Icahn said Thursday that he owns the equivalent of 59 million Yahoo shares and created a slate of 10 directors, including Mark Cuban and Frank Biondi Jr. All 10 of Yahoo's directors are up for re-election at the annual meeting on July 3.
Icahn has led proxy fights at companies such as Motorola Inc. and drugmaker ImClone Systems Inc., frequently pushing them to sell part or all of their businesses to help revive sagging share prices. Thursday he urged Yahoo to make a deal with Microsoft, saying the combination "is by far the most sensible path" if they want to take on Google Inc.
"The board of directors of Yahoo has acted irrationally and lost the faith of shareholders and Microsoft," Icahn, 72, said in a letter to Yahoo's board. "I sincerely hope you heed the wishes of your shareholders and move expeditiously to negotiate a merger with Microsoft, thereby making a proxy fight unnecessary."
Yahoo, based in Sunnyvale, California, climbed 44 cents, or 1.6 percent, to US$27.58 at 8:57 a.m. New York time in trading before U.S. markets opened after closing at US$27.14 Wednesday on the Nasdaq Stock Market. The stock had fallen 32 percent in the year before Microsoft's bid. Microsoft, the world's biggest software maker, gained 15 cents to US$29.93 Wednesday.
Yahoo Chief Executive Officer Jerry Yang rejected Microsoft's US$33-a-share offer this month, saying his company was worth at least US$4 more. Buying Yahoo would have helped Microsoft compete with Google in Internet searches and online advertising, a market the company expects to almost double to about US$80 billion by 2010.
Google, based in Mountain View, California, handled almost two-thirds of U.S. search queries in March. That compared with 21.3 percent for Yahoo and less than 10 percent for Microsoft, according to ComScore Inc., a market researcher in Reston, Virginia.
"For Microsoft to get involved in a proxy fight, it would have created a lot of ill will with Yahoo shareholders," said Youssef Squali, a Jefferies & Co. analyst in New York. Bringing Microsoft in later as a white knight "may turn out to be the winning strategy."
