Did Icahn Sell Out in Yahoo Deal?

After months of speculation and board room wrangling, the fate of Yahoo! is officially decided. Earlier in the week, Carl Icahn and the Yahoo! board came to an agreement over the future of the beleaguered Internet portal.

Under the terms of the deal, eight members of the board will stay on including Chairman Roy Bostock, Ronald Burkle, Eric Hippeau, Vyomesh Joshi, Arthur Kern, Mary Agnes Wilderotter, Gary Wilson and CEO Jerry Yang. Robert Kotick will step down from the board and be replaced by Icahn. The board will also enlarge to include two more members for a total of 11, and both spots will be selected by the Yahoo! board from a list of nine candidates submitted by Icahn. (Source: shareholder.com)

In a statement released by Yahoo! Carl Icahn said, "While I continue to believe that the sale of [Yahoo!] or the sale of its search business in the right transaction must be given full consideration, I share the view that Yahoo!'s valuable collection of assets positions it well to continue expanding its online leadership and enhancing returns to stockholders. I believe this is a good outcome and that we will have a strong working relationship going forward."

This deep belief in Yahoo!'s ability to remain an online leader is a marked change from his statements only a few weeks ago. In a press release dated July 14, 2008, discussing a possible deal between Yahoo! and Microsoft, Icahn said, "Yahoo! would be spared the great expense of maintaining "Search" as well as having to spend billions in developing new technology to compete with Google and Microsoft -- which it is highly doubtful they would be able to do successfully. Additionally, Yahoo! would be able to avoid the great risk of seeing "Search" continue to lose market share and eventually melt away." (Source: icahnreport.com)

So, what happened between the 14th and the 22nd? Well, on his blog after the Yahoo! deal was announced, Icahn expressed concerns that a long, drawn out proxy contest was not worth the effort. It seems that in the face of those big odds against him, Icahn jumped on the spin bandwagon to proclaim that Yahoo! is an industry leader despite the fact that his company, by Icahn's own admission, is ill-equipped to compete with Microsoft and Google, Yahoo!'s two largest competitors.

As of July 23, Yahoo's stock was valued at $20.39, its lowest point since January 31, 2008. (Source: google.com)