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A strange Yahoo compromise that makes sense
July 21, 2008
It is a bit hard to tell whether Carl Icahn or Jerry Yang has backed down the most in the settlement of the proxy fight between Mr Icahn and Yahoo. But I suspect it means that Microsoft will have to make a full bid for Yahoo if it wants to gain control of its search assets.
I think this is the right conclusion. I have written of my doubts about whether Mr Yang is an appropriate chief executive for Yahoo, it also seems to me that Yahoo should not cede control of search to Microsoft unless the latter offers a premium for control.
True, we don’t know what will happen now that Mr Icahn is joining the Yahoo board along with two members of his slate, and he said in a statement that he still wants a “sale of its search business in the right transaction” if not an outright takeover of Yahoo. But Yahoo has made it pretty clear that it rejects the idea of a search carve-out.
So I reckon that Mr Icahn and Mr Yang will have to co-exist uneasily for a bit while Mr Yang tries to prove that he can revive the business independently. I don’t think that Mr Icahn has the votes or the clout immediately to force a search disposal.
In the longer-term, however, I doubt Mr Yang’s ability to do what he claims he will be able to do with Yahoo. So I expect him eventually to step down as chief executive and simply serve as “Chief Yahoo”. If another company is prepared to come up with the money, Yahoo will then be sold.
