Microsoft Backs Play To Dump Yahoo Board

Software Giant Would Renew Its Bid To Take Over The Search Engine If Shareholders Revolt

(AP)  Microsoft Corp. threw its weight behind investor Carl Icahn's effort to dump Yahoo Inc.'s board, saying Monday that a successful shareholder rebellion would encourage the software maker to renew its bid to buy Yahoo's Internet search engine or possibly the entire company.

The unexpected endorsement gives Icahn a carrot to dangle before Yahoo shareholders as he wages an acrimonious campaign to replace Yahoo's nine directors at the company's annual meeting Aug. 1.

It marks the first time that Microsoft has publicly sided with Icahn since the billionaire investor launched his attempted coup nearly eight weeks ago.

The two sides decided they could work together after Icahn held "frequent" discussions with Microsoft Chief Executive Steve Ballmer and some of his top lieutenants during the past week, according to a letter that Icahn sent Monday to Yahoo shareholders.

Industry analysts said Icahn now has more credibility with Yahoo shareholders because he has been arguing that a purge of Yahoo's board is the only way to salvage a deal with Microsoft.

"This breathes new life into Icahn's proposal," said Stanford Group analyst Clayton Moran. "It really pushes the power to Icahn and his board (nominees)."

The prospect that a changing of the guard at Yahoo might pave the way to a friendly deal with Microsoft lifted Yahoo shares $2.56, or 12 percent, to finish Wednesday at $23.91.

Echoing previous remarks in its battle with Icahn, Yahoo questioned Microsoft's interest in buying the entire company.

"If Microsoft and Mr. Ballmer really want to purchase Yahoo, we again invite them to make a proposal immediately," Yahoo said.

But Icahn said Microsoft doesn't want to risk making a bid under Yahoo's current regime, because the software maker fears Yahoo's management would make more poor decisions during an antitrust review that would take at least nine months.

"If the current board and management team of Yahoo mismanage the company (and their recent track record is far from reassuring), Microsoft would be putting its money at risk and a great deal could be lost," Icahn wrote in his letter to shareholders.

Microsoft's willingness to work with Icahn undermines one of Yahoo's chief arguments for re-electing its board.

Yahoo has maintained that it would be foolhardy to back Icahn's slate of alternate nominees because Icahn had no concrete ideas besides selling the company to Microsoft - something that Yahoo has been depicting as a pipe dream since Microsoft withdrew a $47.5 billion offer in early May.

[cjs_cnet_xyz]

Microsoft cannot compete against Google with any other competitors. Let''s just dismantle the entire search/email industry so Microsoft can compete.

[barbaram99]

I need to read more. It is nice here in Seattle.

[barbaram99]

I have books on the XP and Vista plamforms. My Dell is 32 bit and my HP Vista 64 bit. Vince is new to pcs and really he wanted to put together a home network. I wanted a pc I would not out grow. Being 53, I do get out but mostly on computer. MS will get Yahoo as it is only a matter of time. There is a love-hate MS and google. I love google and yahoo.

[godseyesore-2009]

MS mantra...if you can''t fight ''em, join ''em.

Hey, BarbaraM99...
You need to get out more often. OSX is 64bit.

[wl7bzh]

Dear Microsoft,

If you''re going to be dumb enough to marry Yahoo, get a pre-nup. Your bride is all fluff and no substance. You were warned about her son.

[barbaram99]

My friends uses Window Mail and I have MSN Mail. I hate outlook express. I told my ISP it is not legally blind friendly. I use large print.
Apple will not move to 64 bit system. I know of an Apple user where I live and she don''t care for us pc users. It is a blooody personal computer- PC. She is fussy . They talk to each other.

[barbaram99]

Dear MS is too bloody big for its own good..''member Ma Bell..I do. I think that MS can''t push its around. I love what my friend Vince said about Microsoft Sam,he done got fired.Anna beat beat Sam. Yahoo needs to step up to the plate and tell MS to take a hike. I like to have as many engines on my computer as they are different and if MS gets its paws in Yahoo will MS change it . Vista is lovely as my friend loves it. I am still in XP. I have a 64 bit Vista pc.

MicroJunk. The only software that kills other software from the same company.

Posted by FloydZepp2

Ever heard of CA? They''re even worse.

Working for a company that Icahn has very recently tried to destroy (and was somewhat successful) - everything he decides upon is NOT ALWAYS in the shareholders interest.

[floydzepp2]

MicroJunk. The only software that kills other software from the same company.

[alphaa10-2009]

Microsoft, under embarrassment and stress from its failed bid for Yahoo, reverted briefly to its old "engulf and devour" behavior of the past. The stereotyped MS culture remains deeply entrenched.

Clearly, Ozzie has a huge challenge ahead of him. Restructuring Microsoft''s general strategy is something Bill Gates and Ballmer allowed themselves the luxury of ignoring.

The lumbering, "my way or the highway" approach of the MS juggernaut is now entirely laughable, given the circumstances. Equivalent to a temper tantrum at the corporate level.

Microsoft needs to understand the larger picture, and its own changing role in the market. The "kinder, gentler Microsoft" PR campaign is still a bit premature.

[Meg003]

On a selfish note, I just hate to see Microsoft change what I like about Yahoo email. Soon it will be part of the hideous Windows Live mess, instead of nice and simple on its own page.

[fee1free4u]

Txlakeside, your igorance astounds me. Do you not realize the Yahoo shareholders are generally furious at Jerry Yang for blowing the deal with Microsoft and NOT taking the last offer? Sheesh, all the info is out there for you to easily find. Yang''s primary job is to lookout for the shareholders, NOT pretend to be protecting the Yahoo employees.

[spadeisspade]

Man, Microsoft has stooped to some serious lows building their empire-strong arming computer companies into carrying Windows exclusively comes to mind. But a hostile take-over of a huge company like Yahoo is just kind of sickening. I thought the term "hostile take over" was reserved for John Grisham novels, movies and third world countries!

[whitemale08]

What a joke?

Here''s Microsoft trying to dump a bunch of worthless Federal Reserve Notes on Yahoo and there''s nothing they can do about it.

Then again Yahoo and all of these internet companies are fake anyways....fake companies for fake dollars; what''s the difference?

[txlakeside]

Ballmer and Ichan are theives in the night and 2 of the biggest egos on the planet! Why do they want yahoo at firesale prices? So they can divey it up and sell the pieces. Shareholders should give them both the shaft!