Icahn miffed at Yahoo response; Has Google envy too

Another day another Carl Icahn to Roy Bostock letter. In this installment, our activist billionaire is annoyed by the Yahoo chairman's terse response to his previous letter.

Hmm. Maybe these folks should just pick up the damn phone.

Anyway, here's the letter. You can almost see Carl stomping around as he reads Yahoo's reply.

Dear Roy:

After reading Yahoo!'s press release put out on Friday in response to my letter of that morning, I cannot help but wonder if you even read my letter.

Again, Yahoo! keeps repeating misstatements in the hope it will convince its shareholders that these misstatements are valid. I cannot understand why the Yahoo! board feels so strongly about its "poison pill" severance plan and why it continues to refuse to rescind it. How can you continue to repeat that your severance plan is in the best interests of shareholders and employees? Indeed, Yahoo!'s own compensation advisor called the severance plan "nuts." Is it not true, as the shareholder complaint stated, that Microsoft's CEO earmarked $1.5 billion for employee retention (a benefit you neglected to tell your employees about)? Is it not better to incentivize employees to stay in their jobs than to quit? Instead of just continuing to repeat the mantra that we have made an inaccurate interpretation of your severance plan, why do you refuse to go into detail as to why our interpretation is incorrect? Additionally, a New York paper reported this weekend that "sources close to Microsoft said the severance plan was a 'big issue' when deciding what price they could pay for Yahoo!"

In your press release from Friday, you stated again that I do not have a credible plan for Yahoo! Did you even bother to read my letter, which went into great detail on what measures I would ask the new board to take? Ironically, while you keep inquiring about my plans, it is interesting to note that Yahoo!'s board has been busy reaping great compensation benefits. Indeed, you made approximately $10,000 per week last year -- not bad for a board member. I believe most of your shareholders would be interested in seeing your time sheets -- especially in light of the fact that, in my estimation, most of your so-called "plans" over the last few years have been failures. Remember the old adage -- those who live in glass houses should not throw stones. Perhaps most importantly, under my plan, I would ask the Board to bring in a talented and experienced CEO to replace Jerry Yang and return Jerry to his role as "Chief Yahoo!" It is extremely important to note that Google hired a great operator as a CEO who helped to transform the Company into a giant at the expense of Yahoo! According to publicly available financial information, while Google's income from operations grew 59% per year over the last two years, Yahoo!'s income from operations shrank 21%. What was the board doing over this period? Where was their great "plan"? I believe a new CEO with operating experience might well have had and might still have a very salutary impact on Yahoo! I ask again what your great "plan" has been over the last few years. Why did you permit Google to leave you in the dust?

I outlined a number of questions in Friday's letter. Why don't you do me the courtesy of answering my questions as I have answered yours?

Sincerely yours,

CARL C. ICAHN

Here's my one hang-up with this latest missive from our chatty billionaire. Icahn notes that Google CEO Eric Schmidt was a great operator before coming to the search giant. Today, you can't argue with the results from Schmidt, but Icahn may be reaching with this Google analogy. I remember many Novell conference calls where master operator wouldn't be used to describe Schmidt. And at Sun, Schmidt was CTO. Operation types aren't CTOs on the side. My theory with Schmidt is that he landed in a dream scenario and a perfect co-management structure with Sergey Brin and Larry Page. Schmidt is on the same wave length as Brin and Page because he's a technologist not because he's an operating chief.

Bottom line: Few other executives could have pulled off that Schmidt-Brin-Page thing and certainly not the operations wonk that Icahn seems to be advocating. Google is run by engineers and that's why the company knocked the snot out of Yahoo. But that little nuance may be lost on Icahn.