Fast and furious - Yahoo protest vote pushes forward

12:19PM Wednesday May 07, 2008
By Stephen Foley

Yahoo shareholders have been pitted against the clock to organise a protest vote before an AGM deadline of May 15.

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Yahoo has given furious shareholders barely a week to organise a protest vote over its rejection of Microsoft's takeover offers, setting a 15 May deadline for putting resolutions to its annual meeting.

The tactic - after Yahoo had repeatedly delayed setting a date for the meeting, in order to thwart a hostile bid from Microsoft - added to the discomfort of shareholders still reeling from Microsoft's decision to walk away from bid talks at the weekend.

It was announced amid speculation that talks with Google, a key plank of Yahoo's defence strategy, were headed nowhere, reducing further the options available to Jerry Yang, Yahoo founder and chief executive.

Yahoo shares recovered some of their ground yesterday as shareholders bet that Microsoft still wants to acquire the company, having put a $46.5bn bid on the table during a meeting last week between Steve Ballmer, Microsoft chief executive, and Mr Yang.

The stock rose 5 per cent to $25.59, compared to the $33 Mr Ballmer had offered, and some analysts predicted the technology giant could still come back if shareholders pressure Mr Yang.

The Yahoo board, and Mr Yang in particular, were given a public tongue-lashing by Gordon Crawford, portfolio manager at Capital Research Global Investors, which owns 6 per cent of Yahoo.

Mr Crawford told the US media that he was "furious" and "disappointed" given that he, and other shareholders he had spoken to, would have been willing to sell at $34.

Mr Yang told Microsoft that $37 was his price.

Although his decision to comment in public is highly unusual, it was unclear whether Mr Crawford would join the campaign to oust the board at the annual meeting on 3 July.

Small shareholders are trying to foment a rebellion and offer a slate of new directors to take over and restart talks.

Mr Yang is under significant pressure to justify his assertion that Yahoo can once again be worth $37 a share.

However, a tie-up between Google and Yahoo - touted during the protracted talks of the past few months as one way to boost the Yahoo share price - appeared to be suddenly off the cards yesterday.

Bill Miller, fund manager at Legg Mason, Yahoo's number two shareholder, spoke out against a Google-Yahoo deal and analysts weighed in with scepticism, while both companies appeared to privately cool talk of a tie-up.

Yahoo has been exploring outsourcing the sale of adverts that appear alongside its search engine results to Google, which has a wider range of advertising partners.

Mr Miller said that this would provide a boost to cashflow but would negate the investment put into Project Panama, Yahoo's own search technology, which launched last year.

The view was echoed by Derek Brown, analyst at Cantor Fitzgerald.

"While Yahoo may reap a near-term revenue and profit windfall with Google by its side, it may, in the process, be sacrificing its longer-term vision of becoming a 'must buy' for online advertisers, while sabotaging its own hope of transforming the industry through technological leadership and integration," he told clients.

"After all, wouldn't such a deal make Google, not Yahoo, the 'must buy' for online advertisers?"

- THE INDEPENDENT

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