Icahn Increases Yahoo Stake

Multi-billionaire Carl Icahn has increased his stake in Yahoo in the past week. According to SEC filings, he spent about $67 million on more shares of the struggling internet giant. He picked up 6.8 million extra shares to bring his total holding to 75.6 million shares, or about 5.5% of the company. Clearly, he wants a bigger voice in choosing the successor to Jerry Yang, the outgoing CEO and co-founder.

Mr. Icahn has been annoyed with Mr. Yang for some time now. Microsoft offered to buy Yahoo for about $47.5 billion, and Mr. Yang turned it down. Microsoft then walked away from the deal. This caused Mr. Icahn to threaten the board by putting up his own slate for shareholder approval. A compromise gave Mr. Icahn his own seat on the board and the power to appoint two others. It didn't bring Microsoft back to the negotiating table, though.

The latest purchase was a bargain for Mr. Icahn. The average price he paid was about $9.92 a share. His original $1.5 billion investment was priced at roughly $25 a share. This is further proof that cash is king these days. In early trading today, Yahoo rose to $10.94; Mr. Icahn has already made money on the purchase.

With Mr. Yang's departure, the hunt is on for a new CEO. Whoever it is, he or she will have to bring a strategic vision to Yahoo that makes the company stronger as a stand alone, go-it-alone enterprise. For now, no one is interested in buying it, and Microsoft's recent comment that it might entertain the purchase the search part of Yahoo isn't serious (if it were, nothing would have been said).

So, Mr. Icahn will have a bigger say than before in who gets the top job at Yahoo. What many shareholders ought to ask themselves is whether he has any idea of how to pick a CEO for an internet company fallen on hard times? Moreover, they should ask just what role Mr. Yang will play now that he is no longer CEO but remains in an advisory position, “Chief Yahoo.” Anyone acceptable to Mr. Icahn is unlikely to be acceptable to Mr. Yang, and while he doesn't have the ability to prevent a particular individual from becoming CEO, he can certainly undermine the new guy. Mr. Yang and a host of shareholders other than Mr. Icahn still believe this is “Jerry's company.”

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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