Two days ago Carl Icahn wrote a brilliantly pointed letter to Roy Bostock, Yahoo’s chairman of the board. The letter is a masterpiece in swashbuckling rhetoric. My favorite sentnece sentence was:
During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched.
I think Icahn is making the right move. Yahoo has been spinning its wheels for years now. Jerry Yang, Yahoo’s founder and CEO, is widely known to possess a quixotic fixation on his beloved company. He exudes a righteous attitude (Yahoo is too good for Microsoft), and he’s consistently failed to demonstrate business acumen (what has Yahoo done well lately).
Bostock’s reply certainly doesn’t provide any comfort. It’s a long winded effort to claim that really, they honestly did try to strike a fair deal with Microsoft. He assumes that Icahn and other disgruntled shareholders overlooked all the events that he enumerates.
Yesterday John Dvorak wrote an article that evaluates Icahn’s proposed slate of new board members. He concludes that Icahn would destroy Yahoo because the proposed members were corporate hawks instead of savvy technologists. First, board members cannot inject good technology into Yahoo. That is exactly their problem right now, with Yang at the helm. Second, I think Yahoo is destined to fail as a standalone company because its attitude troubles discourage the innovative atmosphere that it would need to turn around.
So let Icahn install its corporate raiders and chop up Yahoo or otherwise package it for sale. Yahoo certainly contains a lot of value, so why not capture it? If the new board succeeds, the shareholders will reap a nice premium, and Yahoo’s technical gemstones will live on under a new brand.
With all this said, I don’t necessarily think Microsoft would benefit from purchasing Yahoo. But if Steve Balmer wants to buy Yahoo, then the Yahoo board should find the best way to strike a deal.
