All Things Digital

A source close to Yahoo’s thinking emailed and declared that BoomTown was misinformed and ignorant of the insider mechanics of the high-level corporate wrangling when I suggested in a post earlier today that the settlement between Yahoo and Carl Icahn was perhaps not the time to break out the bubbly.

You know, because Yahoo’s (YHOO) stock is still moribund, morale is still low, Microsoft (MSFT) is still looming and the economy is still tanking.

Other than that, Yahoo sources wanted to let me know the Icahn truce was a win.

And that is absolutely true, technically speaking.

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Could the new and improved Yahoo CEO Jerry Yang actually manage to beat back the proxy fight being waged against him by activist investor Carl Icahn?

It increasingly looks that way, with only 12 days to go until Yahoo’s annual meeting on Aug. 1.

But exactly which Yang will be running Yahoo (YHOO), if he does win, is probably the most important question shareholders need to ask.

Will it be the seemingly energetic Yang of the past two weeks, invigorated by the battle with Icahn and his new best friend and Yahoo foe, Microsoft (MSFT)?

Or will it be the other Yang?

Because for months and months now, since Microsoft waged its takeover bid on the Internet company he founded, the woe-is-me vibe emanating from Yang has been working the last nerve of anyone paying attention to the proceedings.

Given that this vibe was combined with a kind of cave dweller PR strategy of not speaking publicly–other than releasing an indignant, noncapitalized letter every now and then about the situation–some questioned Yang’s ability to gin up the kind of passion needed to bring Yahoo back from its current straits.

Even before the Microsoft parry in February, the ho-hum mood had trickled down to the troops, causing lower morale, too many departures and a general feeling–deserved or not–that Yahoo has been circling the drain for much too long under its current lackluster leadership.

And, let us not forget the drippy stock performance either.

And while BoomTown, especially, has to give both Yang and also Yahoo President Sue Decker much credit for appearing onstage at our sixth D: All Things Digital conference in May, most who saw the appearance (we posted the whole thing last week, starting here) were not blown away by the performance, considering it too enervated.

What then, do we make of the current round of pugnacious, dare-we-say, passionate, and, as it seems, pretty effective moves Yang has made this week to ward off the attacks of Icahn and Microsoft?

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BoomTown’s most favorite part of the Yahoo takeover circus?

The dueling letters, of course! How the lovely practice of missives has fallen out of favor, as soulless emails have grown in use.

Well, not in the land of hostile takeovers!

So here’s our decoding of billionaire investor Carl Icahn’s thankfully brief letter to Yahoo’s Chairman Roy Bostock, informing Yahoo (YHOO) he begins bombing in five minutes.

Icahn wrote:

Carl C. Icahn
ICAHN CAPITAL LP
767 Fifth Avenue, 47th Floor
New York, NY 10153

Dear Mr. Bostock:

Translation: Who are you? Whatever. I regret to inform you, but I eat wimpy Chairman of the Board types like you for breakfast.

Icahn wrote: It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft. It is quite obvious that Microsoft’s bid of $33 per share is a superior alternative to Yahoo’s prospects on a standalone basis. I am perplexed by the board’s actions. It is irresponsible to hide behind management’s more-than-overly optimistic financial forecasts. It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo’s closing price of $19.18 on the day before the initial Microsoft offer. I and many of your shareholders strongly believe that a combination between Yahoo and Microsoft would form a dynamic company and more importantly would be a force strong enough to compete with Google on the Internet.

Translation: Here I am stating the glaringly obvious. But don’t you like my use of self-righteous and indignant words like “unconscionable”?

Nonetheless, I must ask: What are you smoking over there on the Left Coast?

When someone dangles more than $40 billion to anyone on Wall Street, we’d throw our mother under the wheels of the bus if we needed to to get it. Frankly, we would do it for $12.43.

In any case, your break with reality is my golden opportunity.

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BoomTown feels like a digital postal carrier today, delivering a small message each for Microsoft (MSFT) CEO Steve Ballmer and Yahoo (YHOO) CEO Jerry Yang from some of your bigger shareholders–some of whom own you both, in fact, and with whom we like to check in with from time to time to gauge their mood:

Steve: Greetings! Well, not greetings, exactly, since many of us are still really annoyed by the mean letter you sent to Yahoo two weekends ago.

Actually, we would not have minded a mean letter directed solely at Yang and the board.

In fact, if you had just focused on Yahoo’s lack of cooperation and your frustration in wanting to start negotiating and reiterated how valuable Yahoo was to you, that would have given us cover to phone up Yahoo and complain about inaction.

Instead, you threatened a price drop, which is like delivering a Kung Fu Panda blow right to the collective windpipe of big shareholders and makes it impossible for us to do anything but complain about Microsoft.

Which is precisely what Legg Mason’s Bill Miller did like clockwork, of course.

“The problem is Microsoft blundered with the letter this weekend,” Miller said flatly in an interview in The Wall Street Journal. “Telling the shareholders you’re going to take something away from them is not a way to get their support.”

So, now to assuage us, you probably have to raise the price. A poll of those BoomTown talked to said $2 more would do it and $3 would be a clincher.

Our advice: Lob a call into Miller and also Capital Research & Management and all the other big owners of Yahoo shares and do a little sweet-talking.

Dear Jerry:

Salutations! Well, not salutations, exactly, since many of us are perplexed at what exactly is the plan.

OK, we like all the activity of late, as it is keeping the pressure on Microsoft. But we are deeply dubious of the efficacy of all the various plans.

While we would grudgingly accept a union with AOL, with an investment from Time Warner (TWX) and even a stock buyback, we are nervous that it could be a disaster.

Most of all, there is the question of leadership and who would run this obviously hard-to-manage organization. We are not so sure that anyone in either team is up for it, and we just cannot imagine making that call to Steve Case and Bob Pittman to reassemble the old band.

And, while we love the idea of Google adding $1 billion in cash flow to the bottom line via an outsourcing deal to take over search-ad monetization, it’s a risky move fraught with regulatory questions, potential legal quagmire and increased aggression from Microsoft.

In fact, given how clear the Microsoft option is, especially if the price goes up or it switches to an all-cash deal, we still maintain that the most likely outcome is that we will support a richer Microsoft bid, since it presents us with the most clarity.

Or, as Fergie sings in her delicious “Big Girls Don’t Cry”: “Clarity, Peace, Serenity.”

So whatever happens, remember that big companies don’t cry either.

Have a great weekend and enjoy the video:

Finally, the rumble has moved from letters to numbers, as a major Yahoo shareholder, legendary portfolio manager Bill Miller of Legg Mason (LM), has publicly backed the Internet giant in its takeover tussle with Microsoft.

And exactly what does Miller–whose fund only holds Yahoo (YHOO) shares and not those of Microsoft (MSFT) too, as do many big shareholders of Yahoo–want?

Three guesses and the first two don’t count!

More money, of course, and no more thuggish threatening from Microsoft to drop the price.

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