Icahn wants to replace Yahoo! board to pave the way for Microsoft negotiations

By Lisa Kerner

Charlotte, N.C., July 7 - Activist investor Carl Icahn said Microsoft Corp. chief executive officer Steve Ballmer cannot negotiate any transaction with Yahoo! Inc.'s current board of directors.

Icahn said he has spoken to Ballmer several times, according to a schedule 14A filed with the Securities and Exchange Commission.

In a July 7 letter to fellow Yahoo! stockholders included in the filing, Icahn said if elected to the company's board, he and the new board will:

• Immediately start negotiation with Microsoft to sell the whole company or, in the alternative, sell the "search" function; and

• Move to replace Jerry Yang with a new chief executive officer.

In response, Yahoo! said, "If Microsoft and Mr. Ballmer really want to purchase Yahoo!, we again invite them to make a proposal immediately.

"And if Mr. Icahn has an actual plan for Yahoo! beyond hoping that Microsoft might actually consummate a deal which they have repeatedly walked away from, we would be very interested in hearing it."

Microsoft confirmed that it would be prepared to enter into discussions immediately after Yahoo!'s shareholder meeting if a new board is elected.

It is premature to discuss price or other terms of a possible transaction, Microsoft said.

"We respect the right of Yahoo!'s shareholders to determine the destiny of their company, and we do not intend to engage in ongoing commentary on these issues in advance of Yahoo!'s shareholder meeting," a Microsoft news release stated.

Icahn noted that any transaction between Microsoft and Yahoo! will take several months.

"During that period, if the current board and management team of Yahoo! mismanage the company (and their recent track record is far from reassuring), Microsoft would be putting its money at risk and a great deal could be lost," Icahn said in his letter.

Replacing Yahoo!'s board and Yang means they will be unable to "botch up" a negotiation with Microsoft again, "simply because they will not have the opportunity," according to Icahn.

In June, Yahoo! announced that its discussions with Microsoft regarding a potential transaction had ended.

As previously reported in May, Microsoft withdrew its proposal to acquire Yahoo! for $31 per share, or some $44.6 billion, after Yahoo! failed to move toward accepting Microsoft's increased offer.

The Redmond, Wash., software company was willing to raise its bid to $33 per share, Ballmer said in a May 5 letter to Yahoo!

According to Ballmer, the Sunnyvale, Calif., internet services company wanted at least another $4 per share, or another $5 billion.

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