Microsoft joins push for new Yahoo board

July 7, 2008 8:21:01 AM PDT
Microsoft Corp. threw its weight behind investor Carl Icahn's effort to oust Yahoo Inc.'s board next month, saying Monday that a successful rebellion would encourage the software maker to renew its takeover bid for Yahoo or negotiate another deal. The development gives Icahn a carrot to dangle before Yahoo shareholders as he wages a campaign to oust Yahoo's nine directors at the company's annual meeting Aug. 1.

Icahn has been arguing that a purge of the Yahoo board is the only way to salvage a deal with Microsoft - a position that the Redmond, Wash.-based software maker backed with its Monday statement.

Yahoo shares climbed $1.60, or 7.5 percent, to $22.96 in Monday's morning trading. The company had no immediate comment.

Although it stopped short of endorsing Icahn's slate of candidates, Microsoft made it clear that it didn't believe it could negotiate a deal with Yahoo's current board.

Microsoft didn't say whether it would be willing to buy Yahoo at the same price - $47.5 billion, or $33 per share - that it offered two months ago. Chief Executive Steve Ballmer withdrew that bid after Yahoo CEO Jerry Yang sought $37 per share, a height that Yahoo's stock hasn't reached in 2½ years.

After dropping its takeover bid, Microsoft tried to buy Yahoo's online search engine for $1 billion and invest another $8 billion for a 16 percent stake in Yahoo's remaining operations.

Yahoo instead opted for an online advertising partnership with rival Google Inc. that is supposed to boost its annual revenue by $800 million. That alliance faces an antitrust review by the U.S. Justice Department because Google and Yahoo combined control more than 80 percent of the U.S. search advertising market.