Sat, Jul 19, 2008 - Page 9 News List

Yahoo fate hogs talks at mogul summer camp


“Do you let the fox in the henhouse?”

So asked Jerry Yang (楊致遠), Yahoo’s co-founder and chief executive, as we chatted for more than an hour one afternoon last week at Allen & Co’s annual conference here.

The fox in question, of course, is Carl Icahn, the activist investor who is trying to oust Yang and the Yahoo board so he can sell the company to Microsoft.

“I don’t mean to impugn anyone’s personal integrity,” Yang quickly added.

So let it never be said that Yang lacks manners.

Yahoo — and Yang’s fate — were Topic A at the annual billionaires’ summer camp, as rival moguls gossiped about whether Yahoo would end up in the hands of Microsoft.

While Yang casually smoked a cigar on a Thursday evening last week outside of the bar with Richard Parsons, the chairman of Time Warner — who himself battled Icahn two years ago — the debate was raging at virtually every table.

“There won’t be a deal. There are bad personal feelings,” proclaimed Rupert Murdoch of the News Corp, who lost his wedding ring that night and got down on all fours — along with half a dozen other mogul types — to search for it. (They didn’t find it.)

Another mogul, a longtime friend of Yang’s, took the opposite view: “He’s a goner.”

What almost no one here knew was that behind the scenes, Icahn had been conducting an extraordinary round of secret negotiations with Microsoft CEO Steve Ballmer, the result of which was yet another Microsoft offer for Yahoo. The new bid from Microsoft and Icahn spilled into public view last Saturday evening. Yahoo quickly rejected it.

For good reason. The deal was so ridiculous — it called for Yahoo to sell its search business to Microsoft and for Icahn to take over the board of what was left of the company after assets were spun off and dividends paid out — that when the moguls here started to learn the details, it actually began to change the perception of Yang’s predicament.

Think about it: “What global company in their right mind formally teams up with Mr Icahn?” as one invitee asked.

Icahn may be a brilliant investor but let’s be honest, he doesn’t use a computer, let alone know how to run Yahoo. And what does it say about Microsoft? The notion that Yahoo’s board would sell the crown jewel, its search business, to Microsoft and then hand over the scraps of the company to Icahn is, as Roy Bostock, Yahoo’s chairman, said, “absurd and irresponsible.”

The war of words continued with Icahn firing back on Monday: “I have yet to see a company distort, omit and twist events and facts in the manner that Yahoo has done.”

Separately, Microsoft claimed its proposal “did not include changes to Yahoo’s governance,” though that’s exactly what its partner, Icahn, was calling for.

Yang may once have looked like an entrenched founder unwilling to sell the company, but now it is Microsoft that has those in the deal-making world wondering about its judgment.

“At this point, it’s embarrassing,” one technology CEO whispered just out of earshot of Bill Gates. “Ballmer should either buy the company or forget it.”

To the other moguls, it appears as though Microsoft doesn’t have the courage of its convictions and doesn’t even really seem to know how to proceed.

“If Microsoft called to buy your company, would you call them back?” a media executive asked, incredulously.

Google CEO Eric Schmidt echoed that view.

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