Microsoft has thrown its weight behind investor Carl Icahn’s effort to oust Yahoo’s board, saying a successful shareholder rebellion would encourage the software maker to renew its bid to buy Yahoo’s internet search engine, or possibly the entire company.
The unexpected endorsement gives Mr Icahn a carrot to dangle before Yahoo shareholders as he wages a campaign to replace Yahoo's nine directors at the company's annual meeting on August 1st.
It marks the first time that Microsoft has publicly sided with Mr Icahn since the billionaire investor launched his attempted coup nearly eight weeks ago.
The two sides decided they could work together after Icahn held "frequent" discussions with Microsoft chief executive Steve Ballmer and some of his top lieutenants during the past week, according to a letter that Mr Icahn sent to Yahoo shareholders yesterday.
Industry analysts said Mr Icahn now had more credibility with Yahoo shareholders because he had been arguing that a purge of Yahoo's board was the only way to salvage a deal with Microsoft.
"This breathes new life into Icahn's proposal," said Stanford Group analyst Clayton Moran. "It really pushes the power to Icahn and his board (nominees)."
The prospect that a changing of the guard at Yahoo might pave the way to a friendly deal with Microsoft lifted Yahoo shares $2.56, or 12 per cent, to finish yesterday at $23.91.
Echoing previous remarks in its battle with Mr Icahn, Yahoo questioned Microsoft's interest in buying the entire company. "If Microsoft and Mr Ballmer really want to purchase Yahoo, we again invite them to make a proposal immediately," Yahoo said.
But Mr Icahn said Microsoft did not want to risk making a bid under Yahoo's current regime, because the software maker fears Yahoo's management would make more poor decisions during an anti-trust review that would take at least nine months.
"If the current board and management team of Yahoo mismanage the company (and their recent track record is far from reassuring), Microsoft would be putting its money at risk and a great deal could be lost," Mr Icahn said in his letter to shareholders.
Agencies