Just throwing this up there to stir some debate here:
http://biz.yahoo.com/portfolio/08072...
So there will be no bloody coup. The knives are back in their sheathes. But it would be unwise to bet that Carl Icahn—who on Monday backed down from a proxy fight with Yahoo—is done with the war.
The next battle may even start today, after Yahoo reports its earning for the second quarter—possibly the most bruising three months in the company's 14-year history.
Yahoo has yet to find a plan to unite its balkanized properties into a coherent whole and generate steady profit growth. At the same time it is still facing distractions from a frustratingly ambivalent suitor in Microsoft and Icahn himself. And talented employees have been elbowing each other to get out the door.
In the face of all this, Yahoo is vulnerable to a slowdown in online ad spending. Investors were disappointed by Google's earnings last Thursday. And Google is better positioned than Yahoo: In tough times, advertisers favor search ads over display ads—they are more likely to reach an interested consumer—and Yahoo has long relied more on display ads.
Wall Street isn't hopeful. Cowen & Co. cut its 2009 estimates for Yahoo's earnings per share by 2 cents to 70 cents. Analyst Jim Friedland cited "near-term softness in the display market" and the likelihood that Yahoo's share of the search market will keep shrinking.
Youssef Squali at Jeffries, noting weak spending by financial and consumer advertisers, said the ambitious three-year plans for earnings growth Yahoo unveiled with such fanfare earlier this year could be "virtually unattainable."
So if Yahoo was ever going to deliver blowout earnings, the time to do so is now.
Icahn knows there's little chance for such a miracle. If he is half the legend he's made out to be, Icahn will be quietly, shrewdly biding his time, letting the rope spool out for chief executive Jerry Yang to hang himself with. If things go right, he's only a few moves away from a checkmate.
Yahoo's stock will deflate if today's earnings show weakness. They may drift below the $19-a-share price that prompted Microsoft's takeover offer in February. That would give Icahn leverage to agitate for a new C.E.O.—say, Jonathan Miller, the former AOL chief who is getting one of the new board seats.
At that point, Icahn would have much greater control over Yahoo. If he can't broker a deal with Microsoft, there are assets he can sell off: stakes in Asian entities like Yahoo Japan and Alibaba.com, valued at more than $10 billion, would just be a start.
"The nomination by Icahn of Miller is significant in that he positions him as potentially the next Yahoo C.E.O. in case a deal with Microsoft is not reached and Yahoo fails to execute against its aggressive growth plans," Squali said. "This is an insurance policy for Icahn as Miller would get aggressive about extracting shareholder value through business dealings and assets spin-off."
Such a plan isn't without risk. It skirts the question of how Yahoo can regain some of its former glory. So employees may continue to bolt for the doors, while potential business partners and major advertisers may grow jittery, preferring to work with a company with less uncertain prospects. A company like Google.
But none of this matters to a corporate raider like Icahn. He may not get the complexities of Yahoo's business, but right now he doesn't need to. He just needs a way to sell off his shares at a profit.
For Yahoo, Yang, and his defenders, a happy outcome seems much more remote. It rests on a strong earnings performance.
Without that, Icahn may yet have his way without the bloody coup he once threatened.
