Doesn't Yahoo! Get a Say?

With its boardroom at stake, Yahoo! (Nasdaq: YHOO) wasn't going to take yesterday's one-two punch from Carl Icahn and Microsoft (Nasdaq: MSFT) lying down.

The billionaire investor and the software giant insist that only a new boardroom -- ideally populated by the slate of directors that Icahn is proposing -- will lead Microsoft to reopen acquisition talks with Yahoo!.

Yahoo!'s response is brief, so let's break it down piece by piece.

Yahoo! speaks
Yahoo!'s Board of Directors continues to stand ready to enter into negotiations with Microsoft Corporation for an acquisition of Yahoo!.

This is true. Microsoft walked away from the table, but only after Yahoo! spent several months swatting away Microsoft's advances.

Indeed, as recently as June, Yahoo!'s independent directors and management approached Steve Ballmer about just such a transaction, only to be told that Microsoft was no longer interested even in the price range which they had previously proposed.

It is naive for Yahoo! to believe that it's still worth the $31 a share that Microsoft offered back in January. Since Mr. Softy's initial interest, Yahoo! has lost key executives -- including the founders of Flickr. The prolonged battle has tarnished both Yahoo! and Microsoft's own MSN. A disarray discount is warranted.

Microsoft offered a rich premium -- well above where Yahoo!'s stock was before the deal, and even now, after the deal fell apart -- by design. Microsoft wanted a quick and friendly sale. It never happened. Instead, even if Microsoft wants all of Yahoo!, it will have to spend plenty in mending fences and polishing up the brand.

Now Mr. Ballmer and Mr. Icahn have teamed up in an apparent effort to force Yahoo! into selling to Microsoft its Search business at a price to be determined in a future "negotiation" between Mr. Icahn's directors and Microsoft's management.

This isn't entirely accurate. Yes, Microsoft would rather just pay less to snap up Yahoo!'s search business, but both Icahn and Microsoft indicate that a buyout of Yahoo! in its entirety is also possible.

We feel very strongly that this would not lead to an outcome that would be in the best interests of Yahoo!'s stockholders.

Accepting the $31 offer five months ago would have been in the best interest of Yahoo! stockholders. If that wasn't obvious then, it's crystal clear now. The company's moves since then, particularly the move to beef up executive compensation in light of a hostile takeover battle, have been more self-serving than investor-serving.

Yahoo! isn't broken beyond repair, nor entirely rudderless. However, it's clearly not the most impartial judge of its stockholders' best interests.

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

Yahoo! gets points for trying to shift the burden of indecisiveness elsewhere. Why strike a deal with Icahn's people next month, when Microsoft can nail a deal with Yahoo! today? It's also a brazen move, if it gets Microsoft to crystallize its plans before the shareholder vote.

Icahn knows he's in a bind. He overpaid for his stake in Yahoo! earlier this year. The only person willing to pay more for those shares is Microsoft. Getting Microsoft to make a formal offer, especially if it's significantly less than the original $31 one, may be enough to give shareholders pause. If Microsoft doesn't spell out its plans, Yahoo! can claim that Icahn and Microsoft are simply selling the invisible.

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.

Any points that Yahoo! gained in the earlier sentence, it loses in its close. Taunting Icahn and taking jabs at Microsoft simply emphasizes why Microsoft no longer wants to haggle with CEO Jerry Yang and Chairman Roy Bostock.

It took Microsoft months before it walked away. In that time, companies like Google (Nasdaq: GOOG) and even IAC's (Nasdaq: IACI) Ask.com have grown more quickly.

Yahoo! failed to take this seriously. It's as if this is Deal or No Deal, and Yahoo! has poorly misjudged the diminishing value of its suitcase's contents, even as it keeps dissing the banker by pounding the "no deal" button.

Even Howie Mandel can't save you now, Yahoo!.

Other Microhoo headlines:

• Make Up Your Mind Microsoft
• Life After Microhoo
• You Can't Kill Microhoo