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Yahoo Strikes Back

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Yahoo filed its preliminary proxy statement today in an effort to win over its shareholders for the upcoming August 1st board meeting,
Within its 32 pages, the presentation outlines: 1) the failed Microsoft acquisition and why Microsoft was inconsistent, 2) the downside of a partial search agreement with Microsoft, 3) the benefits of the Google partnership, 4) Yahoo's plan for the future, and 5) also makes a case that Carl Icahn hurts the performances of companies he has recently been involved with and that his board slate is not the answer.
Yahoo cites two separate occasions (May 17 and June 8), where they asked Microsoft if they wanted a full company acquisition, and Microsoft said no. Additionally, Yahoo believes that the partial search agreement does not benefit the company "financially or strategically and is based on flawed assumptions."
The claim that Microsoft was "unresponsive and inconsistent," with regards to making a deal is rather accurate. We are well aware of the see-sawing of Ballmer and Co. as they kept switching positions on the deal. The presentation gives a nice overview of the timeline of events on page 8.
Yahoo addresses each aspect of the hybrid search deal with Microsoft, concluding that it does not improve cash flow and cedes too much control. The $1 billion upfront is taxable and Yahoo believes that Microsoft's cost savings and revenue benefits are far too optimistic and unrealistic. They also make the claim that they are unprotected competitively at the end of the ten year search agreement.
The plan for the future is discussed starting on page 17 of the presentation. Yahoo believes that its unique assets, like its content properties, Yahoo! News, Sports, and Finance, make it a "must buy" for advertisers. They want to better position themselves to link search and display together, and the presentation also mentions cloud computing, the next step towards "Web 3.0."
The recent reorganization within Yahoo's management ranks is their effort to support these core strategies.
By far the most interesting part of the presentation is Yahoo's attack on Carl Icahn, charted out on page 28. Take a look; there are a lot more red arrows than green ones. Yahoo makes the case that Icahn has hurt shareholders of companies he has been involved with in the past year, as stock prices have plunged. At the same time, is it Carl who is hurting the price or is it the company that is battling him and underperforming?
It will be interesting to see Icahn's response to Yahoo playing offense here. On Friday, he indicated he would comment on Yahoo and its management. So far, the only update on his blog today is his responses to a few commenters' remarks regarding his previous rants on corporate America.
You can take a look at the full presentation here.
-- Yacrosoft correspondent Travis