Parsing Icahn (Again): Louder, Faster, Newsier

Is Carl Icahn overplaying the theatrics? That question became even more relevant when the billionaire investor sent another public letter to Yahoo chairman Roy Bostock on Friday, with SAI's Henry Blodgett even saying Icahn is shooting blanks.

But the answer to the question is, "No, probably not."

Why? Well, as Stephen Grocer already pointed out, verbal firebombing is a critical ingredient in the Icahn formula.

But that doesn't explain why Icahn's letters and statements get such consistently strong play by the media. That coverage is actually a product of Icahn's, uh, "technique." While the heavy frequency and blustery language make it clear that he is blatantly trying to work the press to his benefit, Icahn instinctively knows how to keep his letters from being ignored. Four characteristics stand out.

1. He uses colorful language and dramatic numbers. Force-fed for years with bland corporate statements, business reporters can't resist sound-bites that actually sound like they come from a real human being. Icahn also knows the value of sprinkling big dollar figures whenever he can, making his assertions sound far more factual and newsworthy.

2. He moves the ball down the field. While Icahn frequently repeats himself, he also understands that his statements must provide something "new" to reporters, even if it is simply the rebuttal of an opponent's statement.

3. He does it quickly. He makes his noises while events are fresh, often in the same news cycle.

4. He does it himself. Icahn always attaches himself personally to the statement. It's never a statement from his company, or even one of his people. That's important, because Icahn functions as a well-established "character," who reporters, editors and readers already know as a reliable source of heavy drama.

So that's how Icahn ensures good media pick-up. But does it work?

Only when it is an augmentation of a solid deal strategy. But not when it is the strategy itself, as it seemed to be with the run on Time Warner.

Blodgett says Icahn is playing with a weak hand, which may be true. The big question is whether Bostock/Yang's hand is even weaker? While Ballmer strokes his chin, the Google boys must have giggled themselves breathless by this point.

Here's the parse.

Icahn: Dear Roy:

Translation: Dear Toy:

Icahn: While you may take issue with the content of my letter, I take issue with your oversight of Yahoo!

Translation: The theatrics will continue as long as necessary. I enjoy them.

Icahn: Again, I stand by my characterization of your "poison pill" severance plan and I find it humorous to see you attempt to defend it.

Translation: I'm famous for my sense of humor.

Icahn: Roy, it is you who "misrepresents and misstates the details" of the plan.

Translation: I will immediately rebut anything you say.

Icahn: Much like the rhetoric in many well known political campaigns, you keep repeating misstatements in the hopes that by repeating misstatements enough times it will convince your shareholders that these misstatements are valid.

Translation: Much like the rhetoric in many well known political campaigns, I will keep manufacturing "news" that will keep the focus on issues that hurt you.

Icahn: For example, you repeated, "the plan was fully disclosed at the time of its adoption and should be no surprise to anyone at this point." This is simply not true.

Translation: The plan was made public. It's obscene terms were not.

Icahn: The egregious magnitude of the dollar amount cost of the plan was never fully disclosed, nor was the email from your compensation advisor calling the plan "nuts."

Translation: By quoting a third party, I get to call you "nuts" without actually doing it myself.

Icahn: While you keep repeating that the severance plan was in the "best interests of shareholders", you neglect to mention that the financial cost of the plan could be immense. The documents obtained during discovery and released in the shareholder complaint show that Yahoo! estimates the maximum change in control severance expenses to be a staggering $2.4 billion if Microsoft bids $35 per share for Yahoo!

Translation: Billions should not be made by employees. Billions should only be made by... uh, billionaire investors.

Icahn: You neglected to mention that the true cost to an acquirer may be even higher as the perverse change in control severance incentives may diminish the work effort of Yahoo! employees.

Translation: Perverse, says I!

Icahn: In case you do not understand the plan, in addition to the $2.4 billion of severance expenses, I believe the plan will negatively impact employee behavior and degrade the ability of an acquirer to successfully integrate the acquisition. In the event of a change of control, the employee may decide not to work as hard in the hopes of cashing in on a robust severance package that awards up to two years salary and benefits, $15,000 of outplacement expenses, and accelerated vesting of stock options and restricted stock units.

Translation: In case you did not take the time to fully understand the plan, you've incentivized destructive behavior.

Icahn: To make matters worse, it is not just the acquirer firing the employee that can trigger the severance package but the employee who may decide on his or her own to resign for "good reason" at any point within two years of a change in control. It is quite obvious to me that this plan impacts the price an acquirer would pay.

Translation: To make matters worse, I'm going to debate this point over and over. It's an argument in which you lose by even participating.

Icahn: Is it any wonder that an acquirer, once fully comprehending this plan, might not wish to negotiate any further?

Translation: There was a lot of poison in that pill.

Icahn: I again call upon you to honor your fiduciary duty to your shareholders and rescind this "poison pill" severance plan.

Translation: It's about honor and duty. It has nothing to do with me turning hundreds of millions of dollars in a few short months.

Icahn: You asked, "what exactly would happen to our Company if you and your nominees were to take control of Yahoo!" I will give you my perspective on that.

Translation: Thank you for the set up. I'm now going to make things more tangible.

Icahn: First, I would work to have the board replace your "poison pill" severance plan with an acceptable alternative.

Translation: It will be strenuous work.

Icahn: Second, I intend to ask our new board to hire a talented and experienced CEO (attempting to replicate Google's success with Eric Schmidt) to replace Jerry Yang and return Jerry to his role as "Chief Yahoo". Indeed, it was much speculated that Jerry would serve in the CEO role temporarily until a permanent CEO was hired after the board asked Terry Semel to resign.

Translation: It's nothing personal against your visionary. He can hang around to give the place atmosphere. But I want an adult running the show.

Icahn: Third, I intend to ask our new board to inform Microsoft that unless any alternative transaction can insure a $33 or higher stock price (of which I am skeptical) all talks of alternative transactions are over.

Translation: Or unless it can ensure a $33 or higher stock price.

Icahn: Fourth, I will ask our new board to offer publicly to sell Yahoo! to Microsoft in a friendly and cooperative transaction.

Translation: I will shift the burden to Ballmer. He will have a hard time explaining why his $33 offer no longer makes sense. And next to my sense of humor, I'm best known for being friendly and cooperative.

Icahn: Fifth, to the extent Microsoft does not want to make a proposal, I will ask our new board do a deal on search with Google, but only if it contains termination provisions that would in no way impede a subsequent acquisition by Microsoft.

Translation: I'm almost completely dependent on Microsoft to do the rational thing.

Icahn: Now let me ask you a couple of questions, Roy:

Translation: I hope the judge doesn't reprimand me for baiting the witness.

Icahn: Why don't you, now that you have the opportunity, remove the "poison pill" severance plan that I find to be ridiculous and thereby remove a major obstacle to a Microsoft acquisition?

Translation: I'm making it clear that you have the authority to rescind the plan. It's not irreversible.

Icahn: In my opinion, Microsoft does not believe you will ever sell the entire company on a friendly basis. So why don't you stop dancing around the subject and publicly offer to sell the company to Microsoft for $34.375 per share and promise to cooperate completely?

Translation: Come out slowly, with your hands behind your head.

Icahn: Why are you still giving hope to Microsoft that there is a possible "alternative deal"? As long as there is the possibility of an "alternative deal", isn't it obvious that Microsoft will not make a bid for the whole company?

Translation: Why should Microsoft buy the cow, if it can get the milk through a much cheaper alliance?

Icahn: Sincerely yours, CARL C. ICAHN

Translation: Jerry may not like capital letters, BUT I LOVE THEM.