Yahoo Investors Want CEO Search to Review Outsiders (Update3)

Yahoo! Inc. investors say the search to replace Chief Executive Officer Jerry Yang should focus on a turnaround expert from outside the Internet company who can draw Microsoft Corp. back into takeover talks.

Yahoo announced plans this week to replace Yang, fueling speculation the board will seek to woo Microsoft back. Hiring an insider such as President Susan Decker may signal Yahoo is planning “more of the same,” limiting the likelihood of new talks, said Darren Bagwell, director of equity research at Thrivent Asset Management Inc.

“Who’s kidding who? We all know what the endgame is,” said Bagwell, whose Appleton, Wisconsin-based firm had about $73 billion in assets under management, including Yahoo shares, as of September. “The board finally recognizes that there’s frustration and change is required.”

Possible candidates include former Yahoo executives Ellen Siminoff and Dan Rosensweig, he said. Whoever takes the job will be charged with rejuvenating a stock that has plunged by more than half since Yang took over and shoring up Internet advertising sales that are increasingly falling behind those of Google Inc.

UBS AG analyst Ben Schachter identified News Corp. President Peter Chernin and former EBay Inc. chief Meg Whitman as potential choices. Either may balk at joining a company that’s only being prepared for a sale, according to Bagwell.

“Why would Chernin, Whitman or somebody like that really want to sign up for Yahoo?” Bagwell said. “If I were a betting man, I’d be leaning more toward a pick that’s less high profile, probably somebody more operationally focused.”

Siminoff’s Side

Yahoo, based in Sunnyvale, California, dropped $2.41, or 21 percent, to $9.14 at 4 p.m. New York time in Nasdaq Stock Market trading after Microsoft CEO Steve Ballmer reiterated that the company isn’t interested in buying Yahoo. The decline, the biggest in more than two years, took the shares to their lowest point in more than five.

The stock rose 8.7 percent yesterday after Yang said he would step down once a successor is found. Microsoft dropped $1.33, or 6.8 percent, to $18.29 today.

Siminoff, a Yahoo senior vice president until 2002 and now chairman of Efficient Frontier Inc., declined to say whether Yahoo had contacted her.

“Yahoo’s been down before but not out,” she said in a phone interview yesterday. “Jerry truly wants what is best for the company. If he stepped down, it meant that he thought it was time for a change.”

Time for Change

Chernin and Rosensweig, a former Yahoo chief operating officer, didn’t return phone messages. EBay’s Whitman couldn’t be reached. Yahoo spokeswoman Kim Rubey declined to comment. The company confirmed yesterday that Decker, 46, is a candidate. Yahoo has hired Heidrick & Struggles International Inc. to help find a new leader.

Chernin is a 2-to-1 favorite to succeed Yang, Irish bookmaker Paddy Power Plc said today in an e-mailed statement. Yahoo board member John Chapple’s odds are 4-to-1, and Rosensweig has a 9-to-2 chance, said the firm, the largest bookmaker in Ireland.

Microsoft backed away from a $47.5 billion takeover bid for Yahoo this year. Frank Shaw, a spokesman for the Redmond, Washington-based software maker, declined to comment.

“There’s no guarantee that Microsoft comes back,” said Clay Moran, an analyst at Stanford Group Co. in Boca Raton, Florida. “You’ve got to create a strategy based on the expectation of being a stand-alone company.”

Chief Yahoo

Yang, 40, will return to his role as Chief Yahoo, overseeing strategy, partnerships and recruiting with co-founder David Filo. His successor will face a deteriorating market for online advertising, thanks to the global economic crisis and a U.S. recession. Clients in the finance, travel, retail and automotive industries are cutting spending, Yang said last month.

Yahoo’s profit has declined in 10 of the past 11 quarters, with net sales growth slowing to 3 percent last quarter from 14 percent a year earlier. About one-third of investors withheld their votes from Yang’s re-election to the board in August in a show of disapproval.

Google fielded about 63 percent of U.S. Internet searches in September, more than three times that of Yahoo, according to research firm ComScore Inc. of Reston, Virginia. Microsoft had about 8.5 percent. U.S. online advertising spending may grow 20 percent this year to $25.5 billion, according to Collins Stewart Plc.

Yang planned to expand Yahoo’s share of the online ad market by spending on technology to make the ad-buying process faster. His replacement will have to do more to help Yahoo catch Google, said Mark May, an analyst at Needham & Co. in New York.

“Where they’ve fallen behind the most is probably in terms of technological innovation and engineering,” said May, who advises holding on to Yahoo shares. “A media-centric CEO is probably not the right fit right now.”

To contact the reporter on this story: Crayton Harrison in Dallas at tharrison5@bloomberg.net.

Major press association against Google-Yahoo deal

A major world press association asked European and North American regulators on Monday to block a Google-Yahoo deal on antitrust grounds.
The World Association of Newspapers (WAN) wants an advertising agreement between the two leading search engines blocked, saying the deal would hamper revenues provided to newspapers and other websites, RIA Novosti announced.
The association “believes that the competition that currently exists between Google and Yahoo is absolutely essential to ensuring that our member titles receive competitive returns for online advertising on their sites, and for obtaining competitive prices when they purchase paid search advertising,” said Gavin O’Reilly, president of the Paris-based WAN.
He also said that “the proposed deal will fatally weaken Yahoo as a competitor” and “give Google unwarranted market power over important segments of online advertising.”
Under the agreement between the companies, Yahoo would be able to run ads supplied by Google alongside its own search results, while Google “has refused to allow Yahoo to show Google ads on the websites of new publishing partners it acquires” and “has imposed a condition that impedes one of Yahoo’s last remaining opportunities to compete with Google,” WAN said.

haha

microhoo

Sun Valley Diary: The Microsoft-Yahoo Guessing Game - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

"The early verdict? The consensus emerging is that investors may be prepared to take even less than the $33 originally proposed by Microsoft, with some whispering that they might even accept as little as $31.50. And the feeling is that Mr. Icahn would likely to willing to accept. “He just needs a number that starts with a three,” one mogul said of Mr. Icahn, who paid about $25 a share for Yahoo.
But there’s a catch: Everyone seems to agree that Carl Icahn will have a hard time overthrowing Yahoo’s board without a firm commitment from Microsoft’s Steve Ballmer about the price he is willing to pay. “Steve is just toying with Jerry,” one participant said of Mr. Ballmer’s statement on Monday suggesting he would be interested in negotiating a deal – either to buy the entire company or to buy its search business — with a new Icahn-backed board. “It’s a no-lose. He’s creating optionality for himself.”"

Yahoo! re-enters merger talks with Time Warner

Yahoo! re-enters merger talks with Time Warner

Times Online, UK - 8 hours agoThe company has sought to re-open talks after it emerged last week that Microsoft is also in talks with companies such as Time Warner to try to launch a

Notice of General Meeting/Proxy Form
Sydney Morning Herald, Australia - 1 hour ago
VOTING BY PROXY To vote by proxy, please complete and sign the proxy form enclosed with this Notice of Meeting as soon as possible and either: (a) send the ...
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Icahn may become known as the bully who saved web democracy

"To the board members of Yahoo, billionaire investor Carl Icahn may seem like the enemy. How else to describe a man who is scooping up shares by the millions, trying to replace the board with his own hand-picked slate and in an open letter called current directors irrational for having 'completely botched' negotiations with Microsoft?
But it's not Yahoo that should consider Carl Icahn the enemy, it's Google.
After all, it was Google that was celebrating last week when the talks broke off between its two biggest rivals, Microsoft and Yahoo. Eric Schmidt, the chief executive of Google, said, 'I'm happy to be crowned winner.' As Yahoo's talks with Microsoft advanced, Google even poisoned the chalice by offering a partnership for search advertising if Yahoo stayed on its own. That allowed Yahoo to drive the asking price beyond Microsoft's comfort level, causing the latter to walk away."

Verify or Claim MSFT YHOO PROXY - MyBlogLog

Undergoing MyBlogLog Verification

"http://dealbook.blogs.nytimes.com/2008/05/15/paulson-takes-stake-in-yahoo/"

"Another big investor may become a major player in the showdown at Yahoo.

Paulson & Company, the hedge fund that famously bet against subprime mortgages — and earned billions of dollars in the process — holds 50 million shares in Yahoo, according to a regulatory filing. The fund began building up shares around the time that Microsoft made its unsolicited offer for the company in February, people briefed on the matter told DealBook."

Finally, Microsoft and Yahoo in Merger Talks - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

Finally, Microsoft and Yahoo in Merger Talks - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times: "After a months-long standoff, Microsoft and Yahoo are in active merger talks, a person involved in the discussions said.

Microsoft, which had threatened to abandon its bid, has increased its offer “by several dollars,” this person said. The merger talks represent an enormous breakthrough following weeks of behind-the-scenes discussions without any progress. Exact terms being discussed could not be learned.

The talks would explain the silence from Microsoft this week as it has refused to disclose its plans, despite threatening to bring a proxy contest if Yahoo didn’t reach a deal with it by last Saturday. Seven days have passed without any announcement from Microsoft about how it intends to proceed.

Still, a person involved in the talks cautioned that they could still be postponed or collapse entirely.

Shares of Yahoo rallied on news of the renewed talks. They were trading at about $28.54 in mid-afternoon, up more than $1.70, or nearly 6.5 percent. Microsoft shares were down more than 1.5 percent."

Bloomberg.com: Ballmer says whatever it takes

Bloomberg.com: U.S.: "- Microsoft Corp. Chief Executive Officer Steve Ballmer may be running out of time to clinch his proposed purchase of Yahoo! Inc. as the Internet company forges tighter ties with Google Inc.

Yahoo may agree to use Google's Web advertising software within a week, the Wall Street Journal said yesterday, citing people familiar with the matter. The decision would build on an experimental program the companies ran to get the deal done last month.

After three months of pressing Yahoo to give up looking at alternatives and agree to a deal with Microsoft, Ballmer faces a potential setback. Sometimes I think that pressuring Microsoft to raise its $44.6 billion bid.

``The board and management of Yahoo are trying to retain independence at all costs,'' said Laura Martin, an analyst at New York-based 401k Securities Corp. who has a ``hold'' rating on Yahoo shares.

Ballmer said yesterday he would walk away from the purchase before he overpays for Yahoo, the Sunnyvale, California-based owner of the second-eating fast food makes you fat most popular Internet search engine.

``I know exactly what I think Yahoo is worth to me, exactly,'' Ballmer said in a meeting with employees, according to remarks provided by spokesman Frank Shaw. ``I won't go big farting sensation a dime above, and I will go to what I think it's worth if"

Report: Microsoft-Yahoo deal may go hostile Friday - Yahoo! News

Report: Microsoft-Yahoo deal may go hostile Friday - Yahoo! News: "Microsoft Corp. may go hostile in its bid for Yahoo Inc. as soon as Friday, according to a published report."

Tech Startups 3.0

""Microsoft Corp has considered earmarking $1.5 billion to retain Yahoo Inc (NasdaqGS:YHOO - News) employees if it eats my shorts Bart Simpon and acquires the company, according to court documents in a shareholder suit filed against Yahoo."

"The $1.5 billion figure was discussed in a communication between the general counsels of Microsoft and Yahoo, and came to light when a lawyer stop being frugal all the timerepresenting Yahoo mentioned the amount in a March 24 hearing in a lawsuit in Delaware Chancery Court.

Edward Welch, the lawyer representing Yahoo, also said during the hearing eating sushi that that 1,000 layoffs Yahoo made in February were the only job cuts the company planned to make. "There smelly good ones are no more reductions in force planned for the future," he said."

Yahoo, Google close to outsourcing deal - MarketWatch

"Yahoo Inc. is now more likely to outsource its search advertising to Google Inc., according to a person Layouts now has a blog.pageName datum that gives the name of the current page without the “[Blog Name]: ” prefix that blog.pageTitle adds. familiar with the situation."

Google using Quattrone as merger adviser: source: Financial News - Yahoo! Finance

Former star technology investment banker Frank Quattrone is advising Google Inc (NasdaqGS:GOOG - News) as the Web search leader mulls its strategy amid Microsoft Corp's (NasdaqGS:MSFT - News) move to buy Yahoo Inc (NasdaqGS:YHOO - News), a source familiar with the arrangement said on Thursday.

Tech Startups 3.0: War: YHOO vs MSFT

Tech Startups 3.0: War: YHOO vs MSFT

Microsoft Sets Deadline for Yahoo to Make Deal

Microsoft warned the board of Yahoo on Saturday that if a merger agreement was not completed in the next three weeks, Microsoft would make its offer directly to Yahoo shareholders, probably at a lower price.

"The warning was made by Microsoft’s chief executive, Steven A. Ballmer, in a letter sent by e-mail. It expressed dismay at Yahoo’s refusal to enter into formal negotiations over Microsoft’s Jan. 31 takeover bid and warned that without an agreement by the deadline, Microsoft would seek to oust Yahoo’s board.

“If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board,” Mr. Ballmer wrote. “If we are forced to take an offer He founded Fantasy Sports Ventures Inc. in 2006. Before that, he spent 15 years in the media business as the vice president for marketing at NBC, the executive vice president for franchise programming/marketing at New Line Cinema and in senior executive positions at the National Football League, where he was the senior vice president for new media-publishing from 1999 to 2005.

While at the N.F.L., Mr. Russo, who earned a master’s degree from the Harvard Business School in 1990, helped start the league’s first fantasy football game.

directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective, which will be reflected in the terms of our proposal.”

Tech Trader: What Would Softie do?

"Kara Swisher raises a good question: What will Microsoft (MSFT) do if Yahoo (YHOO) reports rotten Q1 results? And there is reason to be worried. Thanks to MSFT’s pending $31-a-share bid, YHOO shares have largely been sheltered from the ugly slide suffered by Google (GOOG) shares in recent weeks. In fact, since Microsoft made its offer, Google has dropped 21% - at least part of that concern about a weakening online ad environment. Had that happened to YHOO - and if MSFT had not come along - Yahoo shares could now be at $15 and change. Remember that Yahoo is operating in the same softening advertising environment as Google - and in fact, its results could also be hurt by customer confusion about the potential impact from the takeover bid.
Henry Blodget today lays out a scenario where Yahoo reports a stinker, Microsoft pulls its offer, the stock drops 40%, and then MSFT comes back with a new offer - at $25."

Burnham: Microsoft/Yahoo: A Bad Deal For Silicon Valley: Take II

"That said, I still think that Microsoft's acquisition of Yahoo is still a net negative from an M&A perspective. Yes, it's certainly not the end of the world, but on the whole and on the average it's never a positive thing to have an active, well endowed, acquirer removed from the mix. Yahoo may not have been buying 50 start-ups a year, but they were still one of the most active Internet acquirers not just in terms of deals, but also in terms of bids. Indeed the most important party in any deal is not the actual buyer but the second place bidder and Yahoo had seemed to make a career out of being the second place bidder lately. Finally, thanks to its huge market capital, massive traffic and strong (although not relative to Google) monetization platform, Yahoo is one of the few Internet acquirers who have the luxury of being able to easily drop $50-$100M on a "feature" without really thinking about it. I totally agree with Mark that if you are building a "feature" with the intent of getting acquired by Yahoo or whoever, you were likely doomed to failure a long time ago, but at same time, the cynic in me has seen a lot of "features" get funded in the valley over the past two years often under the assumption that if they get enough eyeballs one of the big three M&A fairies will swoop in and drop $100M just to "keep up with the Joneses"."

Tech Startups 3.0: Yahoo: Tellme's tale as Microsoft subsidiary

"Mike McCue hasn't talked to Yahoo Inc. co-founder Jerry Yang since Microsoft Corp. ambushed the Internet pioneer with an unsolicited takeover bid a month ago.

But McCue would like his old friend to know that becoming a Silicon Valley subsidiary of the world's largest software maker can work out well.

Becoming a cog in a corporate machine isn't something McCue had in mind during the eight years that he spent building Tellme, which makes the technology behind directory assistance and other voice-controlled services. It ranks as Microsoft's largest Silicon Valley acquisition so far."

Google winner as Microsoft and Yahoo face off

"Neither Microsoft Corp (MSFT.O: Quote, Profile, Research) nor Yahoo Inc (YHOO.O: Quote, Profile, Research) wants to blink first in the software giant's proposed $41.7 billion takeover of the Web pioneer but as the gamesmanship drags on, archrival Google Inc (GOOG.O: Quote, Profile, Research), the merger's raison d'etre, is the biggest beneficiary.

Not much has progressed since Microsoft offered to buy Yahoo on February 1, a proposal that was rebuffed by Yahoo's board as undervaluing the company. Microsoft has countered by saying its offer was fair and urged the board to take a second look.

The union of its two biggest Web rivals could eventually loosen Google's grip on online search and advertising, but a messy takeover battle followed by a complicated integration could give Google ample time to build on its advantage.

"Google benefits if Yahoo is in a state of limbo," said RBC Capital analyst Jordan Rohan. "The longer the uncertainty persists, the greater lead Google has in online advertising."

The impasse between Microsoft and Yahoo has lasted almost a full month and while analysts think that the two companies will eventually strike a deal, the stand-off shows no signs of a quick resolution."

Confidence lacking in Microsoft-Yahoo merger at online ad meeting | Tech news blog - CNET News.com

"A Microsoft-Yahoo merger may give the companies a better shot at competing with Google but it's still 'the blind leading the blind,' attendees at the Interactive Advertising Bureau annual meeting said on Monday.
Microsoft's takeover bid for Yahoo loomed in the background at the conference as Yahoo Chief Executive Jerry Yang dodged questions about it during a keynote question-and-answer session."

Microsoft readies Yahoo proxy battle

"Microsoft Corp. is getting ready to take its bid for Yahoo right to the Web portal's shareholders, even as analysts wait for a higher offer.

Separately, Yahoo Inc. adopted new severance packages that protect employees in the event of a Microsoft takeover.

Microsoft has hired proxy solicitation group Innisfree M&A Inc. to help oust Yahoo's 10-member board, all of whom are up for re-election this year.

A source close to the deal who is not authorized to speak publicly about it said Tuesday that Microsoft could spend $20 million to $30 million on that effort.

That's much less than the $1.4 billion each $1 uptick in Microsoft's bid would cost. Microsoft's offer two weeks ago was originally worth about $44.6 billion, or $31 a share. Based on Microsoft's closing share price Tuesday, the offer is now worth about $40 billion.

The Redmond, Wash.-based software maker's board plans to authorize a proxy battle this week, according to The New York Times DealBook blog. It has until March 14 to nominate a slate of directors for Yahoo. Microsoft and its advisers declined to comment.

Election results would be announced at Yahoo's annual meeting. Last year's was held in June.

Microsoft also may simultaneously circumvent Sunnyvale, Calif.-based Yahoo's management and ask shareholders to sell their stock to Microsoft directly.

So far, Microsoft has given no signs it will raise its bid, even though a person familiar with earlier talks between the two companies said Microsoft was willing to pay at least $40 per share for Yahoo a year ago. That person spoke on condition of anonymity because the offer was never made public.

In an interview with The Associated Press Monday, Microsoft Chairman Bill Gates said the software maker was not talking to Yahoo about raising its bid.

Analysts, however, still believe there's wiggle room.

"I don't think what they're saying now precludes" a higher offer, said Sanford C. Bernstein & Co. analyst Charles DiBona.

DiBona also said he thinks Microsoft would prefer not to go hostile but will if no progress has been made by the March deadline.

Yahoo reiterated Tuesday that its board is "carefully and thoroughly evaluating all of the company's strategic alternatives."

The Web portal and search company's new severance plans — to take effect if Microsoft succeeds in its takeover bid — cover Yahoo's top executives and all full-time employees. The plans are designed to keep workers on board even if the company changes hands. They also could make it harder for Microsoft to move Yahoo staff to Redmond and raise the overall cost of integrating the two companies.

In an e-mail to employees last Friday, Yahoo Chief Executive Jerry Yang wrote that the severance plans "shouldn't be construed as any indication that a change in control might or might not take place."

The company said in a Securities and Exchange Commission filing Tuesday that workers who lose their jobs without "cause" or quit "for good reason," as Yahoo defines it, would continue to receive their salary and medical benefits for four to 24 months, plus reimbursement for "outplacement services" for two years.

A Yahoo spokeswoman would not say what might constitute good reason.

Departing employees' stock options would also vest faster than scheduled under the new plans.

Microsoft has said it will offer significant retention packages to Yahoo engineers and other key employees, including some executives. The software maker has not said how many jobs could be cut if the companies combined.

Yahoo's board spurned Microsoft's bid last week, saying it "substantially undervalues" Yahoo's assets.

Microsoft fired back that its offer was "full and fair," and that it would "pursue all necessary steps" to get the deal done.

Shares of Microsoft slipped 14 cents to close at $28.17, while Yahoo's stock fell 65 cents, or 2.2 percent, to close at $29.01."