Yahoo Slaps Fresh Coat of Gloss on Microsoft Deal Defense
Jun 30, 2008 2:47 PM PT
Continuing its campaign to keep its current board of directors in place ahead of its shareholder meeting, Yahoo had made public a detailed presentation that it says makes it clear why the alternative slate proposed by Carl Icahn is wrong for the Web portal.
Yahoo's 32-page presentation extols the virtues of incumbent board members -- including Chairman Roy Bostock and cofounder and CEO Jerry Yang -- and also provides more details of the company's interactions with Microsoft as well as a breakdown of why the software company's so-called hybrid proposal to buy only Yahoo's search business was not the right move.
While again hailing the search deal it struck with Google as the best option available, Yahoo also attempts to put a positive spin on the rest of its main strategic efforts and highlights its market share in key areas and its overseas initiatives.
The presentation seeks in part to highlight how Icahn's "ill-defined agenda is premised on a sale to Microsoft despite Microsoft's lack of interest in a full acquisition" and also underscore that his attacks on Yahoo's board "are based on misrepresentations," Yang said.
"Despite all the challenges we've been through -- including Microsoft's unsolicited proposal and now a proxy contest by Carl Icahn -- Yahoo remains a unique value proposition," he added.
A Moving Clock
Yahoo's long-delayed shareholder meeting is now scheduled for Aug. 1. Between now and then, thousands of shareholders are expected to cast votes by proxy card, telephone or online. Yahoo's entire board stands for election at the same time.
Icahn has been seeking to take advantage of that fact by putting up a slate of directors who would be sympathetic to a Microsoft purchase, which he believes is the fastest and best way to boost Yahoo's value.
In its presentation, Yahoo broke down what it calls Microsoft's hybrid offer, which included the sale of Yahoo's search ad business, an US$8 billion equity investment and a revenue-sharing agreement, saying the software maker had an unrealistic view of the savings Yahoo would achieve and pointing out that Microsoft's monetization of search is not competitive with Google.
"Yahoo's argument boils down to being able to partner with the market leader and the undisputed champ or a company that hopes to be a contender one day," Sterling Market Intelligence Principal Analyst Greg Sterling told the E-Commerce Times.
The other key difference, as Yahoo points out multiple times in the presentation, is the difference in control levels. Under the Google deal, Yahoo retains the flexibility to serve its own ads and partner with other third parties, while the Microsoft offer required it to give up significant control over its own governance to the software maker.
"Yahoo still has huge market share in display ads and strong assets in local and other types of search that it wants to be able to utilize," Sterling added.
The presentation seeks to hit back at Icahn by suggesting that his entire mission to change the Yahoo board is now pointless, since Microsoft withdrew its offer in May and repeatedly told Yahoo directly that it no longer is interested in an acquisition.
The presentation also tries to rev up enthusiasm for Yahoo's overall business strategy and prospects, citing its 3.7 billion visits per month worldwide and the upcoming launch of its Amp platform for publishers.
Last week, Yahoo issued a letter to shareholders echoing many of the same themes. In the time in-between, it also announced a restructuring of its executive ranks.
"It's not clear they did much other than move people around," Forrester Research analyst Charlene Li told the E-Commerce Times. "Yang has had a long time to create and lay out his vision now, and if shareholders don't back it, it's not because they don't know about it."
Instead, a lack of support may indicate that investors believe the road ahead is more difficult than Yang and the rest of the board believes.
The presentation concludes by highlighting Yahoo's board, which it describes as "experienced and qualified" and by claiming that Icahn's other main objective -- to eliminate a change-in-ownership severance plan he's criticized as too generous -- would have a "destabilizing impact" on Yahoo at a critical time in its history.