Parsing Yahoo: $33 Is More Than $28

Pathologically parsing statement after statement, Jack Flack was finally starting to tire of the MicroHooGleCahn affair, as the recurring statements from Microsoft, Yahoo and Carl Icahn have steadily and effectively turned the three combatants into full-blown caricatures of themselves. And, unfortunately, nothing is tougher to parody than self-parody.

But this morning, Yahoo abandoned it martyr character and put on its Carl Icahn voice, choosing to fight bluster with bluster. The net effect on the overall dialogue was minimal, as most observers of the saga have developed thick calluses on their eardrums.

But to Jack Flack's delight, the Yahoo letter offered the richest parsing material yet.

Yahoo: Dear Fellow Stockholder:

Translation: No, no, no, please don't throw this away. It's us, not Carl again.

Yahoo: The recently-formed Carl Icahn-Microsoft alliance continues to make misleading statements about their plans for Yahoo!.

Translation: The recently formed Gekko-Cyborg Axis continues to lie about their plans to destroy humanity.

Yahoo: Your Board of Directors believes strongly that the Icahn-Microsoft agenda - as presented to us jointly last week - will destroy stockholder value at Yahoo!, serving only their very narrow special interests, clearly not your interests.

Translation: Their agenda is narrowly focused on salvaging a decent return. Your interests are certainly far broader, deeper and nobler than that.

Yahoo: Your Board continues to work to maximize value for you and is taking the following steps to do so:

Translation: Your Board continues to insist that it has upheld it fiduciary duty.

Yahoo: Moving forward with our strategic plan and strategies to lead in online advertising - with both search and display;

Translation: Moving forward with our strategic plan and strategies to click our heals together three times so that we can be miraculously transported back to 2002;

Yahoo: Preparing to implement our recently signed commercial agreement with Google that will increase cash flow;

Translation: Preparing to somehow get anti-trust clearance despite Jerry's monopolistic threats at that San Jose airport meeting;

Yahoo: Continuing to explore other ways to unlock value and return value to you such as unlocking the value of our Asia assets;

Translation: Eliminating the sale of our Asia assets as something that only the new board would do;

Yahoo: ...and Remaining open to negotiating a value creating transaction (including with Microsoft) that provides real and certain value - not just the possibility of value.

Translation: ...and continuing to remind everyone that Carl cannot guarantee a deal, much a less a price.

Yahoo: In contrast, let's review Carl Icahn's brief involvement with the Company to date.

Translation: Let's shift the focus from the weakness of our plan to the even greater weakness of Carl's.

Yahoo: Carl Icahn bought his stock two months ago for an estimated average cost of less than $25 per share.

Translation: Carl Icahn bought his stock for an estimated cost of $15 per share less than Microsoft offered us 14 months ago.

Yahoo: He is well-known as a corporate agitator with a short-term approach to his investments.

Translation: We are agitated that he is capitalizing on our obvious vulnerability.

Yahoo: His short-term approach gives Mr. Icahn a strong incentive to strike any deal with Microsoft that enables him to recover his investment and get back his money quickly, even a deal that does not provide full and fair value to you.

Translation: He will sell for as little as $28 per share.

Yahoo: Is that in the interests of all stockholders? Clearly, it is not.

Translation: Is that in the interest of all stockholders? Clearly, only those who want to see $28 before 2013... if our strategic plan actually works.

Yahoo: Mr. Icahn has severely handicapped himself in his ability to negotiate a favorable transaction with Microsoft. Why?

Translation: Mr. Icahn has already negotiated a favorable transaction with Microsoft. We all know why.

Yahoo: Mr. Icahn has made it clear that his only objective is to sell part or all of Yahoo! to Microsoft. That fact, combined with his lack of an operating plan going forward, means that he will have no leverage to negotiate a fair deal with Microsoft. He has set himself up for failure.

Translation: Mr. Icahn will only get $28.

Yahoo: Second, Mr. Icahn and his slate lack the working knowledge of Yahoo! and its Internet business needed to do two things that are required to successfully deliver a value-enhancing transaction for Yahoo! stockholders. First, they do not have the detailed knowledge to negotiate a complex restructuring of a large, innovative high technology company in a rapidly changing environment. Second, they do not have the hands-on experience to manage and lead Yahoo! during the approximately one year period estimated to be required to gain regulatory approval for a deal or to manage and lead the remainder of the Company (non-search) after a transaction is completed. Don't take our word for that. Mr. Icahn will be calling the shots if his slate wins and yet Mr. Icahn himself told the Wall Street Journal last fall: "Technology hasn't really been one of the things I've focused on too much before" and "It's hard to understand these technology companies." That's why you need a knowledgeable, experienced and independent board to represent your interests vis-a-vis Microsoft.

Translation: The guy can't even write code. How could he possibly have had any success in the business world?

Yahoo: Mr. Icahn can't make up his mind about what he thinks will work for Yahoo!. He bought his position believing that he could bring Microsoft back to buy all of Yahoo!, at one point suggesting we publicly offer to sell Yahoo! to Microsoft for $34.375. But he didn't do enough due diligence to determine what your Board already knew: that it was Microsoft's decision to walk away and that it had rebuffed repeated efforts by your independent directors to get a whole company acquisition back on the table. Recognizing that a sale to Microsoft might not be an option, Mr. Icahn said as an alternative that we should enter into an agreement with Google (which we were already negotiating and subsequently signed), and that we should walk away from Microsoft's search-only proposal (which we did after careful evaluation of that proposal). Then, in an extraordinary flip flop, Mr. Icahn teamed up with Microsoft and embraced their latest joint search-only proposal--even though it involved significant execution and operational risks and was fraught with flaws that made the "headline value" asserted by Microsoft and Mr. Icahn more illusion than reality.

Translation: We detest self-servingly erratic behavior.

Yahoo: How can Yahoo! stockholders trust Mr. Icahn to deliver what he claims he can deliver when his actions have been so contradictory -and when all he has delivered so far is a risky proposal of questionable value from his new friends at Microsoft?

Translation: How can Yahoo stockholders trust anybody involved, at this point?

Yahoo: Yes, the Microsoft/Icahn proposal is somewhat of an improvement over Microsoft's last search-only proposal, but no one should confuse a modestly improved offer with a good offer. The Icahn/Microsoft proposal was more "smoke and mirrors" than objective reality.

Translation: A search-only deal has always been a bad idea. The only reason Microsoft suggested it in the first place is they thought that Jerry might actually sell the heart of the business in exchange for appearing to keep Yahoo independent.

Yahoo: Now let's turn to the recent marriage of convenience between Microsoft and Mr. Icahn.

Translation: They don't really love each other. They both married for money.

Yahoo: This "odd couple" collaboration - between two parties with keenly different agendas - is indeed perplexing.

Translation: This "odd couple" collaboration does seem to have one point of common interest: $28.

Yahoo: Why does Mr. Icahn believe he can count on Microsoft to complete a transaction?

Translation: Just because Microsoft will get a bargain and spite us?

Yahoo: Certainly Microsoft is a well-respected and successful company and we have been clear that we are fully prepared to do a deal with them.

Translation: Before we trash the people we want to convince to give us $33 per share, let us first say something vaguely positive. In fact, we'll say it in passive language, so it's clear that while Microsoft may be admired, we ourselves do not necessarily admire them.

Yahoo: But Microsoft's flip flops and inconsistencies over the past five months are so stupefying that one can only conclude that Microsoft was never fully committed to acquiring Yahoo! either because:

Translation: They've been incompetent deal-makers on purpose. And that's because:

Yahoo: Microsoft can't decide what is and isn't strategically important to its online business; or...

Translation: Microsoft cannot publicly admit that it's game-over for them in search if they don't get Yahoo; or...

Yahoo: Microsoft is more interested in destabilizing a key competitor so that it can either enhance its competitive position or buy our highly valuable search business--and the enormously desirable intellectual property associated with it --at a bargain basement price.

Translation: Microsoft is interested in further destabilizing a key competitor just enough to turn it into a key asset.

Yahoo: Microsoft desperately needs to improve the performance of its online services business (consisting of its search and display assets) which, cumulatively since 2003, has lost money despite billions of dollars of investment.

Translation: Microsoft's desperation should not be under-estimated... though we've come to learn that it should not be over-estimated either.

Yahoo: And yet Mr. Icahn would ignore this track record and its implications for his fellow Yahoo! stockholders, swallowing a deal that leaves Yahoo!'s future dependent, in part, on Microsoft's ability to monetize search. And, as Mr. Icahn has himself pointed out, it would eliminate any opportunity we may have to sell the entire Company for an attractive premium.

Translation: It's starting to become clear to us that he's just in this for the money.

Yahoo: In contrast to the conflicting and confusing statements emanating from the Icahn-Microsoft alliance, your Board and management have been crystal clear about our position.

Translation: We keep repeating we have a strategy and that we are acting in your best interest. Capice?

Yahoo: First, we will sell the entire Company to Microsoft for $33 per share or more if Microsoft will negotiate a transaction that delivers certainty of value and certainty of closing.

Translation: Even at $33, we're not making a commitment. "Certainty of value" is subjective, and "certainty of closing" can only be guaranteed by the regulators.

Yahoo: This is the simplest, most straightforward way to maximize value for you.

Translation: This is the only way to salvage that kind of value.

Yahoo: Second, we remain open to selling only search to Microsoft as long as it provides real value to our stockholders and resolves the substantial execution and operational risks associated with the separation of our search and display businesses.

Translation: Real value would require much bigger numbers. Well all now know a partial deal will never happen.

Yahoo: Third, your Board takes seriously its obligation to examine all value-creating steps it could take and continues to actively examine many of these now, including a potential spin-off of our Asia assets and a return of cash to stockholders.

Translation: ...and AOL. Don't forget AOL. They seem like delightful people. A little quiet, but delightful.

Yahoo: These are steps Yahoo! could take, if we determine they are feasible and in our stockholders' best interests, without any "help" from Microsoft or Mr. Icahn. But they are complex steps that require care and prudence. These should not be adopted simply because Mr. Icahn and Microsoft are trying to dress up Microsoft's inadequate search-only proposal.

Translation: We know you appreciate where all that care and prudence have gotten us over the past five years.

Yahoo: While your Board continues to evaluate the foregoing avenues, your current Board and management continue to execute on our strategy to grow the value of our unique collection of assets.

Translation: We are not a deer in the headlights. Think of us more as an angry possum cornered by a confused Great Dane and a hungry coyote.

Yahoo: That strategy is working and we believe it can result in substantial double digit growth in operating cash flow as we move forward.

Translation: There's no place like home...there's no place like home... there's no place like home.

Yahoo: Our recently executed search advertising agreement with Google reflects our commitment to achieving our strategic goals, while preserving flexibility to pursue a sale of the Company or even, on the right terms, a sale of our search business.

Translation: Our recently executed search advertising agreement with Google reflects our desire to buy time until after the shareholder meeting. The regulators may shred the deal, but not before August 1.

Yahoo: Please compare and contrast the straightforward, responsible actions and positions of your Board of Directors with the behavior of Mr. Icahn and Microsoft.

Translation: When you are finished, place your number-two pencil on the desk and raise your hand, so that an attendant can collect your test booklet.

Yahoo: There you have the situation, as we see it, put as simply and clearly as we can. We believe the Icahn slate and agenda present significant risk to your investment in Yahoo!.

Translation: And here you thought there were no credible characters in this farce?

Yahoo: We believe you cannot count on Microsoft to bail out Mr. Icahn's misguided agenda, at least not on terms that are in the best interests of Yahoo! stockholders.

Translation: $28. That's $5 less than $33!

Yahoo: In contrast, your Board remains fully prepared to represent your interests aggressively and conscientiously in the effort to maximize value--whether that takes the form of negotiating a transaction that provides full and fair value, with certainty; finding other ways to unlock and return value to you; or moving forward with our accelerated strategies to lead in online advertising.

Translation: We have become very open-minded people.

Yahoo: Your Board of Directors remains committed to maximizing stockholder value. It is--and will remain--our number one priority.

Translation: Have we mentioned that before?

Yahoo: Do not be fooled into thinking otherwise by Carl Icahn.

Translation: Do not -- we repeat -- do not look directly into his eyes.

Yahoo: We strongly urge you to vote your WHITE Proxy Card today for your current Board of Directors.

Translation: The WHITE CARD, not the WHITE FLAG.

Yahoo: Thank you for your support.

Translation: If you need to, you can hold your nose when you vote that WHITE card.

Yahoo: Roy Bostock, Chairman of the Board; Jerry Yang, Chief Executive Officer

Translation: The Experienced Ticket