Signaling that he wants to invest up to $2.5 billion, activist investor Carl Icahn launched Thursday, May 15, a proxy contest at Yahoo! Inc. (NASDAQ: YHOO), nominating 10 directors in the hopes of negotiating a successful merger with Microsoft Corp. (NASDAQ: MSFT).
In a letter addressed to Yahoo! chairman Roy Bostock, Icahn said: "It is clear to me that the board of directors of Yahoo! has acted irrationally and lost the faith of shareholders and Microsoft."
He called Microsoft's $33-per-share offer price a "superior alternative" to the company's standalone prospects and pointed out that the offer represented a 72% premium to Yahoo!'s closing price of $19.18 ahead of the offer. Microsoft originally put forth a $31 per share offer and, after increasing the bid but being repeatedly rebuffed, withdrew its $47.5 billion bid May 3.
Will he or won't he? That's the question of the day surrounding Yahoo! Inc. (NASDAQ: YHOO) amid speculation that Carl Icahn could be close to staging a proxy fight for control of the company's board of directors. A formal announcement of his plans could come as early as Wednesday, according to reports, just ahead of a Thursday filing deadline for Yahoo!'s annual meeting July 3.
Icahn probably would not go to all the trouble of amassing a 3.5% stake in Yahoo! if he wasn't intent on pursuing a proxy battle, though there are a number of potential roadblocks that could thwart him.
The biggest appears to be whether Microsoft Corp. (NASDAQ: MSFT) would still be interested in acquiring Yahoo! should Icahn take over the board. All indications are that the company has moved on, though it's entirely possible Microsoft is just posturing and would gladly come back to the negotiating table if it could acquire Yahoo! for $33 a share, or $47.5 billion, its last offer price.
Yahoo! Inc.'s (NASDAQ: YHOO) stock price has held up surprisingly well. Trading at $26.07 midday, its shares are only modestly below their closing price of $26.81 on May 1, the session before they rallied on talk that Yahoo! and Microsoft Corp. (NASDAQ: MSFT). were close to a deal. The price is even more surprising given the reports that Yahoo! plans to outsource its search advertising to Google Inc. (NASDAQ: GOOG) may be premature. If that deal is on the backburner, there's little else to support Yahoo!'s stock unless investors are counting on it renewing talks with Microsoft.
Yahoo! has come under fire from shareholders after Microsoft withdrew its offer over the weekend. In the fallout, Yahoo! execs have postured to suggest they were open a deal for even less than the $37 a share, or $53.2 billion, counteroffer they reportedly made to Microsoft's $33 a share, or $47.5 billion, offer.
But If Yahoo! really has indicated to Microsoft that it would accept $34 a share offer, which comes to $48.9 billion, a deal could still come together quickly. Not that it would be simple. Yahoo! has had plenty of time to come to terms. Meanwhile, with Yahoo! shares poised on the precipice, Microsoft arguably has more leverage than it has during the entire saga, which means it can better dictate terms. Microsoft can let Yahoo! sweat it out until the Internet company's annual meeting in July, when shareholders are likely to be in a lather.
It's increasingly clear that Motorola Inc.'s (NYSE: MOT) plan to split into two companies to separate its ailing cell phone business from its other telecommunications equipment operations is not appeasing shareholders. The latest sign came Monday evening at the company's shareholder meeting, where investors did more than just make a lot of noise. They passed a resolution loosening management's control over executive pay by making it subject to an annual shareholder vote.
FT.com, which covered the meeting, quotes shareholders as saying they were "embarrassed and outraged" by the company's decline,and calling the plan to split into two a "cop out" that does nothing to revive the company's cell phone business.
In the days leading up to the shareholder meeting, activist investor Eric Jackson, who heads a group called Motorola Plan B representing 135 investors holding 600,000 Motorola shares, had urged shareholders to vote against three longstanding Motorola board members, who he said had failed to learn the lessons of two boom-and-bust cycles (the StarTac and the Razr) -- namely, that phones are fashion, and fashion gets old very fast.
Faced with a revolt from angry shareholders who saw the value of their investments drop sharply after Microsoft Corp.(NASDAQ: MSFT) abandoned its acquisition offer over the weekend, Yahoo! Inc. (NASDAQ: YHOO) executives were doing their best spin control to deflect blame.
Yahoo! CEO Jerry Yang told Reuters the company was in negotiations to find common ground with Microsoft when the deal collapsed, adding he would still be open to further discussions with the company. Yahoo! president Susan Decker, meanwhile, tells us that Microsoft never put a $33 per share offer in writing.
We certainly could envision a scenario where Microsoft got cold feet and decided to walk rather than negotiate further with someone who didn't really want to make a deal, so Decker and Yang's take on things could be completely accurate. There's only one problem with it -- by not getting involved in serious discussions even earlier, Yahoo! did a disservice to its shareholders, who are now left holding the bag and hoping Microsoft sees fit to revisit the offer.
Following a trend in new fund formation that has seen the rich get richer, Kleiner Perkins Caufield & Byers Thursday announced that it has hit up eager limited partners for $1.2 billion, closing two new funds.
The blue-chip Sand Hill Road firm launched its 13th general interest fund, KPCB XIII, garnering $700 million for investment across all the firm's investment sectors of energy and environmental technologies ("which it terms greentech"), information technology and life sciences ventures. It also raised a $500 million Green Growth Fund, which will support later stage greentech companies.
The greentech fund is a tacit acknowledgment that as an industrial sector, much of the new energy and environmental development being funded is fundamentally different from traditional venture areas such as life sciences and information technology. While ideally built on breakthrough technologies, greentech companies are typically more capital intensive in later-stage development, requiring more flexible funding models than traditional venture capital.
The deadline Microsoft Corp. (NASDAQ: MSFT) imposed on Yahoo! Inc. (NASDAQ: YHOO) to come to terms on an acquisition before it moved into hostile takeover mode has come and gone, but now it appears the software maker may be taking a softer line.
Or maybe not. The Wall Street Journalreported late Wednesday that the boards of both companies met Wednesday in an attempt to reach an agreement on Microsoft raising its bid in lieu of going hostile.
At the same time, the Journal also reported that Microsoft CEO Steve Ballmer and its financial advisers had been lobbying Yahoo! shareholders to rally support for the company to accept a lower price.
It looks like the latest round of rumors that Dell Inc. (NASDAQ: DELL) is considering buying RadioShack Corp. (NYSE: RSH) are not only untrue, but probably stirred up by some unhappy shareholders of the 109-year-old consumer electronics retailer.
"I don't see any strategic buyers for RadioShack," said Anthony Chukumba, an analyst with FTN Midwest Securities who predicted a Dell acquisition is "highly unlikely." While Dell has made some uncharacteristic moves over the past year, like signing a deal last May to sell its computers at Wal-Mart Stores Inc. (NYSE: WMT) and other big-box retailers, Chukumba says the idea of buying any retailer outright, let alone the struggling RadioShack, does not compute.
"They would completely anger their partners," said Chukumba, who added that RadioShack's mostly small, mall-based stores are impractical for displaying an extensive line of PCs. "RadioShack is becoming less and less relevant as a consumer electronics retailer. I think they'll just continue to drift along."
In one of the biggest technology-related IPOs this year, website and IT system hosting company Rackspace Inc. late Friday filed to raise up to $400 million on the NYSE.
The company previously sought to raise $42 million in an IPO in 2001, but withdrew it in the wake of the tech market meltdown. Rackspace reported 2007 profits of $18 million on net revenue of $362 million. In 2006, it earned $20 million on net revenues of $224 million.
The offering, which will be conducted via auction, would represent a rare IPO exit for a host of investors that have backed Rackspace during its eight-year history. Norwest Venture Partners owns 16.2% of the company, while Sequoia Capital owns 11.6%. Chairman and former CEO Graham Weston is the largest shareholder, with 23.9% of the company's equity. Goldman, Sachs & Co., Credit Suisse, Merrill Lynch & Co. and W.R. Hambrecht & Co. are underwriting the offering.
Barring last-minute, behind-the-scenes maneuverings, the stalemate between Microsoft Corp. (NASDAQ: MSFT) and Yahoo! Inc. (NASDAQ: YHOO) is expected to persist through the weekend, when Microsoft's three-week deadline to reach an amicable agreement on an acquisition expires.
Microsoft on April 5 said if an agreement with Yahoo! was not concluded by April 26, it would take its case directly to Yahoo! shareholders and initiate a proxy contest for seats on the Sunnyvale, Calif., company's board of directors. Microsoft this week leaked names of its candidates to The Wall Street Journal, which also reported that employees at the Redmond, Wash., company have expressed skepticism about the deal. In addition, the New York Post, citing unnamed sources, reported that Microsoft CEO Steven Ballmer could reach out to Yahoo! and say it would sweeten its $31 a share, $43 billion offer slightly if Yahoo! agrees to formal deal discussions.
"Obviously with all this being leaked it's going down to the wire," said Jeffrey Lindsay, an analyst with Sanford C. Bernstein & Co. "Microsoft's really trying to persuade Yahoo! to negotiate.
If you take Microsoft Corp. (NASDAQ: MSFT) CEO Steven Ballmer at his word, the company has no intentions of raising its current $31 a share, $43 billion offer to acquire Yahoo! Inc. (NASDAQ: YHOO). But those following the seemingly never-ending saga (and one that appears destined to continue indefinitely) still see a higher offer in Yahoo!'s future.
Yahoo!'s first-quarter earnings report on Tuesday in and of itself will not get Microsoft to increase its offer. But they do give the company some leverage if and when it chooses to enter into serious negotiations with Microsoft.
"The most feasible, logical combination is still Microsoft buying them; it just comes down to the last-minute negotiations and whether the first quarter and outsourcing search to Google (NASDAQ: GOOG) are enough of a trump card to raise the bid," said RBC Capital Markets analyst Ross Sandler. "Or Microsoft can choose not to and go hostile."
After Yahoo! Inc. (NASDAQ: YHOO) reports its first-quarter earnings tonight, stories will flow about how the numbers could alter the price Microsoft Corp. (NASDAQ: MSFT) may eventually pay to acquire the Internet portal.
Apparently Microsoft CEO Steven Ballmer won't be reading them. Speaking in Morocco on Tuesday, he said the results won't "affect the value of Yahoo! to Microsoft." Negotiating tactics? Of course. And Ballmer didn't say Microsoft wouldn't raise its offer no matter what.
Besides, the report could still sway Yahoo! shareholders, who must sign off on any deal and may hesitate in backing a takeover at Microsoft's standing offer of $31 a share, or $43 billion.
Sandeep Aggarwal leaves no stone unturned in his analysis of Microsoft Corp.'s (NASDAQ: MSFT) pursuit of Yahoo! Inc. (NASDAQ: YHOO) in a research report he put out Wednesday for Collins Stewart. Aggarwal, who was previously the Internet analyst at Oppenheimer, assigns a 90%-plus probability to Microsoft acquiring Yahoo! and that it is "very likely" that the price will be higher than the $31 a share cash-and-stock offer Microsoft originally made Feb. 1.
A la David Letterman, Aggarwal publishes a Top 10 questions list relating to the deal. We won't go through all 10 of them (a couple are actually answered in the above paragraph), but some of the more relevant ones. Foremost, Aggarwal believes that Microsoft will likely pay $33.50 per share in cash and stock for Yahoo!, or 10% more than its current offer. He writes that he does not think Microsoft is willing to pay "materially higher" than its original offer, especially considering the economic outlook and its current share price. He assigns less than a 10% chance the deal gets done above $33.50.
Aggarwal assigns a 55% probability to a deal getting done amicably (that means a 45% chance of a hostile deal, for those among the math-challenged). Depending on which of those scenarios comes to fruition, he would expect a resolution by the end of April or mid-May (in an amicable deal), or in the case of an unfriendly deal, he predicted Microsoft would start a proxy war by the end of April with the hopes of getting its candidates on Yahoo!'s board by July. In both scenarios Aggarwal expects regulatory approvals to take up to three quarters.
In a research note, UBS analyst Benjamin Schachter on Monday says that pre-release reviews of the game are "overwhelmingly positive," with one reviewer describing it as "even better than the hype suggests." If GTA IV is as good as expected, Schachter estimates that it could sell six million-plus units in the U.S. in 2008, which would amount to $360 million in retail sales, and seven million to eight million units in the U.S. if the reviews are stellar, or $420 million to $480 million in retail dollars.
Yet while the presumed success of GTA will help Take Two in negotiating a better deal with EA, which has made a tender offer to acquire the company for $26, or $1.9 billion, "at the end of the day we continue to believe that Electronic Arts will be able to buy Take-Two in the $26-$28 range," the analyst writes.
Following this Yahoo! Inc. (NASDAQ: YHOO) affair is like playing a very high-stakes game of Three Card Monte: Take your eyes off the lucky lady and, pfffft, you're cooked.
As paidContent reported yesterday and the Wall Street Journal confirmed this morning, Time Warner Inc. (NYSE: TWX) is talking with the Internet company about shipping AOL and a trunk full of cash to Yahoo! in exchange for a minority stake in the combined company and a chance to close the door on one of the dumbest mergers in recent memory. AOL would get a lifeline. Beyond escaping Microsoft Corp.'s (NASDAQ: MSFT) $42 billion headlock, in AOL Yahoo! would get what remains a premier player in internet advertising and a company that retains large online audiences for financial, entertainment and other content.
The hardest thing to figure here is what's happening on the other side of the deal, where Microsoft is reportedly lining up News Corp. (NYSE: NWS) for a joint bid for Yahoo!. Under that scenario, Yahoo! would be folded in with Microsoft's MSN portal and News Corp.'s MySpace unit in one mighty online ad-selling, application-bundling, social networking-ing company. That Microsoft CEO Steve Ballmer is thinking of climbing into business with News Corp.'s Rupert Murdoch (pictured) suggests just how worried the software giant is about losing Yahoo!. But Ballmer should think twice. Murdoch has a famously keen instinct for when to buy, sell or hold a business. His interest in unloading MySpace underscores that, with the rise of FaceBook and other social networks, the Web property's best days might be behind it.
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Will he or won't he? That's the question of the day surrounding 
