Icahn Has Pushed The Button – Proxy Fight Is Being Launched

Implications: As I have said in past analyses, Carl Icahn is a tough fighter.  If he succeeds in replacing Yahoo’s board, we will likely be seeing Jerry Yang waving bye bye as well. This is what happens when you get greedy; you get your clock cleaned in public.

Analysis: Carl Icahn must feel confident in his ability to restart talks between Yahoo and Microsoft.  I think Yahoo’s big mistake this week was not taking Icahn seriously.  The next big mistake they will be making is not giving Icahn what he wants.

Icahn does not want to run Yahoo.  Icahn wants Jerry Yang to do his job, which is to increase shareholder value.  Playing “chicken” with Carl Icahn is simply stupid.  I believe that Yahoo’s days of pretending to be that “bleeding edge” and cool company are over.  Yahoo it is time to grow up.  Yahoo’s executive team should have seen this coming.  Come to think of it they probably did.

You don’t have a fellow like Icahn buy up your stock without knowing it.  Yang might have been trying to appease Icahn by leaking stories that Yahoo might be willing to go back to the negotiating table.  However, the stories I saw being leaked were about how Yahoo was taking steps to talk to News Corp. and dropping hints that their relationship with Google was something bigger than an advertising relationship.  Main stream media was doing all it could to keep the story alive.

Now Yang has to get his head handed to him in public by the last guy you want to “tick off”.

Yang needs to find out what Icahn is doing at Motorola right now – learn how your new boss thinks.  I also suggest that Yahoo management read up on Icahn’s success stories and even failures.  Yahoo ought not to think the largest shareholders will come to it rescue.  Legg Mason, the second largest shareholder has already said it will support Icahn.

Yahoo executives may try to appease Icahn by giving him a couple of board seats.  However, Yahoo management needs to understand that whether Icahn gets the entire board replaced or just gets two board seats, Icahn is running the show now.

Depending on how the proxy fight/negotiations go, Yahoo’s stock will probably rise and fall all within a matter of hours.  Microsoft will need to remain as silent to avoid any interference in Yahoo’s house cleaning.  Microsoft should remain silent about Yahoo over the next couple of days to avoid any price fluctuations on its stock.

Icahn will probably end up with a seat or two in Microsoft as well after Yahoo is acquired.

Next up – What does Microsoft do with Yahoo after the acquisition?