made an interesting hire.  Icahn has hired Dane Hamilton, a hedge fund reporter from Thomson Reuters to manage his blog, The Icahn Report.  Hamilton will be publishing data regarding Icahn’s opinions on corporate America. 

When Icahn was nominating his own slate of directors for Yahoo!’s Board of Directors, Icahn communicated regularly on his blog regarding why he was doing so.  Hamilton has been writing for the last seven years about hedge funds and even about Icahn.  Hamilton recently published an article from Reuters called Icahn says Yahoo-Google ad deal has merit.

Carl Icahn grew up in Brooklyn, New York, dropped out of medical school, joined the army, then went back to NYC to work on Wall Street.  Icahn & Co. Inc. started in 1968.  Icahn has overtaken positions at RJR Nabisco, Yahoo!, Texaco, Phillips Petroleum, Western Union, Gulf & Western, Viacom, USX, American Can, Imclone, Marvel, Federal-Mogul, Kerr-McGee, BEA Systems, Medimmune, and Time Warner.  Icahn is currently worth about $14 billion.

Related Links:
1. NYT
2. The Icahn Report

Yahoo Inc. (NASDAQ:YHOO) has reached an settled on agreement with Carl Icahn.  Carl Icahn will be given the chance to appoint himself and two other people to the Yahoo! board.  Yahoo! was able to prevent a showdown on August 1st during the annual shareholder meeting.  Yahoo!’s board will expand from 9 members to 11.  Jerry Yang, Yahoo!’s current CEO along with 8 other members will be looking to stand for a re-election.

“While I continue to believe that the sale of the whole company or the sale of its Search business in the right transaction must be given full consideration, I share the view that Yahoo’s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders,” stated Icahn in a letter regarding the settlement.

Yahoo!’s current board turned down 3 acquisition offers from Microsoft over the last few months while Carl Icahn was pushing Yahoo! to sell themselves.  If Icahn keeps persisting on selling Yahoo! while the rest of the board maintains their position, then there will obviously problems with keeping the search engine company stable.

But in the meantime, Yahoo! has removed the banner that they placed on the homepage that made Icahn look bad.

Yahoo Inc. (NASDAQ:YHOO) is using Yahoo.com, the #1 homepage in the world to promote their interests.  On the homepage, the following message is on the right.  When clicking on the message, Yahoo! stockholder information is pulled up.  And an article at the top is labeled as: “The Icahn Slate Is Not the Right Answer for Yahoo!”

“On May 15, 2008, Carl Icahn announced his intent to nominate a slate of directors for election at Yahoo!’s 2008 annual meeting of stockholders to take control of Yahoo!. When Mr. Icahn began his proxy contest he had no articulated plan for Yahoo! other than a sale of the Company to Microsoft and today he still lacks a strategy that makes sense for Yahoo! stockholders,” states the article.  “His current plan is a complex restructuring of the Company which includes a sale of Yahoo!’s valuable search business to Microsoft.”

Below a couple of articles, there is a screenshot of all of the companies that Icahn was recently involved with and how their stock is performing.

This chart that Yahoo! put together is slightly irrelevant because it does not factor market conditions.  For example, Blockbuster Inc. suddenly faced intense competition from Netflix.

Personally I don’t want to see Yahoo! bought by a bigger company or have the company broken apart, but this move was pretty low on Yahoo!’s part.  In May 2008, the Yahoo! homepage received over 304 million unique visitors.  This is obviously going to tarnish Carl Icahn’s image.

Legg Mason, a 4.4% owner in Yahoo! announced today that they were going to favor Jerry Yang to remain as the CEO.  And several other investors are shifting towards favoring Yang.  Start the countdown.  Something big is going to happen at Yahoo! in exactly two weeks from today.

Related Links:
TechCrunch
Yahoo.com

Earlier today, Carl Icahn filed a proxy statement letter indicated that over the weekend when Microsoft Corporation (NASDAQ:MSFT) made an offer to Yahoo! Inc. (NASDAQ:YHOO), the search engine company was focusing more on who would be running the company if the deal went through.

Icahn also mentioned that Yahoo! distorted a lot of the facts in their press release.  Below is the letter that Icahn wrote to the shareholders today.

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Microsoft Corporation (NASDAQ:MSFT) guaranteed Yahoo! Inc. (NASDAQ:YHOO) $2.3 billion in revenue per year for 5 years through the deal that was offered over the weekend.  The deal was also extendable for another 5 years.  The source of this information preferred not to be named, but Reuters broke the story earlier today.

After Microsoft withdrew their $47.5 billion offer for all of Yahoo!, they offered a $9 billion partial deal and revenue guarantees for the search engine company.  However, Microsoft wanted the advertising partnership to remain exclusive for 10 years.  Yahoo! opted out on Saturday night and decided to stick with the partnership they have with Google.  Google guarantees Yahoo! $800 million a year in revenue through their advertising partnership.

Source: Reuters

“This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo’s stockholders in mind.” “It is ludicrous to think that our Board could accept such a proposal,” stated Yahoo! Chairman Roy Bostock. “While this type of erratic and unpredictable behavior is consistent with what we have come to expect from Microsoft, we will not be bludgeoned into a transaction that is not in the best interests of our stockholders.”

On Friday night, Microsoft Corporation (NASDAQ:MSFT) and Carl Icahn proposed a deal to Yahoo! Inc. (NASDAQ:YHOO) and wanted an answer back within 24 hours.  Yahoo! said no.  What was the deal?  The deal was that Microsoft would buy Yahoo!’s search business and then allow Icahn to choose his own board of directors for the rest of the company.

Yahoo! worked with financial advisers and a legal team to decide whether the deal was feasible or not.  The Microsoft offer just wasn’t sweet enough.  The reasons why Yahoo! turned down Microsoft again was because:

* Yahoo!’s deal with Google Inc. (NASDAQ:GOOG) was superior in financial value and less riskier.
* If Microsoft/Icahn took over Yahoo!, the search engine company would not be able to be sold for a full & fair price.
* The new slate of directors Icahn selected has no working knowledge dealing with Yahoo!’s businesses.
* Removing all of Yahoo!’s board would destabilize the company for at least the amount of time that it would take to gain regulatory approval for the deal to go through.

Yahoo! did admit that this new deal has improvements over the past offerings, but it still would not be in the interest of shareholders.  The reason is that the revenue guarantees suggested in the Microsoft deal are below the search revenue that Yahoo! is expecting to make with it’s Google deal.  Yahoo!’s success would be extremely dependent on Microsoft’s ability to monetize search.  And another reason why Microsoft’s deal isn’t worth it is because they are not considering the incremental value of Yahoo!’s search algorithms and intellectual property.

The usual timeline is available after the jump.

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carl Icahn, a major shareholder in Yahoo! Inc. (NASDAQ:YHOO) issued a new statement today about the partnership Yahoo! made with Google Inc. (NASDAQ:GOOG).  Icahn actually complimented Yahoo!’s decision this time. 

“While the Google deal is not the same as an offer of $34.375 per share for Yahoo, I am continuing to study it, and it might have some merit,” stated Icahn.  This is a more positive statement than saying that Yahoo! created a doomsday device to prevent the Microsoft deal from happening. 

“I continue to be extremely disappointed with the Yahoo management, but the Google deal might have some merit and seems to be better then the alternative deal proposed by Microsoft.”

Will Icahn continue to push for his slate of a new board of directors?  We’ll find out on August 1st.

“If you can’t beat em,’ join em.’”
-Commonly used idiom

Yahoo! Inc. (NASDAQ:YHOO) was cornered by Microsoft Corporation (NASDAQ:MSFT),  shareholders, and Carl Icahn over the last few months.  After months of negotiating a bid price for Microsoft and having to deal with Carl Icahn, Yahoo! decided to sign an advertising partnership with Google Inc. (NASDAQ:GOOG).  Was it a good idea or will there be negative implications? 

A Lost Opportunity for Yahoo! in 2001
At one point Yahoo! had the chance to buy Google, when it was still blossoming into the search and ad powerhouse that it is today.   Larry Page and Sergey Brin made a $3 billion offer to former Yahoo! CEO, Terry Semel in 2001, but he turned it down. 

Three years later Google filed for an IPO and continuously pulled marketshare away from Yahoo!  Google became a $180 billion powerhouse and Yahoo! shareholders lost confidence in Terry Semel.  In June 2007, Semel resigned after 6 years as CEO.  Jerry Yang stepped up as CEO and said that he’ll be able to turn around the company in 100 days.  This was around the same time that Brad Garlinghouse wrote a public memo about how Yahoo!’s own divisions were competing with each other:

“We end up with competing (or redundant) initiatives and synergistic opportunities living in the different silos of our company such as:
• YME vs. Musicmatch
 • Flickr vs. Photos
 • YMG video vs. Search video
 • Deli.cio.us vs. myweb
 • Messenger and plug-ins vs. Sidebar and widgets
 • Social media vs. 360 and Groups
 • Front page vs. YMG
 • Global strategy from BU’vs. Global strategy from Int’l”

Yahoo! had not been able to lickir the wounds fast enough to prevent Google from dominating the market. Yang failed to get back the trust of the shareholders.  Yahoo! did still have the millions of loyal users and the #1 website on the planet, but without shareholder trust, the overall company value declined. 

Microsoft, the software company with a fat wallet became fed up with Yahoo!’s lack of a game plan so they stepped in and made a $44 billion offer.  Yahoo! tried to pull a Google and ask for more money, but then Microsoft walked away from a deal.  It’s like 2001 all over again and Google walked away as the winner once again by signing a partnership with Yahoo!.

Yahoo! will be using Google AdSense to place Google Ads all on their online properties.  Google wrote a blog post about the non-exclusive partnership on their blog.

What are the implications?
The first obvious implication is the stock price.  After yesterday’s announcement, Yahoo!’s stock plummeted and caused them to lose a few billion off of their market cap.  On August 1, Yahoo!’s shareholders will come together and decide whether this was a smart choice for the company. 

The second implication is that Yahoo! is allowing themselves to become dependent on a third party to make money.  If Yahoo! becomes comfortable on this dependency, how will they be able to compete?  Google compares it to Toyota selling hybrid technology to GM and Canon providing laser printer engines to HP. 

An implication against Google is that they are giving Yahoo! the opportunity to make more money.  And Yahoo! wants to make more money so that they can build themselves to be more competitive against Google.  So why allow it?  All I know is that Eric Schmidt said that “we like them very much [CNET].” 

Yahoo! still has the potential to gain the confidence from their shareholders whether it is through rebranding themselves, refurbishing their advertising strategy, or even by allowing Icahn to select executive board members at the August 1 shareholder meeting.

The timeline of the Microsoft & Yahoo! saga is after the jump.
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The saga continues.  Yahoo! Inc. (NASDAQ:YHOO) issued a quick response to Carl Icahn’s letter containing a 5 point game plan for what would happen if his suggested slate of Directors takes over Yahoo!  Below is the response:

  Leaving aside Mr. Icahn’s inaccurate interpretation of our retention
  plan, we again note that he has no credible plan to operate Yahoo!.
  We believe that Mr. Icahn’s suggestion that we cancel our retention
  plan would have a destabilizing impact on Yahoo! and would clearly
  not be in the best interests of our shareholders. Furthermore, his
  suggestion that we put out a price publicly to see if Microsoft will
  alter its stated position is ill-advised. As we have stated numerous
  times publicly and privately, we are open to any transaction
  including a sale to Microsoft if it is in the best interests of
  shareholders.

For those who don’t want to interpret the letter above, I’ll give a quick summary:
1.) Icahn doesn’t have a credible plan for Yahoo!
2.) Cancelling the severance packages built into the Microsoft Corporation (NASDAQ:MSFT) bid would make the company unstable post-acquisition.
3.) Asking Microsoft to buy the company whole again is “ill-advised” since Microsoft may no longer be interested.
4.) Yahoo! is still open to a sale if the shareholders agree.

The timeline and information source of the Yahoo! & Microsoft saga is available after the jump.
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