Microsoft-Icahn-Yahoo - The Saga Continues
Published by: Codrut Nistor, in News
July14th2008

Although the open letter to the Yahoo! Shareholders is available on Carl Icahn's blog, and you can easily view it by using the link in the previous paragraph, I want to help you spare some of your precious time, so I'll quote the most interesting(or simply outrageous, for some) parts. Here we go...
"Dear Fellow Yahoo! Shareholders:
Over the years I have attempted to make changes at many companies but I have yet to see a company distort, omit and twist events and facts in the manner that Yahoo! has done in their press release issued Saturday night, July 12th," started Carl Icahn his open letter. Oh, well, as if Yahoo is the big bad wolf here, and Mr. Icahn, the poor little girl...
Now, here's the interesting part. It may be a bit long, but it's worth your time, believe me!
"During the last week, Goldman Sachs called me a number of times asking me to relate to them any transaction that Microsoft might be interested in transacting with Yahoo! I discussed with them the possibility of doing a “Search only” deal wherein Microsoft would purchase “Search” from Yahoo! and pay Yahoo! for any searches that would originate from a Yahoo! content page. Yahoo! felt that a deal of this nature would be very interesting, but only if Microsoft would guarantee the revenue that Yahoo! now received. This would obviously be a great deal for Yahoo! because Yahoo! would, for five years, receive a minimum of the $2.3 billion they are currently receiving as long as they continued to supply the page views and affiliate traffic they now had. Heretofore, Microsoft had been unwilling to even come close to making this guarantee. However, after I negotiated with Steve Ballmer for the better part of a week, he agreed to the guarantee. He also agreed to commit $7.7 billion dollars to the transaction (consisting of a $1 billion payment for “Search”, a $2.8 billion loan and a $3.9 billion tender offer to Yahoo! shareholders). Under the transaction, Yahoo! shareholders would receive $16.25 per share in distributions (consisting of cash and securities) and be left with a content company which would have a minimum guarantee of $2.3 billion per year of “Search” revenue from Microsoft and cost saving synergies from exiting the “Search” business that <-336x280 Large Rectangle - right->
Yahoo! has publicly stated would be $750 million per year (excluding the benefits from reduction of stock compensation and other non-cash items). However, Microsoft believes the synergies from Yahoo! exiting “Search” would be far superior and that Yahoo!’s 2009 GAAP operating income would exceed $2 billion. Microsoft would be making a substantial equity investment in the remaining company at a valuation of $19.50 per share. Furthermore, Yahoo! would be spared the great expense of maintaining “Search” as well as having to spend billions in developing new technology to compete with Google and Microsoft - which it is highly doubtful they would be able to do successfully. Additionally, Yahoo! would be able to avoid the great risk of seeing “Search” continue to lose market share and eventually melt away."
So, Carl Icahn is saving Yahoo? Come on! Who said Yahoo needs to be saved, and how is it possible to say such things like Yahoo Search "melting away??!" I wonder, and I have no answer to that yet, but I think the game is getting uglier with each day.
As a Yahoo user, I still think they have much to offer, and I don't think they'll ever "melt away," but I would really like to hear the opinion of some small Yahoo shareholder, so if you're one of them, please drop your comment below. What do you think? Would you like to see this company becoming a puppet in Icahn's and Ballmer's hands?















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