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Buyout Criticism Muted At Yahoo's Annual Meeting

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Cox News Service

The Tampa Tribune

Published: August 2, 2008

SAN JOSE, Calif. - What was expected to be a firestorm of shareholder fury fizzled into a mundane annual meeting for Yahoo on Friday, despite lingering disappointment among some shareholders about a failed merger with Microsoft that could have been worth $47.5 billion.

With billionaire investor Carl Icahn, a chief critic of Yahoo's management, absent, Yahoo Chairman Roy Bostock spent much of the session defending the decision to reject Microsoft and trying to assure shareholders that Yahoo's top managers were fully open to selling to software giant.

"There was never a conversation that took place ... where we did not discuss shareholder value," Bostock said. "I want no one to make a mistake about that."
Company CEO and co-founder Jerry Yang, meanwhile, tried to reassure shareholders that a strategy he launched last year to increase advertising revenue and reinvigorate the company was proceeding according to plan, despite the Microsoft sideshow. "We have a very good operating model ... and we believe our operating model will allow us to accelerate our growth," Yang said.

An offer from Redmond, Wash.-based Microsoft of $47.5 billion, or $33 a share, in May would have netted stockholders almost $20 billion. Instead, Sunnyvale-based Yahoo's shares today are trading about $20, about $3 less than a year ago, as the Internet pioneer continues to lose ground to rival Google.

Addressing Yahoo's board, Eric Jackson, who runs Ironfire Capital, a Naples activist investment firm, told members, "I think you ... overplayed your hand with Microsoft and overstayed your welcome on the board."

Other shareholders, however, praised the company's decision not to sell.

"Microsoft was the wrong corporation," said Richard Lammerding, who said he and his wife own 1,200 Yahoo shares. "They are a corporation-destroying, over-the-hill, green-tentacled octopus."

In taking shareholders through the details of the Microsoft discussions, Bostock said Yahoo's board got only one written offer to buy the company, a $31-a-share bid made by Microsoft CEO Steve Ballmer on Jan. 31.

A subsequent Microsoft offer in May, he said, was just an "offhand comment" from Microsoft executives that "there may be a few more dollars on the table."

Nonetheless, Bostock said, Yahoo's board considered a potential $33 a share sale to Microsoft, but when he and others sought more information about such an offer, Microsoft withdrew its offer to buy the company, according to Bostock.

In a statement, Microsoft denied Bostock's characterization of the talks.

"Yahoo is attempting to rewrite history yet again with statements that are not supported by the facts," the company said.

Much of the tension surrounding Friday's shareholder meeting was diffused by a July 21 agreement between Yahoo and Icahn, who had launched a proxy fight to protest the failure to reach a deal with Microsoft. Icahn owns about 5 percent of Yahoo's outstanding shares.

Under the agreement, Yahoo will expand its board from nine members to 11, give Icahn a board seat, and pick two other board members from a slate of Icahn nominees.

Also as part of the deal with Icahn, eight of Yahoo's nine directors had to stand for re-election Friday. All were overwhelmingly re-elected. One board member previously stepped down.

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