All Things Digital

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.

Icahn wrote: During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched. I believe that a combination between Microsoft and Yahoo is by far the most sensible path for both companies. I have therefore taken the following actions: (1) during the last 10 days, I have purchased approximately 59 million shares and share-equivalents of Yahoo; (2) I have formed a 10-person slate which will stand for election against the current board; and (3) I have sought antitrust clearance from the Federal Trade Commission to acquire up to approximately $2.5 billion worth of Yahoo stock. The biographies of the members of our slate are attached to this letter. A more formal notification is being delivered today to Yahoo under separate cover.

Translation: Gordon Crawford of Capital Research has me on speed dial, for your information. Also, you don’t have Legg Mason’s (LM) Bill Miller to kick around anymore!

Thus, like the good-only-for-pate goose you are, I am going to force-feed the Microsoft (MSFT) merger down Yahoo’s gullet on my terms and remove you from any and all decision-making.

I have bought a ton of your shares, I am going to buy more, I am checking with the Feds.

Check, check, double-check!

And, as an added SuperPoke, my largely unimpressive dissident board slate includes Mark Cuban, whose Broadcast.com Yahoo overpaid for in the last Web 1.0 bubble, giving him the ability to be the loud-mouthed, but highly entertaining owner of sports teams and a dancing fool, I might add, to always remind you that nice guys do finish last.

Nice guy? That would be you. Finish last? You again!

Icahn wrote: While it is my understanding that you do not intend to enter into any transaction that would impede a Microsoft-Yahoo merger, I am concerned that in several recent press releases you stated that you intend to pursue certain “strategic alternatives.” I therefore hope and trust that if there is any question that these “strategic alternatives” might in any way impede a future Microsoft merger you will at the very least allow shareholders to opine on them before embarking on such a transaction.

Translation: Make a move to kiss up to Google (GOOG) any more and I promise I will slap you back to last Sunday, instead of just having a hissy fit like Microsoft CEO Steve Ballmer.

As to AOL (TWX), I have three words, if you try to merge with that dog: An Overwhelming Lawsuit.

Icahn wrote: I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary.

Translation: Wait, I have three more words: Make my day.

Icahn wrote:

Sincerely yours,
CARL C. ICAHN

Translation: First, I am adult who uses all caps when writing my name, as opposed to Yang, who signs letters like a toddler, like this: jerry.

Also, I am not sincere in any way whatsoever and never have been in my entire life.

Except that one heart-breaking time when I was but a wee billionaire activist investor: Rosebud!

Off with the Yahoo CEO’s head!

OK, maybe not so much, at least today.

Indeed, according to many sources, Jerry Yang’s head still sits squarely on his neck.

And, moreover, his job as CEO has not been usurped by Yahoo (YHOO) Chairman Roy Bostock, who was allegedly–as one rumor went–authorized by Yahoo’s board, instead of Yang, to restart negotiations with Microsoft (MSFT).

(Which is kind of obvious when you actually think about it, given that Bostock is mired in this takeover collapse mess up to his own at-risk neck along with Yang. Bostock has been deeply involved all along and will likely continue to be.)

Thus, lots of smoke and little fire, contrary to rumor-based reports, like this one from TechCrunch–most of which seem to hang on the thinnest of threads (Where in the world is Yahoo board member Eric Hippeau?).

More importantly, even though they move share price, these rumors show almost no knowledge of how public company boards actually operate, which is to say with slug-like speed, even when under fire as Yahoo clearly is.

And if Yang were to go, I would guess it would be under his own steam or he’d be run out with Yahoo’s directors on a rail by angry shareholders.

Still, as a post yesterday of BoomTown’s book excerpt on the AOL Time Warner (TWX) debacle illustrates, even shoving aside a much-pilloried exec like former Chairman Steve Case, who presided over the merger disaster of all time, it took months and months and months and months and finally came well after the wheels fell off the bus there in a move made by Case and not his detractors.

And such a move to denude Yang, in the midst of the most trying time for the company, would make Yahoo’s board seem like particularly thickheaded morons–backing Yang strongly one day and throwing him overboard the next.

That is not to say Yang has not lost a mountain of credibility with Wall Street, investors, his own employees and in the industry in general, over the way he has handled the situation with Microsoft. The fallout from the debacle has damaged him badly.

The reviews are in and it is pretty much one million angry thumbs down.

Unfortunately, Yahoo’s leadership team has not exactly distinguished itself in the aftermath with their public statements, whether it be Bostock’s fanciful musings that Yahoo had the support of shareholders or President Sue Decker’s ungracious dissing of disgruntled Yahoo employees or pretty much the bulk of the backpedaling Yang has done.

And I don’t even know what to say about the excuse about the $33 offer not being written down as a problem by Yahoo execs, which makes them all move a little closer to Nearly Headless Nick in “Harry Potter,” in my estimation.

I do get their fervent need to explain themselves, especially in the face of such ferocious criticism.

But it has been so cringe-inducing to watch, that part of me wishes they would slink back into that cave Yang and his team have been living in all year long.

Obviously, Yang cannot and must now take the heat and find a way to clearly articulate a really good vision of what lies ahead for Yahoo.

That does not mean dangling the possibility of another deal with Microsoft to placate critics or pretending Yahoo wanted such a merger.

The very fact that Yang brought the painfully terse Yahoo Co-Founder and tech guru David Filo–who has fervently opposed a lot of Yahoo hookups in the past, like with eBay (EBAY) many years ago–with him to the key meeting last weekend with Microsoft CEO Steve Ballmer was all I needed to know to determine that the company did not want to sell.

So, Yang and the board got what they wanted–for now, at least–which is a very painful dose of independence.

If they want that to mean going back to talk with Microsoft, Yahoo should stop playing games and do so with a minimal amount of jockeying.

If it means making a series of bold moves to focus and define its business, then Yahoo should do that and quickly.

And if Yang can’t lead or is still lonely–he said last year of the CEO job, “It is a lonely job in the sense that you have to make some of the tough calls”–he needs to step aside for a new leader of Yahoo.

Because, even if Yang lives to fight another day, this much is clear: The clock is running down for him and his stewardship of Yahoo.

Yang is, as Dean Vernon Wormer of “Animal House” said so eloquently, on double secret probation.

So, if I were to predict, I would say six months without meaningful change is all he has.

And after that, I would imagine, is when the blade really starts really falling.

Be careful what you wish for, Jerry Yang.

Because after talking to a dozen Yahoo (YHOO) execs over the weekend after the Microsoft (MSFT) takeover deal cratered, most of whom are vice presidents or above, I have to say that your stock drop isn’t the worst thing you will have to deal with this morning when you pull up at work.

The worst? That’ll be the very hairy eyeballs you will be getting from a lot more of your employees, who are scared silly and a lot peeved by the limb many feel you have dragged them and their stock options out onto.

A major decline in the share price today was of prime concern to those I interviewed, with most hoping it would not dip below $20, based on the possibility of signing a long-rumored ad outsourcing deal with Google (GOOG) soon that could potentially keep the stock higher.

Also of concern: making too many sudden moves to placate Wall Street, like a possible alternative merger with AOL (TWX) (which the Yahoo troops still don’t seem to welcome).

But causing particular dismay was the image of Yahoo’s top execs high-fiving after Microsoft CEO Steve Ballmer walked away from the deal, an act reported in the New York Times this weekend after the deal was scotched.

“That was very telling, if it was true,” said one exec, who–like everyone–did not want to be named. “It shows a complete lack of connection to the balance of the company.”

And that was the nice quote!

Last night, Yang tried to placate employees a bit by posting an aptly named communication, “OK, so now what,” on Yahoo’s blog called (not so aptly) Yodel Anecdotal. He also took a slap at, presumably, Microsoft’s PR effort and the press coverage around the takeover attempt.

“By the way, I’m sure you’ve all read or watched the news about this. Frankly, there’s a lot of nonsense and misinformation in what’s being reported. Just so we are all clear, here’s what happened. The board took its mission very seriously. We clearly indicated to Microsoft that we were open to a transaction but only if it were on terms that fully recognized the value of Yahoo and was in the best interests of our stockholders.

“No one is celebrating about the outcome of these past three months… and no one should.”

So no high-fiving anymore, right? And, just so we are all clear, everyone at Yahoo I talked to sure isn’t celebrating.

So, here’s a sampling of the feelings, none of which were positive, even though BoomTown tried mightily to get someone to render a more sanguine spin on the proceedings:

“I am in shock.”

“I don’t know if we won or we lost. I think we lost.”

“I don’t love that it was Microsoft, but I think everyone thought $33 was a pretty good offer from a pretty good tech company.”

“Having to face my staff tomorrow will not be so much fun and I need some Prozac, since I don’t know what I can say to them about how our leadership is going to get our company going again.”

“Where’s the Jelly memo when you need it?”

“I can’t really talk to Jerry, since it is difficult to tell a founder tough things he probably needs to hear.”

And, “Do you think we need to do an intervention with Jerry and the board?”

I am not sure that would work, but most employees I talked to thought a new leader at the top of Yahoo would be a good idea to give employees a fresh start and a new outlook.

Suggestions ranged from former Yahoo COO Dan Rosensweig to former Viacom (VIA) CEO Tom Freston to former eBay (EBAY) CEO Meg Whitman (pictured here).

“Jerry could become chairman, Sue [Decker] could remain president and then someone who can really charge in and make drastic change could be CEO,” suggested one exec. “Do you think Meg Whitman would do it?”

Um, no. But, ironically, Whitman was almost Yahoo CEO in a potential merger between Yahoo and eBay that never happened in the late 1990s.

As they will also say someday about 2008’s stillborn takeover of Yahoo by Microsoft: Could’ve, would’ve, should’ve.

But didn’t.

Oh dear.

Even more waiting for Yahoo to turn itself around? Until 2009? Really? Another 100 days, and another, and another and then more than half of another?

This is starting to feel very, very familiar.

Too familiar.

Well, it did take seven months to replace Farzad Nazem as CTO at a–um, well–technology-dependent company, so perhaps the glacial pace of non-change change planned for the Internet giant should not come as too much of a surprise.

Still, any surprise or new development from Yahoo might be more welcomed by Wall Street, which decidedly did not like much of what it heard from CEO and Co-Founder Jerry Yang or other Yahoo top execs during their fourth quarter and year-end earnings session yesterday.

After the underwhelming call, which came after the markets had closed, Yahoo shares were off almost 10% in after-hours trading, falling below a dangerous $20 level to $18.89.

Or, as I like to call it, takeover territory. Or even, as many media and tech players I talked to recently have been suggesting more fervently, the land where Yahoo merges with AOL or eBay.

But, really, who knows? Even, it seems, Jerry Yang.

He used the term “head winds” to characterize Yahoo’s sober guidance for the future, even as Yahoo had a sharp drop-off in net profit for the quarter.

Oddly, he did not highlight the much ballyhooed layoffs, which might number about 1,000. Or not–because some laid off can look for other jobs at Yahoo in more promising product areas. Got that?

I don’t and that’s probably the most critical problem Yahoo faces. Still, right after the call, Yang and his top execs went back into the cone of silence they have been living in, which is located in their cozy cave of noncommunication, without further comment.

Incredibly, reporters were asked to email or text any follow-up questions and given no access to anyone in charge.

While Yang and others there often note that they have their heads down–remember, there are scary head winds out there and potential hair-mussing dangers!–and don’t have time for such things, even Punxsutawney Phil knows that the only way winter ends is if you come out of your hole and don’t get scared looking at your own shadow.

Please see this disclosure related to me and Google.

Good god, Google at $2,000 a share?

Oh, it’s just that Web sprite Henry Blodget (pictured here), at it again, over at his blog on his site Silicon Alley Insider.

The former Wall Street analyst enjoyed brief fame in the last Internet mania for predicting that Amazon stock would go to $400 a share (and it did–but not for long!). Then later, he got investigated for touting stocks publicly that he disdained privately and, thus, was barred from the securities industry for life.

Yesterday, the can’t-help-himself Blodget wrote a much-noticed post arguing that the search giant’s stock could go nuclear.

Wrote Blodget:

Remember a couple years back when some analyst floated the idea that Google could eventually be worth $2,000 a share–and was ridiculed from coast to coast? Well, first it’s worth noting that Google is now almost a third of the way there. Second, it’s worth noting that $2,000 a share would mean a market cap of about $750 billion, which–given a reasonable time horizon–just isn’t that far-fetched.”

Um, Henry, it is far-fetched, as to be borderline fanciful. So, please stop taking all those cold medicines that make you all fuzzy-headed, because your theory even makes Facebook at $15 billion seem reasonable.

Given my obvious link to Google (see my disclosure here again, if you did not click at the top), it might surprise you that I think the current price for Google–zeroing in on $600 a share–is moderately insane.

But it’s fueled by the fact that there is not a whole lot out there to invest in if you want to be in the Internet market. Yahoo? Maybe after that 100 days is up. eBay? Skyped! Microsoft? Zzzz. Amazon? Still, in the end, a retailer.

Thus, search behemoth Google, which keeps gobbling up share right in the middle of the boom in the search-ad business, wins the beauty pageant and the faux diamond tiara.

For now. While Google is a real star in its core business (and what a business it is–it’s like having the water franchise in the Mojave desert), there are a lot of obvious issues the company will be facing as it moves forward.

Not today maybe, but three or four years hence–and the seeds of trouble are already planted.

You could go on about the lack of stunning success in its diversification efforts–admirable as some of them are. You could wonder, whither YouTube? You could worry about that DoubleClick deal getting slowed down or even stopped by the government.

You could focus on too-high development and employee costs. A downturn in the economy and the ad market is a recessionary nightmare all around and especially for Google. And did we mention the potential power of social networking?

Or that Google founders Larry Page and Sergey Brin might soon have to return to the alien planet from whence they came, taking with them those big-brained, bike-riding, solar-power-generating Googlers and leaving all us small-brains to flail around once again on the Web?

But while we can all have a good long giggle at Henry’s cheek, I think I have to side solidly with TechCrunch’s Michael Arrington on this issue (and, those who follow stupid tech blogging insider stuff, you know it’s not my first or even second impulse).

Except for the too-aggressive suggestion that someone “muzzle” Blodget, Arrington (pictured here in a disturbingly Blodgety pose) wrote a passionate and most excellent post on Blodget’s latest prediction.

He is entirely right that even if Blodget was not being serious, such outlandish statements are not helpful.

Writes Arrington persuasively:

Henry Blodget made his name by predicting outlandish price increases for Internet stocks in the late nineties. A lot of people lost a lot of money (or, all their money) by listening to his recommendations. The government charged him with securities fraud in 2003 and he was subsequently banned from the securities industry for life.

“But Blodget is a bit of a one-trick pony, and he likes to stay in the headlines. So he continues to build cases for big valuations of Internet companies. The only difference is he publishes these thoughts on his blogs. And people still listen to what he has to say.

“He isn’t always bullish (he’s recently trashed Yahoo and eBay). But he can’t seem to contain his regular predictive outbursts that such-and-such stock is worth massively more than it is now.

“When he’s talking about Facebook being worth $6 billion to $20 billion that’s OK, because it isn’t a public stock and no one is going to go out and throw away their life savings. But when he builds a case for Google’s stock to go to $2,000/share, he’s crossing a line.”

I agree wholeheartedly.

And, admirably, Arrington also points out criticism he himself gets for being “overly optimistic about young start-ups.”

He is, but he’s right that it does not matter nearly as much–who really cares that much if another venture capitalist doesn’t get his gold-plated wings–as much as those companies in the public market where regular people can lose hard-earned money trusting faulty advice.

I was always offended back in the last dot-com frenzy, when Wall Street analysts were giddily recommending stocks in companies they knew full well were not up to snuff and then walking away with bags of money from mutant initial public offerings they engineered.

The press, including myself at times, were bad enough by not being as tough as we should have been, but the double-dealing and “friends-of” stock roundelays were indeed sickening to watch.

At one point, in a story I tell a lot, when an investment banker said to me that he was about to take a company that was “pre-revenue” public, I asked if perhaps it wasn’t easier just to go mug some old lady on the street and grab the money in her purse to speed things along.

This should not happen again. This new round of Internet innovation–and, yes, bubble–has much more significant and useful and terrific companies in it and many deserve to grow in a healthy environment.

And there’s already enough hype without writers like Blodget piling on, especially since he is (and always was) such an excellent and convincing writer.

It wasn’t always thus for Blodget in regards to Google, by the way. He was a bear on it as recently as January 2006, as reported by Digital Daily’s John Paczkowski, back when he was writing for “Good Morning Silicon Valley.”

So let’s return to that little oasis of sanity and not wallow in mania and heedless speculation.

In the name of safety of old ladies everywhere (and I am veering in on that demographic all too soon), we all can do better than that.