Kara Swisher

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Major Yahoo Investor Leans Toward Backing Carl Icahn Too

Microsoft’s not the only one possibly backing billionaire investor Carl Icahn in his quest to unseat Yahoo’s leadership and board–major Yahoo investor Gordon Crawford told Yahoo CEO Jerry Yang in a face-to-face meeting last week that he was seriously considering voting against Yahoo (YHOO) in the looming proxy fight.

The troubled meeting that took place last Tuesday in Los Angeles between Capital Research Global Investors’ Crawford (pictured here) and Yang–accompanied by three Yahoo board members–could be seen as a portent of what is to come at the company’s annual meeting on August 1.

And those signs are definitely not good for Yahoo’s current leaders.

At the meeting, according to several sources with knowledge of the encounter, Yang–as well as Yahoo Chairman Roy Bostock and board members Ron Burkle and Gary Wilson–strongly defended their actions thus far.

That included claiming Yahoo’s recent management reorganization was sound–despite internal unrest over it–and calling top execs who have recently left the company “MBA types,” even though several were key tech leaders.

Yang also underscored his opinion that Yahoo needed to keep its online ad search business intact with its display business, rather than sell it off to Microsoft (MSFT), although he noted the company was open to all proposals.

But Crawford and his top analysts aggressively questioned Yang’s assertions and pressed him on Yahoo’s strategy going forward.

And they indicated they had lost patience, as Yahoo shares have drifted downward in the wake of the collapse of Microsoft’s takeover attempt.

Microsoft had offered $31 a share for Yahoo and dangled a $33 price for the company, whose stock has been trading lately in the low $20s.

According to sources, Crawford told the Yahoo contingent that he was considering backing Icahn’s new board slate–although he has not yet firmly committed to it–if the company did not engage with Microsoft over some sort of deal or find a suitable alternative.

Crawford’s Capital Research Global Investors fund–one of two separately managed at Capital Research & Management–owns 6.5 percent of Yahoo, according to recent filings. Capital World Investors, which is not run by Crawford, owns 9.8 percent.

Abandonment by Crawford, an influential investor who has become increasingly and publicly disdainful of Yang and its board, means the unlikely chance that Icahn could topple Yahoo’s board and make good on his promise to throw the Yahoo co-founder out becomes a much more distinct possibility.

Of course, that got another boost today with a classic wrestling double-body slam that Icahn and Microsoft CEO Steve Ballmer perpetrated on Yang today by unveiling their own dysfunctional love match–united in hatred of current Yahoo leadership.

The move was a little sneaky and a lot crude–and mostly served to unveil just how much Microsoft dissembles about its shifting interest and non-interest in Yahoo.

But it was still an effective blow.

Wrote Icahn in an open letter to Yahoo shareholders:

“Steve made it clear to me that if a new board were elected, he would be interested in discussing a major transaction with Yahoo!, such as either a transaction to purchase the ‘Search’ function with large financial guarantees or, in the alternative, purchasing the whole company.”

Like Tweedledee to Tweedledum, Microsoft quickly followed up with its own clearly coordinated statement:

“We confirm, however, that after the shareholder election Microsoft would be interested in discussing with a new board a major transaction with Yahoo!, such as either a transaction to purchase the ‘Search’ function with large financial guarantees or, in the alternative, purchasing the whole company.”

It is a union weary Yahoo investors like Crawford might welcome.

“I never though Carl [Icahn] would really prevail,” said one Yahoo source last week. “But losing the support of a major investor like Crawford would create a very slippery slope.”

Indeed, as the stock situation has deteriorated, investors have been pressuring Yahoo and also Microsoft for weeks to engage in new talks about a sweeping search and investment deal and perhaps more.

While Microsoft has been considering a sweetened bid, it was irked by Yahoo’s recent filing that called the software giant “unresponsive and inconsistent” in its intentions toward buying Yahoo.

Yahoo has clearly been trying to make the case that Microsoft had never intended to actually buy the company.

In its own statement about the Icahn-Microsoft lovefest, Yahoo said: “If Microsoft and Mr. Ballmer really want to purchase Yahoo!, we again invite them to make a proposal immediately.”

Well, as it turned out today, Microsoft doesn’t intend to buy Yahoo now–at least from Yang.

Said Microsoft in its statement today:

“Despite working since January 31 of this year, as well as in the early part of last year, we have never been able to reach an agreement in a timely way on acceptable terms with the current management and Board of Directors at Yahoo!. We have concluded that we cannot reach an agreement with them.”

Icahn is another story, of course. For now.


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— Kara Swisher and Walt Mossberg, in their farewell D post