Icahn says Yahoo's Yang sabotaged Microsoft takeover attempts
Billionaire investor Carl Icahn said Yahoo! Inc. Chief Executive Officer Jerry Yang should be replaced for sabotaging Microsoft Corp.'s efforts to buy the Internet company.
In a letter to the board today, Icahn outlined his case for shareholders to back him in a proxy fight and remove the directors at a meeting Aug. 1. Yang and the directors thwarted Microsoft by implementing a costly employee retention plan and may pursue an alternative deal that hurts shareholders, he said.
"It will be extremely difficult for Microsoft or other companies to trust, work with and negotiate with a company that would go to these lengths," Icahn said in the letter.
Combining with Microsoft is the only way Yahoo can become a "true competitor" to Google Inc. in Internet search traffic, Icahn said. Yang has insisted his company can fuel growth on its own, making Yahoo worth more than the $33-a-share bid from the world's biggest software maker.
Icahn urged Yahoo to get rid of its employee severance plan, saying it would free up as much as $2.4 billion. He alleged the plan gives Yahoo's full-time employees the right to quit with severance if the purchase leads to a "substantive adverse alteration" in job duties or responsibilities.
"If you are not completely disingenuous in your protestations concerning 'doing the right thing' for shareholders, you should rescind the severance plan expeditiously," Icahn said.
Taking over Yahoo, the second most popular U.S. search engine, would help Microsoft triple its share of Web searches in the country, narrowing the gap with Google. Google performed almost two-thirds of Internet searches in the U.S. in April, according to researcher ComScore Inc.
Google's dominance also has given the Mountain View, California-based company the lead in Internet ad sales, a market worth $41 billion worldwide last year, according to Piper Jaffray & Co. Microsoft predicts that may almost double by 2010.
Microsoft scrapped its bid after Yang, 39, rejected the price, demanding at least $37 a share. That prompted Icahn, 72, to nominate his own slate of directors, including himself and Dallas Mavericks owner Mark Cuban. The investor owned 10 million Yahoo shares and options to acquire 49 million more as of May 15. Yahoo's annual meeting is set for Aug. 1.
Yahoo spokeswoman Diana Wong said she couldn't immediately comment. Microsoft representative Frank Shaw said he has nothing to add to company management's recent comments. CEO Steve Ballmer said yesterday in Washington that Microsoft is still interested in striking a deal with Yahoo.
