War of words escalates over Yahoo’s future

War of words escalates over Yahoo’s future
By Chris Nuttall in San Francisco and Joshua Chaffin in New York
Published: June 9 2008 23:51 Last updated: June 9 2008 23:51
Yahoo and Carl Icahn, the activist investor, exchanged barbs again on Monday as the internet company prepared for a showdown at its annual meeting.
In a letter to shareholders, included in its definitive proxy statement sent out ahead of the August 1 meeting, the group said the vote for directors would be the most important in the company’s history.
Mr Icahn is trying to replace the Yahoo board with his own slate of directors and engineer a sale of the company to Microsoft.
In the latest of a series of letters to Roy Bostock, Yahoo chairman, Mr Icahn asked on Monday what the board’s “great plan” had been over the past few years. “While Google’s income from operations grew 59 per cent per year over the last two years, Yahoo’s . . . shrank 21 per cent . . . why did you permit Google to leave you in the dust?” he wrote.
Mr Icahn was commenting on the internet leadership Yahoo has lost to Google and responding to the company’s accusations that he had no alternative strategy.
“Mr Icahn has no credible plan except to sell the company to Microsoft – despite the fact that Microsoft has publicly indicated that it has no current interest in such a transaction,” said the letter to shareholders from Mr Bostock and Jerry Yang, Yahoo chief executive.
They argued the election of Mr Icahn’s slate could result in “substantial erosion of stockholder value”.
Mr Icahn has built a 4.3 per cent stake in Yahoo since Microsoft abandoned a $44.6bn takeover bid on May 3. He has warned that Yahoo would in effect create a poison pill if it was to sell its search division to Microsoft as Microsoft would then have no need to buy the company anymore. Talks between the two companies have been reported.
Yahoo has been considering a number of alliances and options, including a combination with Time Warner’s AOL.
Jeff Bewkes, Time Warner’s chief executive, indicated on Monday that AOL remained in the mix for a possible transaction.
“There is obviously – given the uncertainty of where [Microsoft and Yahoo] are going – a number of scenarios that could implicate AOL,” said Mr Bewkes, responding to a question at the Deutsche Bank media conference.