May 15, 2008
Carl Icahn's Letter to Yahoo Chairman Roy Bostock
Posted by Gordon Smith

Just in case Yahoo's board of directors thought Carl Icahn was going to play nice, this is the first sentence of his letter to Yahoo Chairman Roy Bostock:

It is clear to me that the board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft.

Icahn has purchased 59 million shares of Yahoo in the mid-20s, and he would be thrilled to take Microsoft's $33/share offer. This is what I wrote about Microsoft's bid on March 4:

Here is the important thing to understand: lots of shares have changed hands since the Microsoft bid was announced, and those new buyers did not buy Yahoo because they have warm and fuzzy feelings about Jerry Yang. These new shareholders paid a premium for their shares, and they are counting on a big transaction. Yahoo's managers are facing tremendous pressure to deliver.

Carl Icahn now speaks for those shareholders when he writes:

It is unconscionable that you have not allowed your shareholders to choose to accept an offer that represented a 72% premium over Yahoo's closing price of $19.18 on the day before the initial Microsoft offer.


During the past week, a number of shareholders have asked me to lead a proxy fight to attempt to remove the current board and to establish a new board which would attempt to negotiate a successful merger with Microsoft, something that in my opinion the current board has completely botched.

So what sort of grade would Icahn receive in his business letter writing assignment? The person who taught my business writing class would have given this a B on a good day, but I think it's an A. Remember: audience, audience, audience. Icahn is only nominally writing to Yahoo's board of directors. This letter is aimed at Yahoo's shareholders. And Microsoft, to whom the message is unmistakable: Yahoo should love Microsoft. Microsoft was right, and Yahoo was wrong. Please, Steve Ballmer, come back to the party.

By the way, Icahn's nominees include Harvard professor Lucian Bebchuk, who has become increasingly active in policy and advocacy over the past few years.

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