Carl Icahn and Microsoft appear to be coordinating an attack on the current Yahoo board with today’s joint announcements by Icahn and a Microsoft stating they are ready to do a major deal with Yahoo. The animosity towards Microsoft is conspicuous given that one can reasonably argue (I would) that Microsoft remains pretty generous all things considered. They appear to comfortable with a share price in the same neighborhood of the $33 that Yahoo rejected months ago, despite the fact that shareholder discontent with Yahoo’s price and board combined with continued US economic concerns would arguably support a somewhat lower valuation.
In this corporate showdown at the Yahoo Corral I think Jerry Yang and David Filo have drawn the unfortunate roles of Billy Clanton and Frank McLaury
I got a huge kick out of Kara Swisher’s disturbing picture of the corporate death match:
… another boost today with a classic wrestling double-body slam that Icahn and Microsoft CEO Steve Ballmer perpetrated on Yang today by unveiling their own dysfunctional love match–united in hatred of current Yahoo leadership.
I think however that Kara is very wrong to suggest that Icahn toppling the Yahoo board is “unlikely”. Most of the small shareholders do not have the vested interest in the company of a Yang or Filo and are likely to support Icahn. More importantly, I think that Yang has lost what appeared to be a sort of hypnotic impact on some of the existing board members and large shareholders and even if they are not stating this publicly I’m fairly confident they’ll be voting for Icahn in August. For small investors it is painful to turn away a 50%+ boost in share value – for big investors it could spell their eventual ruin. With billions at stake I think the predictive model here is fairly simple: Yahoo will be sold either in part or whole to Microsoft at a share price of about $34. I’ve been saying this for some time and see nothing to suggest it’s not going to happen in August- just a bit later than a rational market model would have suggested because egos and exaggerations, and the legendary Silicon Valley v. Microsoft animosity got in the way.
Disclosure: I’m Long on Yahoo