Microsoft may come out winner in Yahoo deal

Microsoft may be the biggest winner in the proxy fight settlement between Yahoo and activist investor Carl Icahn, whose peace accord was announced Monday.

With its ally Icahn and two members of Icahn's former dissident proxy slate getting three seats on Yahoo's expanded 11-member board as part of the settlement, Microsoft may find a sympathetic ear on any future buyout or asset acquisition proposals for Yahoo's search business, said sources. That, as a result, could push Microsoft to make another bid sooner than later, sources said.

"This settlement is a good thing for Microsoft," said one attorney who specializes in mergers and acquisitions and has been involved in proxy fights before. "It puts people on the board who aren't interested in more of the same, so it creates new opportunities to get a new perspective on the board."
And Chris Young, director of M&A research for proxy advisory service RiskMetrics Group, said the settlement may bring Microsoft back to the negotiating table once again.

"In my opinion, there is a greater chance Microsoft comes back to the table than there was yesterday. Whether its more likely a deal gets done is heard to say," Young said.

He did add, however, that without Icahn waging a proxy fight and keeping the pressure and distraction on Yahoo leading up to the Internet pioneer's August 1 shareholders meeting, that Microsoft has no reason to delay making another offer for all or part of Yahoo.

"Before, they were taking advantage of the leverage that Icahn gave them. But now that leverage is gone," Young said. "If they truly were interested in a deal, there is no reason to delay to maximize their leverage."

Microsoft was not immediately available for comment. Icahn did not return phone calls.

Microsoft, in announcing its support for Icahn's initial proxy slate to run against Yahoo's current board earlier this month, said it was no longer willing to negotiate a deal with the Internet search pioneer's current board. The settlement will alter Yahoo's current board, but it has yet to be seen how much influence Icahn and two of the members from his former dissident slate will have on the 11-member Yahoo board.

Wall Street appeared a little skeptical. Yahoo fell nearly 2.67 percent in morning trading to $21.78 a share.

Nonetheless, the M&A attorney noted that Icahn has had success in winning other directors over to his views and thinking, even in situations where he or his representatives accounted for less than a majority of the seats on a company's board.

Under the agreement, Icahn will be nominated to Yahoo's board of directors and the current board will chose two additional directors from among Icahn's former dissident slate to join Yahoo's expanded board of 11 members. Icahn will have three of those 11 seats.

But only having a minority of the available board seats didn't deter Icahn from having an affect on ImClome Systems, a biotechnology company he waged war with two years ago.

In a previous CNET News article on Icahn's track record with his proxy fights, Dr. David Sidransky, an ImClone director who served on the biotechnology company's board prior to and after Icahn's arrival said:


The board was divided with different strategic alternatives in mind...Although (Icahn) was in the minority...he presented a plan and said this is what I want, and this is how I want to achieve it. He got people interested in that plan and eventually gained a majority support on the board.
Icahn, during his proxy fight, advocated taking ImClone's core cancer drug Erbitux, which is used for combating head and neck cancers, and aggressively expanding trial tests for other uses. The former corporate raider also called for finding a permanent CEO after a lengthy period with an interim CEO and tying executive compensation more tightly with ImClone's stock price. Sidransky further added:
Carl is very convincing and has passion. He convinced me that we could do it--that we could get the drug going and expand the company. We've since hired a competent CEO and the right management...This is a complete turnaround. This board is going in a completely different direction now, than before Carl came aboard.

The M&A attorney made a similar observation.

"If a strong director is on a board, even if they are in the minority, that person can add value to the board, because directors want to accommodate reasonable views," said the M&A attorney.

And if some of the advisory services to institutional investors still want to weigh in on Yahoo's director nominees, post Icahn settlement, one act they could take would to be to issue a "withhold" recommendation, noted on source with such a service.

"Yahoo's recent behavior calls into question some of their activities. Although people have called into question (co-founder David) Filo going to negotiate with Microsoft when he wasn't even a director, it raises the question of where was the chairman and the corporate governance committee?" said a source with an institutional investor advisory service. "If there is a withhold vote of 30 to 50 percent on directors, it sends a strong message and would give a dissident a strong voice on the board."

Whether or not advisory services to institutional investors, such RiskMetrics, Glass Lewis & Co., and Proxy Governance, issue withhold recommendations has yet to be seen.

But one proxy solicitor said any benefit of greater influence on Yahoo's board that Icahn may receive from a "withhold" vote recommendation will depend on the reason cited by the institutional investor advisory service.

Said the proxy solicitor: "Sometimes dissidents put on a board are piranhas and remain outsiders, and sometimes they integrate very well on the board and are thought leaders
And Chris Young, director of M&A research for proxy advisory service RiskMetrics Group, said the settlement may bring Microsoft back to the negotiating table once again.

"In my opinion, there is a greater chance Microsoft comes back to the table than there was yesterday. Whether its more likely a deal gets done is heard to say," Young said.

He did add, however, that without Icahn waging a proxy fight and keeping the pressure and distraction on Yahoo leading up to the Internet pioneer's August 1 shareholders meeting, that Microsoft has no reason to delay making another offer for all or part of Yahoo.

"Before, they were taking advantage of the leverage that Icahn gave them. But now that leverage is gone," Young said. "If they truly were interested in a deal, there is no reason to delay to maximize their leverage."

Microsoft was not immediately available for comment. Icahn did not return phone calls.

Microsoft, in announcing its support for Icahn's initial proxy slate to run against Yahoo's current board earlier this month, said it was no longer willing to negotiate a deal with the Internet search pioneer's current board. The settlement will alter Yahoo's current board, but it has yet to be seen how much influence Icahn and two of the members from his former dissident slate will have on the 11-member Yahoo board.

Wall Street appeared a little skeptical. Yahoo fell nearly 2.67 percent in morning trading to $21.78 a share.

Nonetheless, the M&A attorney noted that Icahn has had success in winning other directors over to his views and thinking, even in situations where he or his representatives accounted for less than a majority of the seats on a company's board.

Under the agreement, Icahn will be nominated to Yahoo's board of directors and the current board will chose two additional directors from among Icahn's former dissident slate to join Yahoo's expanded board of 11 members. Icahn will have three of those 11 seats.

But only having a minority of the available board seats didn't deter Icahn from having an affect on ImClome Systems, a biotechnology company he waged war with two years ago.

In a previous CNET News article on Icahn's track record with his proxy fights, Dr. David Sidransky, an ImClone director who served on the biotechnology company's board prior to and after Icahn's arrival said:


The board was divided with different strategic alternatives in mind...Although (Icahn) was in the minority...he presented a plan and said this is what I want, and this is how I want to achieve it. He got people interested in that plan and eventually gained a majority support on the board.
Icahn, during his proxy fight, advocated taking ImClone's core cancer drug Erbitux, which is used for combating head and neck cancers, and aggressively expanding trial tests for other uses. The former corporate raider also called for finding a permanent CEO after a lengthy period with an interim CEO and tying executive compensation more tightly with ImClone's stock price. Sidransky further added:
Carl is very convincing and has passion. He convinced me that we could do it--that we could get the drug going and expand the company. We've since hired a competent CEO and the right management...This is a complete turnaround. This board is going in a completely different direction now, than before Carl came aboard.

The M&A attorney made a similar observation.

"If a strong director is on a board, even if they are in the minority, that person can add value to the board, because directors want to accommodate reasonable views," said the M&A attorney.

And if some of the advisory services to institutional investors still want to weigh in on Yahoo's director nominees, post Icahn settlement, one act they could take would to be to issue a "withhold" recommendation, noted on source with such a service.

"Yahoo's recent behavior calls into question some of their activities. Although people have called into question (co-founder David) Filo going to negotiate with Microsoft when he wasn't even a director, it raises the question of where was the chairman and the corporate governance committee?" said a source with an institutional investor advisory service. "If there is a withhold vote of 30 to 50 percent on directors, it sends a strong message and would give a dissident a strong voice on the board."

Whether or not advisory services to institutional investors, such RiskMetrics, Glass Lewis & Co., and Proxy Governance, issue withhold recommendations has yet to be seen.

But one proxy solicitor said any benefit of greater influence on Yahoo's board that Icahn may receive from a "withhold" vote recommendation will depend on the reason cited by the institutional investor advisory service.

Said the proxy solicitor: "Sometimes dissidents put on a board are piranhas and remain outsiders, and sometimes they integrate very well on the board and are thought leaders



Yahoo prediction: Jerry’s a goner

The Eagle has landed"

Thirty-nine years to the day after Neil Armstrong radioed "The Eagle has landed" from the Sea of Tranquility, NASA on Sunday turned its eyes toward the moon, gazing both forward and backward in time.

For the next three days, Silicon Valley will be the base for planning humankind's return to the moon, as more than 400 scientists from around the world assemble at NASA/Ames Research Center for a conference on what type of science should be done when astronauts revisit Earth's nearest neighbor.

It could happen in the decade after NASA retires the space shuttle in 2010 and begins flying a new generation of rocket booster. And it won't be a temporary visit, NASA officials and scientists said Sunday. The United States, they said, needs to focus on creating a permanent presence on the moon, using it as a training platform for missions to Mars and beyond.

"We're going back, and this time we're going to stay," S. Pete Worden, director of NASA/Ames, said in remarks opening the lunar science conference. "This is the first step in settling the solar system."

The conference, hosted by the newly created NASA Lunar Science Institute at NASA/Ames, doesn't start officially until today. Sunday's event at Moffett Field was a celebration for all those who remember exactly what they were doing on the historic day Apollo 11 landed in 1969, and for the generation who hadn't been born yet - those who might take the next steps on the moon.

officials wrestled with the philosophical and technical questions of a return to the moon, scores of kids got a chance to build and fly their own paper rockets and to re-enact their own version of an upcoming NASA/Ames robotic mission that will crash a rocket into the moon to try to discover if there is water there.
NASA also showcased a new generation of scientists, people in their 20s and even younger who are already working on reaching the moon or Mars.

Young scientists

Mary Beth Wilhelm of Fremont is just 18 and won't begin studying physics and astronomy at Cornell University until the fall. But Sunday, the NASA/Ames research assistant spoke on a panel of young NASA experts about the return to the moon.

Wilhelm noted that the far side of the moon would be an excellent place to build a radio telescope, and she weighed in the value of human explorers over robotic probes.

"A human can do in a minute what it takes a robot a day to do on Mars," she said.

American astronauts last visited the moon in 1972, and there are huge questions - both of technology and politics - about how and when astronauts will return. For now, NASA is focused on building the powerful new rocket boosters that could reach the moon and beyond.

Chris McKay, a planetary scientist at NASA/Ames working on the Constellation program - the name of the next generation of human-operated spaceflight - said the space agency needs to develop a whole new culture, along with the new hardware.

"I would argue that long-term planning has been something that NASA has not been very good at," McKay said in a speech to about 200 scientists and members of the public. "We are going to the moon to stay - and to stay means 50 years."

McKay said the return to the moon should imitate the way scientists have explored Antarctica, using an international base at the South Pole as a permanent outpost for scientific exploration.

Before NASA attempts the even more difficult, expensive and remote journey to Mars, the space agency will first have to learn how to do things like grow plants that can recycle human waste in the low-gravity, radioactive environment of the moon, he said. NASA also will need to learn more about how people function and relate in the most remote place where humans have ever lived.

On the moon, NASA can learn "how we get 10 people to live together productively on another world," McKay said.

Moment in history

But as the world's top lunar scientists begin wrestling at NASA/Ames this morning with questions ranging from what kind of astronomy could be done on the moon to the chemistry of lunar dust, the 39th anniversary of Apollo 11's touchdown was a time to remember its historical footprint.

Andrew Chaikin, whose book "A Man on the Moon" was the basis for an HBO television miniseries, asked the audience to recall the sense of wonder people felt at the Apollo voyages.

"This was something that was in the culture; science fiction was becoming reality," Chaikin said. "This was one of the great moments of the 20th century, not just the '60s."