Disappointing results from Yahoo

Internet company Yahoo has reported worse-than-expected results for a three-month period in which it fought off a takeover approach from Microsoft.

Net income fell 18.6% to $131m (£65.8m) in the three months to the end of June.

Microsoft offered $31 a share for Yahoo in February but Yahoo has said it will only consider an offer of $37 a share.

The results came the day after Yahoo reached an agreement with Carl Icahn to stop him trying to replace its entire board at next month's annual meeting.

Mr Icahn and two of his appointees have been given seats on an enlarged Yahoo board in return for agreeing to withdraw his slate from election at the 1 August annual meeting.

Mr Icahn, who owns about 5% of Yahoo, felt that the search engine company should have accepted Microsoft's $31 a share offer - its shares closed on Tuesday at $21.58.

Another set of disappointing figures will increase pressure on Yahoo to reach a deal.

"The results, I would say, were relatively mediocre," said Ryan Jacob, a portfolio manager from Jacob Internet Fund.

"Given concerns about a slowdown in the display ad market, expectations were very low."

Yahoo rejects new break-up offer

Yahoo has angrily rejected a joint takeover offer from Microsoft and the investor Carl Icahn.

Microsoft would have bought Yahoo's search engine while Mr Icahn would have ended up with the rest of the business.

Yahoo objected to being given only 24 hours to consider the offer and there being no opportunity to negotiate the terms of the deal.

"It is ludicrous to think that our board would accept such a proposal,"

Yahoo said in a statement.

"This odd and opportunistic alliance of Microsoft and Carl Icahn has anything but the interests of Yahoo!'s stockholders in mind," Roy Bostock, chairman of Yahoo, said.

Still for sale

The proposal involved the immediate removal of the Yahoo board as well as its top management.

The statement from Yahoo repeated the offer to sell the entire company to Microsoft for at least $33 (£16.5) a share and suggested that a takeover of the entire company would be much simpler than the proposed restructuring.

Microsoft offered $31 a share for Yahoo in February. On Friday the shares closed at $23.16.

The latest offer comes weeks before Yahoo's 1 August annual meeting, when Mr Icahn will be trying to replace its board with his own slate of directors.

Mr Icahn owns about 5% of Yahoo.

Microsoft has said it is no longer interested in negotiating with the current directors, but will enter talks if a new board is in place in August.

Battle for Yahoo gets ugly as Icahn steps up attack

The battle of control for Yahoo took another nasty turn on Wednesday as billionaire Carl Icahn accused top management of the Internet giant of deceitful actions to sabotage a takeover bid from Microsoft.

In a statement released after details emerged from a shareholder lawsuit, Icahn said the "best chance" for the struggling firm would be to replace the current board and chief executive Jerry Yang to revive the Microsoft bid.

Icahn, citing details from the legal complaint, said he believes Yang and the board were deceitful in negotiations with Microsoft.

"Most importantly, Microsoft might never be able to trust a CEO and board who, while claiming to be negotiating in good faith, went behind their back and adopted a 'plan' which not only sabotages any Microsoft acquisition but went so far as to completely disable its own ability to rescind the 'plan' as long as Microsoft's offer remains pending," Icahn said.

The plan that Icahn refers to relates to an employee retention mechanism the complaint said was put in place "to sabotage a Microsoft bid," according to the statement, which was an open letter to Yahoo's board.

The plan allows Yahoo employees to leave with hefty severance payments in the event of a takeover, making a bid more expensive.

Icahn said the deal is effectively a 2.4 billion dollar "poison pill."

He said the board should "simply rescind the poison pill 'severance plan,' which would free up approximately 2.4 billion dollars and possibly even more which could be added to the bid."

The latest barbs from Icahn sets up a proxy fight at the company's annual shareholder meeting, which has been rescheduled to August 1. Yahoo's board is urging stockholders to reject Icahn's proposed slate of directors.

Icahn said last month in an open letter that Yahoo "completely botched" merger talks with Microsoft and that he was amassing Yahoo stock to oust the board of directors at the shareholders meeting.

Icahn has acquired 59 million shares of Yahoo -- around four percent of its capital -- and had formed a 10-person slate which will stand for election against the current board.

Earlier this week, details of a shareholder lawsuit unveiled in Delaware showed Microsoft offered 40 dollars a share to buy Yahoo in 2007, well above the 31 dollars proposed in January.

Microsoft says it broke off takeover talks in late April after it upped its bid by three billion dollars and Yahoo's board still wanted more.

In his latest letter to Yahoo chairman Roy Bostock, Icahn said: "I have constantly complained about how far CEOs and boards will go in order to retain their jobs, yet even I am amazed at the length Jerry Yang and the Yahoo board have gone to in order to entrench their positions and keep shareholders from deciding if they wished to sell to Microsoft."

Icahn added: "Until now I naively believed that self-destructive doomsday machines were fictional devices found only in James Bond movies. I never believed that anyone would actually create and activate one in real life. I guess I never knew about Yang and the Yahoo board."

Icahn argued that he and many other shareholders "believe that the only way to salvage Yahoo in the long if not short run is to merge with Microsoft." But he argued that "in light of Yang and the board's recent actions in response to Microsoft's overtures, it may be too late to convince Microsoft to trust Yang and the current board to run the company" during any negotiating process.

"Therefore, the best chance to bring Microsoft and Yahoo together is to replace Yang and the current Yahoo board with a board that will negotiate in good faith with Microsoft and in whom Microsoft will have trust to operate the company during the long period between signing and closing," he said.

Microsoft not interested in renewed takeover try: Yahoo chief

Yahoo chief executive Jerry Yang said on Wednesday that Microsoft is 'no longer interested' in buying the pioneering Internet firm, but is considering 'other partnerships.'

Yang also maintained that Yahoo is "not under siege" despite a threatened stockholder revolt led by billionaire corporate raider Carl Icahn.

Yang's comments came during a speech at an "All Things Digital" conference organized by the Wall Street Journal in the Southern California city of Carlsbad.

"Microsoft is no longer interested in buying the company and they are discussing various other partnerships with us," Yang said, echoing comments made the prior evening by Microsoft chief executive Steve Ballmer.

"We are listening."

Yang implied that sparring that took place between the companies while Microsoft's nearly 50 billion dollar offer was on the table has given way to talks aimed at finding a way for them to work together.

Microsoft could have taken a "much more hostile" tact and tried to oust the Yahoo board of directors that rebuffed advances by the Redmond, Washington, based software giant, according to Yang.

Yang stressed that it was Microsoft, not Yahoo, which walked away from the bargaining table.

Microsoft says it broke off takeover talks in late April after it upped its February 1 bid of 44.6 billion dollars by three billion dollars and Yahoo's board still wanted more.

Yang defended the board's handling of failed takeover talks with Microsoft and pleaded anew the case that the struggling Internet firm is poised to recapture its former glory and a bigger share of online advertising dollars.

Microsoft wanted to buy Yahoo to better take on Google, which dominates the lucrative world of Internet search and advertising.

"They definitely have an interest in Yahoo," Yang said of Microsoft. "With the right circumstances, not only price, our board is open."

Talks between Yahoo and Microsoft may be centered on letting Microsoft handle Yahoo's online advertising in the belief it can pump more cash out of the promising revenue source.

Yahoo successfully tested just such an arrangement with Google during Microsoft's takeover try.

An alliance with Microsoft, or even Google, could be a salvation for Yahoo board members facing a showdown with Icahn.

Icahn has reportedly bought a stake of more than four percent in the California firm and says he plans to oust board members he accuses of botching takeover talks with Microsoft.

Icahn has nominated a Microsoft-friendly slate, which includes him, to replace all ten Yahoo board members at elections to be held at an annual meeting in late July.

Yahoo delayed the shareholders meeting to an unspecified date because it needs time to prepare for the threatened coup attempt.

"The perception of us being a company under siege is just not accurate," Yang said as he was peppered with questions about Yahoo's future.

Yahoo's potential to make money online stretches far beyond search, according to company president Susan Decker.

Internet search accounts for only 10 percent of the space for placing online advertising, and Yahoo boasts 500 million people that routinely use its properties, which include free email and user groups.

"It's an enormous asset," Decker said at the conference. "It's undervalued. We want to do more with it."