Carl Icahn said Tuesday that Microsoft Corp needs Yahoo to be competitive with Google over the next five years.
“They can’t compete” if the company doesn’t acquire Yahoo, he said at the annual New York Financial Writers Association Awards Dinner at the Marriott Marquis in Times Square.
Icahn cited Google’s incursions into core Microsoft businesses such as word processing and spreadsheet applications. Microsoft’s Word and Excel have dominated this area for years. Google recently launched its own versions of these products, giving them away free on its website.
“Microsoft needs this company,” Icahn said. “They have to be on the internet if they’re going to compete with Google. These applications are all going online.”
Icahn owns 10 million shares of Yahoo, and has put up his own slate of directors to replace Yahoo’s board. He wants the company to rethink it’s resistance to being acquired by Microsoft, which withdrew a bid for the company earlier this year saying Yahoo was not cooperating.
Microsoft
Carl Icahn said today that he will seek to oust Jerry Yang as Yahoo’s CEO if he wins his proxy fight bid to control the company’s board. Was this every in doubt?
What seems to have really annoyed Icahn is information released when a Delaware judge unsealed a shareholder suit against Yahoo. The unsealed pleadings revealed that even as Yahoo was claiming to consider the Microsoft bid, it adopted an expensive an employee-severance plan that Icahn is characterizing as an underhanded poison pill meant to scuttle the deal.
“It’s no longer a mystery to me why Microsoft’s offer isn’t around,” Icahn says in an interview with the Wall Street Journal. “How can Yahoo keep saying they’re willing to negotiate and sell the company on the one hand, while at the same time they’re completely sabotaging the process without telling anyone?”
In other news, the Yahoo board is scheduled to meet today.
Icahn Steps Up Yahoo Attack, Seeks Yang’s Ouster as CEO [Wall Street Journal]
Bill Miller, the Legg Mason fund manager who controls 5.4 percent of Yahoo, wants to see Microsoft buy the company. Halfway measures–such as a joint venture –don’t interest him.
That would seem to put him squarely in Icahn’s camp. But Miller’s still being coy, saying he’s undecided on how he’ll vote in the proxy fight.
Legg’s Miller undecided on Icahn’s Yahoo slate [Retuers]
So Microsoft chief executive Steve Ballmer says the company is not looking to buy Yahoo. They’re talking about other stuff that might “create value” or some such. It’s pretty much what we learned on Sunday, when Microsoft and Yahoo disclosed that they were in negotiations.
Is a buyout really off the table? The market doesn’t seem to think so. Shares are down a bit today but not by what you’d expect them to drop if the buyout was really done. Perhaps Ballmer is just sticking to the script, playing hardball to get a better price for Yahoo.
Still, this can’t make Carl Icahn and the rest of his hedge fund cohort happy. (Then again, he’s still up about $120 million, which would keep us happy.)
Microsoft Not Bidding to Buy Yahoo: CEO Ballmer [Reuters via ABC News]
Third Point LLC, the $5.7 billion hedge fund run by acid penned yoga enthusiast Dan Loeb, is getting into the Yahoo acquisition trade, Reuter’s great Dane Hamilton is reporting. The fund has accumulated a stake of over 5 million shares, and may build a 10 million share stake. At the end of March, Third Point held only 1 million shares.
Texas oil legend T. Boone Pickens revealed this morning that he owns 10 million Yahoo, and plans to vote them in support of Carl Icahn. Paulson & Co, another large hedge fund that is bursting with funds after making a killing last year shorting subprime, disclosed last week that it holds 50 million shares and is supporting the Icahn move. Capital Research owns 85 million shares and Legg-Mason owns 83 million. Both are thought to favor a deal to sell Yahoo to Microsoft.
Third Point backs Icahn in Yahoo fight [Yahoo]
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Carl Icahn
Sorkin Versus The Shareholder Superman
ARS-ED: Andrew Ross Sorkin Educates DealBreaker
By John Carney
ARS-ED is a new weekly feature on what we’re learning from Andrew Ross Sorkin’s weekly column, DealBook, in the New York Times.
It was about a year and a half ago when we first saw New York Times hotshot Andrew Ross Sorkin in the same room as Carl Icahn. They were on a panel together at some midtown club, discussing exactly what you’d expect Sorkin–who runs DealBook for the Times and is the paper’s top M&A reporter (and is rumored to be in the running to take the top editorial job at the Wall Street Journal)–and Icahn to discuss: deals, CEOs and money.
(After the jump, more on what we learned at that panel and what we learned this week from Sorkin.)
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Carl Icahn
Could Microsoft’s New Yahoo Plan Backfire?
Icahn Friend Says Financier Could Push For Google Deal
By John Carney
Carl Icahn apparently isn’t happy with the latest talks between Microsoft and Yahoo, and it looks like the financier is using proxies to threaten to push Yahoo into Google’s arms.
Dane Hamilton at Reuters is reporting that Icahn, who holds 9 million shares and options for 49 million more, could attempt to scuttle a deal between Microsoft and Yahoo if it falls short of a complete merger.
“Microsoft is trying to get the milk without buying the cow, and if you look at Icahn’s history, he has never been used that way,” a person described as “familiar with the financier’s thinking” tells Hamilton. “He does not want to see Yahoo pushed into some joint venture with Microsoft and is not going to be used to push Yahoo into it.”
But could Icahn’s eagerness to have a deal now be scuttling Microsoft’s long-term deal plans? UBS analysts are floating the idea that a more limited partnership deal between Microsoft Yahoo could be a a stepping stone to an acquisition. The idea is that since Yahoo announced its refusal to go all the way with Microsoft when it first proposed the deal, perhaps it might relent after a bit of a courtship.
Microsoft move unlikely to win Icahn favor: source [Reuters]
There was lots of chatter this morning about the possibility that Microsoft is negotiating to buy Yahoo‘s search business. But the latest rumor is sure to set the internet ablaze with speculation–people are saying that after inking the deal with Yahoo, Microsoft will turn around and buy internet favorite Facebook.
“What a move this makes. Yahoo gets everyone off their back, Microsoft gets a credible position in search, and buys Facebook to compete with Google,” Furrier.org writes. “The price about $45 billion.”
Silicon Valley Rumor: Microsoft to Buy Yahoo Search and Then Facebook [Furrier.org]
The key to Yahoo! chief Jerry Yang’s apparently successful attempt to avoid being Microserfed was the threat to enter into a partnership with Google. Under the proposal, Yahoo! would outsource to Google important paid search terms, a move that struck many as all but admitting that Yahoo was incompetent at monetizing search terms and that seems to have driven away Microsoft’s Steve Ballmer.
It was a cagey move but is it legal? Can the management of a public company targeted for opposition adopt a perhaps suicidal business plan to drive away suitor? Maybe not. Although Delaware courts—which, for quirky federalist reasons, get to decide these things—give companies broad leeway to undertake defensive measures, there are supposed to be limits to this sort of thing. Stephen Bainbridge, one of our favorite law professors, explains that Yang’s takeover defense might be acceptable to Delaware courts if he could prove it was part of Yahoo’s long-term business plan. But that seems implausible—everyone knows they came up with this as an ad-hoc defense.
If Microsoft really wanted to get hostile, they might have actually been able to get a Delaware court to stop Yahoo from running into the arms of Google.
Using a strategic partnership as a poison pill [Bainbridge]
Because he’s a genius—or maybe just one of the few remaining people not seduced by the idea of a site that refuses to put a cap on the amount of useless crap “applications” it will offer, none of which does anything to better facilitate the stalking/slaying of potential prey—Steve Ballmer said that he regards individual social networks as a “fad,” seemingly implying that Microsoft will not be making a $300-500 million investment in Facebook (for a 5% stake that would place the company’s value at around $10 billion). (You have Christ, we have wishful thinking.)
“I think these things [social networks] are going to have some legs, and yet there’s a faddishness, a faddish nature about anything that basically appeals to younger people,” Ballmer told Times Online. Though he acknowledged some vague potential value in Facebook’s 40 million users, he noted that “There can’t be any more deep technology in Facebook than what dozens of people could write in a couple of years,” a point that makes the valuation Zucks (claims not to be but probably) is seeking, for a site expected to achieve revenues of only $150 million this year, what’s the word? Insane. (Ridiculous. Dumb. Adidas shower shoes. Etc.)
Ballmer also, somewhat awesomely, added that sites like Geocities “had most of what Facebook has” years ago (and without the personification-of-a-smug-twat grin). He did not comment on why Mark Zuckerberg was seen in Seattle last week (a spotting that fueled speculation about a Microsoft investment). However, the tone of his voice seemed to hint at a combination of a. (“Bryan Adams with George Thorogood concert at the WaMu theater”) and e. (“Annual pilgrimage to Brandon Lee’s grave in Lake View Cemetery”).
Earlier: Cutting The FaceBook/Microsoft Deal Rumor Off At The Knees
Ballmer: Facebook risks being ‘a fad’ [Times Online]
Bear Stearns, trying to deflect attention from its own woes, re-sparked Yacrosoft speculation, after it was re-sparked last May. Bear Stearns analyst Robert Peck wrote in a letter to clients that he thinks Microsoft “continues to evaluate Yahoo as a target,” and that a potential bid could fetch a $50 per share price tag – currently double Yahoo’s current share price. Bear set a price target of $30 per share on its latest Yahoo report.
Yahoo (Nasdaq: YHOO) is up more than 5% today at $23.96 a share.
UPDATE 2-RESEARCH ALERT-Bear Stearns names Yahoo as top pick [Reuters via DealBook]
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