The next move in the Yahoo-Microsoft-Icahn saga is Carl Icahn’s. As Yahoo (YHOO) wisely pointed out in its rebuff letter, there’s no bid for Yahoo on the table right now, so it’s hard to accuse Yahoo’s board of doing anything worse than blowing the original negotiations.
The truth, of course, is that Icahn doesn’t actually want to get Yahoo’s board fired. What he wants to do is force the board to sell the company to Microsoft (MSFT) for something north of, say, $31 a share (preferably well north). Icahn might actually proceed with trying to get the board fired, but only as a last resort: What he’s focused on right now is what happens over the next few weeks.
To force Yahoo’s board into a sale, Icahn needs to turn up the heat on Jerry Yang, Roy Bostock, et al. He will likely attempt to do this in three ways:
- Get Microsoft to reopen the door
- Tell Yahoo shareholders (through the press) that Yahoo is refusing to engage even though Microsoft has reopened the door
- Tell Yahoo’s board (through the press) that he has the support of enough shareholders that he will successfully get the board fired.
If Icahn can do all three of these things, Roy will be on a plane to Seattle (this time, we suspect, Jerry will stay home. David Filo, meanwhile, probably won’t be leaving his desk). To get any of this done, however, Icahn will have to get Microsoft to reopen the door.
If not for Microsoft strategist Craig Mundie’s remarks last week, an interesting addition to Icahn’s board slate, and a nugget in today’s New York Post, we would say “no.” We suspect that Microsoft really has “moved on,” that–gradually, over the course of three months–Steve Ballmer eventually decided that buying Yahoo would be a mistake. And if this is what Steve concluded, we agree with him. We think it would be a disaster.
But here are the three points that make us think the door might still be open:
- Microsoft’s Mundie said last week that if Yahoo begged Microsoft to buy it for $33, Microsoft would probably revisit it.
- Two members of Microsoft’s dissolved board slate are now on Carl Icahn’s board slate (and we imagine have been in contact with Microsoft).
- One Icahn board slate member, John Chapple, reportedly told some Post sources that he wouldn’t join an Icahn slate unless Microsoft was willing to come back to the table.
The last of these nuggets third hand, and, even if it’s true, Chapple could have changed his mind (doing Carl Icahn a favour probably isn’t the worst career move and we imagine Icahn’s board members aren’t working for free). In combination with the other two, however–and the fact that, ex-Yahoo, Microsoft is nowhere in the web business–makes us think the door is still open a crack. But only a crack.
So what’s next for Yahoo’s stock? Here’s the problem: Even if Microsoft agreed to buy Yahoo for $33 this afternoon, Yahoo’s stock would probably only go to $30ish, especially if the offer were partially stock. Given that the stock is already trading at $27.64, that’s just not a very compelling return. (Yes, if you own 59 million shares it is, but we’re not all Carl Icahn.)