Fresh off his success in taking BEA down for Oracle, predatory investor Carl Icahn, in his letter to Yahoo today, charged that the company “botched” its negotiations with Microsoft. Icahn is more than a clumsy communicator. The most appropriate metaphor for Icahn might be T-Rex, with an insatiable hunger for fresh meat. Icahn knows little about software or Silicon Valley, and the place must resemble Jurassic Park to him.
CEO Jerry Yang as much as anyone, is responsible for the difficult circumstances at Yahoo. His first mistake was to allow the company to get into bad product shape under previous CEO, and Yang selection, Terry Semel. His second mistake was the amount of time he waited before making significant personnel and product changes once Yang himself became CEO. Now the changes are coming a little faster, but there are still too many employees at Yahoo without the ability to make technical contributions. This illustrates Yang’s weakness. For Internet companies like Yahoo or Google, success is all about the people you employ and the innovations they create. Yang seems to be holding onto some pleasant fantasy.
Yet, when faced with a complex problem, Yang demonstrated he has a lot of smarts. The bid by Microsoft was such a challenge. In a clear grudge match, the PhD against the MBA, Yang crushed Ballmer embarrassingly. Looking objectively at the situation, Yahoo was about $18 per share before the Microsoft offer, and is still over $26 per share. Don’t try to tell anyone Yang didn’t come out ahead.
Is Icahn going to be more successful in his bid for control of Yahoo? He’s going to have a lot of shareholders on his side, although co-founders Yang and Filo also control substantial shares opposing Icahn. The director slate proposed by Icahn is unremarkable except for the enigma, Mark Cuban, who unloaded Broadcast.com on Yahoo for $5.7 billion at the height of the Internet bubble. Icahn’s inability to propose a compelling board simply demonstrates his lack of insight and underscores his ineptitude at evaluating the business itself. Perhaps he should take a recommendation from Warren Buffet, and “not invest in companies I don’t understand”. A letter from Icahn to the Yahoo board does nothing to suggests ways to improve Yahoo’s business and Icahn’s conclusions are no more than grade school arithmetic.
Microsoft appears to have moved beyond Yahoo. Yahoo has scheduled its annual shareholder meeting for next month. Shareholders like Icahn will want so see some early fireworks. But that’s not likely to happen this time. Icahn needs to accept the proposition that even a wounded Yahoo is no quick kill, and he might be better off stalking prey in some other domain he might honestly understand.
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