“When the Suits, Go Marchin’ In! When ….”

Just when it looked like the Microsoft deal was buried, here we go again. It looks like Ballmer has been talking to Icahn. Which kind of brings back memories…. Like we have said all along till the Suits are being talked to nothing would happen. Now the big question is how much is the Yahoo board in Yang’s back pocket?? –

In a letter to Yahoo’s board, Mr Icahn, said he had spoken “frequently” to Steve Ballmer, Microsoft’s chief executive, in the past week, in conversations that “lasted as long as an hour”.

Microsoft said that, with another board in place, it would be interested in discussing a deal either to assume Yahoo’s search function “with large financial guarantees” for the internet company, or to buy Yahoo outright.

The earlier offer for Yahoo’s search business, in which Microsoft would have taken over the service and paid a percentage of the advertising money it received to Yahoo, did not include any revenue guarantees for Yahoo.

Yahoo said it was open to negotiating an offer from Microsoft but that, after an overture of its own last month, Mr Ballmer had said he was “no longer interested even in the price range [Microsoft] had previously indicated.”

Turning Yahoo over to Mr Icahn so that he could sell the search business to Microsoft “at a price to be determined in a future ‘negotiation’” would not be in the best interests of shareholders, it added.

It now starts to get interesting. If Yang cannot keep the board intact then he is cooked. His hold on them is highly dependent on how much holdings many of them have in Yahoo itself. Oh and what is the comp package for Yahoo board members. They would lose all that in a Microsoft take over.

For the industry, like we have said before, its not a good deal. From Microsoft’s perspective yes they gain a search engine presence as Yahoo. That might be in doubt if rebranded as Live Search. Then the consequent brain drain as developers jump ship. Don’t forget that one. If I were a MS stockholder I might question the buy as paying a premium for something that will be highly devalued in a year.

This latest gambit might be the end of Yahoo.

Linky