Why did Yahoo (NSDQ: YHOO) agree to give Icahn three seats on its board, when by all accounts it was cruising to a victory on August 1? Perhaps the company was a little worried about losing the vote, an outcome it hoped to avoid at all costs. But even if it had won, consider: Where would Yahoo be with Icahn and Microsoft out of the picture and a likely ho-hum earnings report due out tomorrow (we'll preview that later)? Hello sub-$20s again. By making this move, Yahoo tells shareholders: we didn't want to get decapitated, but we know you're frustrated with the status quo. Now representing shareholders: a fierce activist (Icahn), a highly respected internet executive (Jonathan Miller, probably) and someone else from Icahn's list that Yahoo gets to choose (probably not Mark Cuban, though that would be funny).
As for Icahn, what's he get out of it? He made his name battling industry giants like RJR Nabisco and Texaco. In recent years, his dalliances with tech and media names have been kind of mixed: Time Warner (NYSE: TWX) (nothing), Motorola (NYSE: MOT) (board representation and a split, maybe), BEA Systems (sold off to Oracle), Blockbuster (NYSE: BBI) (Icahn was a big proponent of the Circuit City deal, which ultimately fell through). Of these, Motorola is probably the closest analogue. Obviously, he'd have liked this to be over a lot sooner. If he'd had his way it would've ended like Oracle and BEA, and Yahoo and Microsoft would be on the long path towards regulatory clearance. His next preferencesome kind of partial dealalso went nowhere. So where now?
In a note, via CNNMoney, Stifel Nicolaus analyst George Askew predicted that the presence of Icahn on the board might entice Microsoft (NSDQ: MSFT). There's logic to that, especially if you believe the line about Ballmer feeling like he can't trust the current board. Meanwhile, S&P's Scott Kessler thinks Yang's days as CEO could be numbered. From the above lreport: "Given the macroeconomic backdrop and the considerable distractions with Microsoft, people are not expecting much from Yahoo this quarter One of Icahn's refrains had been that he wants Yang replaced with a more experienced CEO since Yang, while a great engineer, is not a manager with operational acumen."
Also in a note sent out this morning, UBS' Ben Schachter said he didn't think the agreement procluded a future deal with Microsoft: "With the proxy battle behind them and a unified voice in any future communications with MSFT and potentially others, today's announcement will enable more focus on operational execution, while still being open to possible transactions."
By Joseph Weisenthal