Back in the Roaring 1980s, Carl Icahn was known as a prototypical corporate raider as he went hostile on a myriad of old-world companies such as B. F. Goodrich and American Can.
Now, in his early 70s, Icahn hasn't slowed down much. Funny enough, these days he's targeting tech companies, like BEA, Motorola (NYSE: MOT) and, of course, Yahoo! (NASDAQ: YHOO). Hmmmm... maybe these companies have become bloated and mature -- just like the laggards of the 1980s?
Perhaps so. After all, Icahn's strategy is to agitate for change, such as for cost cutting, share buybacks and higher dividends.
As for his pursuit of Yahoo (which involves a proxy fight), it's certainly a gutsy play. Simply put, there's no guarantee that Microsoft (NASDAQ: MSFT) will come to the table again. So far, the company is doing a good job in showing disinterest.
According to internal company and agency documents, the Wall Street Journal reported that the FAA is investigating into why AMR Corporation's (NYSE: AMR) American Airlines ordered mechanics to skip specific safety instructions to detect damage to planes from potential lightning strikes.
Yahoo! Inc (NASDAQ: YHOO) is trying to quickly put the finishing touches on a search advertising deal with Google Inc (NASDAQ: GOOG) as billionaire Carl Icahn launches a proxy fight for control of Yahoo's board, according to the New York Post. Yahoo! hopes to announce a deal with Google to create an open platform system within the next week, two inside sources said.
The New York Post reported that a partnership of MGM Mirage (NYSE: MGM) and investment company Dubai World may seek to buy the Drake Hotel site from developer Harry Macklowe. If a deal is reached, MGM and Dubai World would assume $580M in defaulted debt and interest, inside sources said.
What a fabulous defense. The Yahoo! (NASDAQ:YHOO) board has written Carl Icahn about his plan to run his own slate of directors in a proxy war. The portal's governing body reasons that because Icahn was not in any of its meetings and did not attend negotiations with Microsoft (NASDAQ:MSFT) that the billionaire can't understand why Yahoo! is worth more than $33 a share.
In a letter run inThe Wall Street Journal, Yahoo! writes that the company's board "remains the best and most qualified group to maximize value for all Yahoo! stockholders."
The reasoning by the board is flawed to the bone. Whether Icahn or any other shareholder attended meetings is beside the question. Yahoo!'s value in the market before the Microsoft bid was $19. Wall Street placed that value on the company because it had repeatedly put out disappointing results. The bad numbers cost former CEO Terry Semel his job. Yahoo! has less than 25% of the US search market, and that number is falling. To argue that the board understands why the company is worth $37 a share is both arrogant and has no basis in fact.
The other part of the Yahoo! reasoning is based on the idea that management's projections for the next three years create a value for the company well beyond its current share price. This does not take into account that no one believes that Yahoo! can hit the numbers. The Paulson hedge fund, one of the largest shareholders in the portal company, has already said it will back the Icahn bid. So have other owners of the company's stock.
Yahoo!'s board cannot simply dismiss arguments about the value of the company because it has talked in private and come up with higher numbers. "If wishes were horses, all the beggars would ride."
Douglas A. McIntyre is an editor at 247wallst.com.
Well, maybe Icahn can save them from themselves. Who? Yahoo!'s board of course.
Seems Carl Icahn, whom earlier reports had considering moving in on Yahoo! Inc. (NASDAQ: YHOO)'s board, has made a decision. The billionaire activist investor, who has amassed some 50 million shares of the internet portal company to a 3.6% stake, is planning "to move ahead with plans to run a dissident board slate at Yahoo," according to Reuters.
A Reuters source said that already he has lined up at least 12 potential board candidates and could announce the slate as early as tonight, ahead of Thursday's deadline.
It's not just that Yahoo! has so offhandedly rejected Microsoft Corp. (NASDAQ: MSFT)'s attempts to buy it, but it's also -- and probably mainly -- the way the company has been managed for some time now. It's not just Jerry Yang, the current CEO, but his predecessor Terry Semel as well. Yahoo! has been behind the curve in technology and trend, not only losing market share in search, but mainly failing to capitalize on its assets and the traffic they generate.
Already following the early reports today, Yahoo shares finished the day up 2.18%. Now, in after-hours it's gaining another 1.5%. Yahoo! investors seem to put their trust in Icahn.
Recently I posted a Serious Money metrics story that included Microsoft Corp. (NASDAQ: MSFT) and Yahoo Inc. (NASDAQ: YHOO) comparisons along with six other stocks. Until now I have not felt very strongly about the merits of Microsoft's offer to acquire Yahoo! and merge assets and features.
I was leaning toward the price is too high camp, but now, after Microsoft has withdrawn the offer and I have looked at the current state of affairs of both companies, I think it did the right thing and may have avoided a nightmare.
To bring Yahoo! into the fold, Microsoft would have had to find enough cost savings by eliminating overlapping departments or it would have had to hope it could double Yahoo's earnings. If not, the acquisition would unduly weigh down the mother ship, because Microsoft's P/E Ratio of 17.08 is half that of Yahoo!'s 34.25.
When you look at the ROE,Microsoft (NASDAQ: MSFT) -- with its 45.28% -- has a four times greater return than that of Yahoo Inc. (NASDAQ: YHOO)'s 10.96%. Yahoo looks like another drag.
By saying "no" to Microsoft (Nasdaq: MSFT)'s buyout bid, Yahoo! (NASDAQ: YHOO) thought there would be no more distractions.
Maybe not.
Yahoo! now has a new pesky shareholder -- Carl Icahn, the shareholder activist -- who according to CNBC has accumulated a 50 million share stake in Yahoo. And it looks like Icahn is putting together a proxy fight.
Icahn loves to battle senior managers and boards. He has been doing this for decades, and seems to get better and better (and the deals get bigger and bigger).
He has a huge war chest (his personal fortune). He also has his own hedge fund, and more importantly, he has lots of credibility with the Street.
Icahn won't take any excuses from Yahoo!'s CEO, Jerry Yang. If anything, he's going to make Yang's life miserable, so as to pad his pockets.
In other words, just when it seemed things couldn't get more interesting, the Yahoo! saga has been elevated to a new level... of excitement.
For the past year, Circuit City (NYSE: CC) has done a nice job short-circuiting its shareholders. But lately, there has been hope.
In fact, today the company essentially said it's "in play" for a sale. That is, it will allow Blockbuster (NYSE: BBI) – which has expressed buyout interest – to check out the books.
Although, it helped that billionaire activist investor, Carl Icahn, has been pushing for a deal. In a letter to Circuit City, he said he'll write a check to buy the company if Blockbuster can't come up with sufficient financing.
Yet, the question lingers: does a combination makes sense? After all, both Circuit City and Blockbuster are ailing. So why would a merger of two duds turn into a great entity? I seriously doubt it's something that frightens the folks at Best Buy (NYSE: BBY).
Then again, Circuit City may really be allowing itself to be sold to another player. For example, the company put an end to its proxy fight with Wattles Capital Management, which got three board seat. Oh, and Circuit City has retained Goldman Sachs (NYSE: GS) to explore strategic alternatives.
Thus, for the most part, Icahn is playing his typical role as the instigator. Keep in mind that he can be pretty tough to negotiate with – especially when you're selling your company to him.
And, so far in today's trading, Circuit City's shares are up 8%.
Miller has built his reputation as a "firefighter" brought in to fix serious problems at deeply troubled companies. He got his start as the CFO at Chrysler where he signed ten thousand documents in one sitting for the loan guarantees that brought the company back from the brink. His career later took him to Olympia & York Developments Ltd., Bethlehem Steel, Morrison-Knudson, Federal-Mogul, Waste Management, and Delphi, where he currently serves as chairman.
His accounts of these struggles are interesting, but the most compelling reading comes when Miller talks about the more prominent people his career has brought him into contact with. This description of Carl Icahn alone is worth the price of admission:
Icahn was uniquely creative in his demands. He was impatient with the board's decision and would bully us to do things his way ... In face to face meetings he gave everyone whiplash. One moment he'd bellow, "That's the stupidest goddamn thing I ever heard heard," and the next he'd put his arm around you. He's effective, I think, because people become so traumatized that they wind up suffering from Stockholm syndrome and will do anything to please him.
His description of Lee Iacocca's decline caused by ego also serves as an interesting cautionary tale.
If you enjoy reading about business history, you'll like this book. And here's the best part: it's a book about management that's generally devoid of cliches and trite platitudes.
It's easy to understand why Blockbuster's (NYSE: BBI) out-of-nowhere bid for Circuit City (NYSE: CC) has been greeted with such skepticism: it's one of the most patently moronic business stories in recent months. And given the subprime mess, that's saying a lot.
The New York Times quotes a number of analysts, all of whom expressed substantial skepticism about the Circuit City deal. Most just don't see the point. Some worry that such a large deal will distract Blockbuster management from the task of restructuring its struggling core business.
Lehman Brothers analyst Douglas Anmuth has a creative take on it, pointing out that Netflix (NASDAQ: NFLX) could be the ultimate beneficiary of the deal: "The extensive use of both financial and management resources by Blockbuster throughout this process could be positive for Netflix as Netflix continues to focus on growing its subscriber base."
I'm not so sure about that, but I would look at it this way: how confident can Blockbuster be about its future as a stand-alone company if it's trying to pour its resources into such a bizarre acquisition?
Carl Icahn has said he is willing to step in as the financier of last resort if no one else will finance the deal, which seems like a good bet. Given the status of the credit markets, I can't see any bank rushing in to finance this universally maligned deal.
But questions remain about Icahn's offer. What are the terms? The publicly available details are vague.
Whether the deal will get done is anyone's guess. I'll leave Circuit City to the arbitrageurs, but I'd stay away from Blockbuster. This drunken-sailor grabbing the arm of another drunken sailor bid looks desperate -- and may indicate that Blockbuster's management is far less confident about its future with or without Circuit City than it's been letting on.
When Blockbuster (NYSE:BBI) said it would buy Circuit City (NYSE:CC), it may not have occurred to many on Wall Street that the movie rental company did not have the money to do the deal.
Surprise.
According toThe Wall Street Journal, "Concerns about Blockbuster's methods for financing a bid contributed to a sharp fall in the company's shares when it announced its move last week." Blockbuster investor Carl Icahn may help put up some of the capital and there is cash on the Circuit City balance sheet.
Part of the argument for Circuit City being a good buyout target is because its shares are down more than 40% in the last six months. Those who bother to look at a stock chart will see that Blockbuster shares are down by the same amount during that period. Circuit City now has a market cap of $740 million. Blockbuster's is only $605 million.
All of this data is simply data. The biggest reason for Blockbuster to drop its bid is that, if it has not been able to fix its own company, how does it expect to fix Circuit City?
Douglas A. McIntyre is an editor at 247wallst.com.
After Blockbuster (NYSE: BBI) announced its bid for Circuit City (NYSE: CC) in the $6-8 range this morning, Circuit City replied in a press release that "to date Blockbuster has been unable to satisfy Circuit City and its advisors that Blockbuster's proposal could be financed."
Now the Wall Street Journal is reporting (subscription required) that "Mr. Icahn, a Blockbuster director whose companies own about 16% of Blockbuster's Class A shares, has agreed to backstop Blockbuster's rights offering if it cannot obtain the financing elsewhere, according to Circuit City investor Mark Wattles."
All of this raises an interesting question: has Mr. Icahn gotten daft? Blockbuster shares are down more than 16% on the news of this offer, strong evidence that, rightly or wrongly, Icahn is seeing something investors don't.
In any case, Icahn's backing removes one big stumbling block from this deal's path, as there is no question that he has the resources to make it happen. Even so, at its current price of $5.08, Circuit City is trading at a wide discount to the $6-8 offer contemplated in the letter. Perhaps people think King Icahn will change his mind.
"Carl Icahn - one of Wall Street's most renowned and successful investors - is on another mission; this pitbull is sinking his teeth into one of the companies in our portfolio - Enzon Pharmaceuticals (NASDAQ: ENZN)," notes Marc Lichtenfeld.
In Xcelerated Profits Report, the senior analyst and noted healthcare sector expert takes a look at the small cap biotechnology, which is involved in developing products for the treatment of cancer.
"With an infamous reputation for diving into stocks that he perceives as undervalued and shaking up management teams in order to boost shareholder value, Icahn us one of the best 'business partners' we could have.
"One of the big reasons why we recommended Enzon was because some major institutional investors are clamoring for change at the company. They contend that if Enzon was better at maximizing its true potential, the stock could easily vault from its current undervalued state and generate some real wealth for its shareholders.
"Well, it's finally happened; under mounting internal and external pressure, Motorola (NYSE: MOT) has spun off its handset business," says technology stock expert Gregg Early.
This move, he notes, developed after Carl Icahn came in, picked up about 6% of the company, and wanted to shake things up. Here's Gregg's update from his industry-leading The Real Nanontech Investor.
"Motorola's handset division has been lost in the desert since the successful launch of the Razr a couple years ago. Since then, it's lost market share and has been less than imaginative in developing new mobile handsets. This kind of product pipeline strangulation isn't unusual at Moto.
"In the 1990s, the company almost went under because it couldn't quite figure out how to exploit all the great work it was doing in its labs. Getting products to market seems to escape this company.
"It looked like mobile phones were a sector where Moto could make big inroads, and the 'lab to fab' pipeline was working very well-for a few years. Now the No. 2 mobile phone maker is No. 3, having lost its spot to relative newcomer Samsung. And even No. 3 isn't secure if something doesn't happen quickly.
"This has been one of activist investor Carl Icahn's claims regarding the company. Moto is sitting on piles of cash; it has a world-class R&D program, and apparently no one who wanted to do anything bold or even businesslike with either.
The Wall Street Journal reported that private loans under the Federal Family Education Loan, or FEEL, program have begun to give way to the federal direct loan program, as private lenders run into subsidy cuts and problems raising capital. To date about 60 colleges and universities have made the switch.
Carl Icahn, a 6.3% Motorola Inc (NYSE: MOT) shareholder, has sued the company to get board of director documents, turning away offers of two board seats, the Wall Street Journal reported. Icahn wants information about the company's unprofitable handset business.
According to the Business Review, New York State Senator Charles Schumer is planning to 'reveal details' of a conversation he had with the CEO of Advanced Micro Devices Inc (NYSE: AMD) on March 21 about the company's plans to build a $3.2B computer chip plant in Saratoga County.
If you are a longtime shareholder of Time Warner Inc. (NYSE: TWX), you are very patient indeed. You can count me among you, and you can count a thousand times we've had carrots dangled in front of us that gave us hope we would see some nice gains in our shares.
I am pondering why I am still hanging on. My cost basis was $12.10 and we sold half our shares in the low $20's amid the flurry of news about Carl Icahn, share buy backs and breaking up the company. I sold some stock and he sold some stock, I kept some shares and he kept some shares. Mine are of little consequence except to me. His are of the utmost importance to everyone.
As long as Carl still has some hope, should we? TWX is trading around $14 these days. This is a story of a company going nowhere fast. It has been improving AOL over the past few years and the site is very good in my estimation. But that does not seem to be producing much growth.
As AOL improves, so do the competitors and to a large part the status quo continues. From my perspective, the Web business is just a spending game where the stakes keep increasing but the rewards are not always tangible. (Disclosure: AOL is the mothership for BloggingStocks.com which by many metrics has been very successful, but our success has limited impact on AOL's overall revenue).
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