Yahoo: Can Icahn Get Microsoft Back to the Table?

So here’s the basic conundrum in this whole concept of Carl Icahn launching a proxy contest for Yahoo (YHOO): what’s the point unless he can get Microsoft (MSFT) to launch a new bid?

It is certainly possible that institutional investors are sufficiently irritated at Yahoo CEO Jerry Yang and the company’s board that they might want to oust some or all of the directors. But to what end? This is not Motorola (MOT), or Time Warner (TWX) - other situations where Icahn has waded in - where there are a variety of potential shareholder-enhancing alternatives to consider. There is only one potential buyer for Yahoo, and they walked.

Proxy battles can also be bruising affairs. George Askew, an analyst at Stifel Nicolaus, asserts in a note this morning that a successful proxy fight is “a bit like a scorched earth policy - you may win the battle but what you ultimately win may be so damaged that it wasn’t worth fighting for.” Askew says Microsoft shied away from a proxy fight for exactly that reason. “We don’t think the software giant’s view will change with Carl Icahn doing the dirty work,” he says.

Askew contends that the only way MSFT comes back to the table is if current Yahoo management invites them back and requests a friendly deal at a price close to the $33 that was already offered. “We don’t believe a proxy battle by Carl Icahn will compel Yang and [David] Filo to ask for Microsoft’s help as a rescuer,” he writes. “And without that request, Microsoft will stay on the sidelines, in our view. Microsoft will not want to be viewed as the conqueror in a battler of mercenaries.”

Askew’s advice to Yahoo holders: swap into Google (GOOG).

Comments

[Paul Firgens]

Maybe Icahn already has a deal with MSFT? Maybe Ballmer will have Icahn deliver Yahoo? A proxy proxy fighter?