MAJOR PAPERS:

• Corporate advertisers are not flocking to YouTube despite the fact that the video sharing site attracts one billion views a day, upsetting Google Inc's (NASDAQ: GOOG) expectations for a strong revenue stream, according to the Wall Street Journal. Total ad revenue for Google this year will be about $200M from the site, where the company is counting on growth beyond its text ads from Web searches.
• A day after Microsoft Corporation (NASDAQ: MSFT) said it would be interested in reopening talks to acquire some of all of Yahoo! Inc (NASDAQ: YHOO) if Carl Icahn's proxy battle succeeds, the Wall Street Journal reported that Yahoo! CEO Jerry Yang accused Microsoft of "trying to destabilize" the company "without a real desire to complete a deal".

OTHER PAPERS:

• The Atlanta Journal Constitution reported that Comair, a subsidiary of Delta Air Lines Inc (NYSE: DAL), is set to cut 300 pilots and 220 flight attendants from its staff. The paper said the layoffs will go into effect in September when Comair cuts its flight schedule as part of Delta's capacity cuts and will affect crew members based at Cincinnati/Northern Kentucky International Airport and New York's John F. Kennedy International Airport.

WEB SITES:

• Iran successfully test-launched a long-range version of its Shahab-3 missile, according to Iranian news service Al-Alam. The missile can reach U.S. military bases in the Persian Gulf and Israel.

There's no question that, at this point, Yahoo! (NASDAQ: YHOO) needs to partner up with some company. I didn't see the logic behind the Microsoft (NASDAQ: MSFT) interest in Yahoo! I thought then -- and still think now -- that Microsoft didn't need a big brand in the Internet portal space. It's doing fine with its own MSN.com, its operating-system monopoly and current portfolio of investments.

However, I see the merit in a deal between Yahoo! and Time Warner (NYSE: TWX). The following article discusses the possibility that Time Warner and Yahoo! are talking about a combination. Since Time Warner owns AOL, and since AOL has been transforming its business model over the last few years to capture a more advertising revenue, Time Warner would be wise to at least consider the transaction. Leveraging both brands would generate a lot of clout when it comes to advertisers, who would look at the platform as a must-buy to reach the surfing eyeballs.

There would be many other areas of synergy between the two companies and, of course, the potential to cut redundant costs. Or course, the deal would have to make financial sense and who knows if Yahoo! CEO Jerry Yang will be reasonable.

I think we'll be hearing more about Time Warner and Yahoo! in the coming weeks. However, I don't think anyone should place trades in these stocks based on deal speculation. Buy them for other reasons, but not for purposes of gambling on potential headline news.

Disclosure: I don't own any company mentioned; positions can change at any time.

The Microsoft Corp. (NASDAQ: MSFT) -- Yahoo Inc. (NASDAQ: YHOO) merger dance is not quite over yet.

In an open letter to his fellow long-suffering Yahoo shareholders, billionaire Carl Icahn disclosed that he has spoken "frequently" with Microsoft CEO Steve Ballmer; "frequently" over the past week about Yahoo. Ballmer indicated to Icahn that the world's largest software company would still be interested in doing a deal ... with one catch.

"Steve made it abundantly clear that, due to his experiences with Yahoo! during the past several months, he cannot negotiate any transaction with the current board," Icahn said. "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. He stated that Microsoft would be willing to enter into discussion immediately if the new board that has been nominated were elected."

In a separate press release, Microsoft underscored Icahn's statement, adding that despite speaking with Yahoo!'s board since last year, the company decided that it cannot reach an agreement with the current board. Can you say trial balloon?

It should be no surprise to anyone that despite all the ranting and raving to the contrary Mr. Carl Icahn, billionaire investor, shareholder white knight and corporate raider is heating up things in the Yahoo! Inc (NASDAQ: YHOO) boardroom.

It has been reported that he purchased a sizable chunk of the company in the neighborhood of $25 per share, hoping to make another fortune pushing Yahoo back to the negotiating table with Microsoft Corp. (NASDAQ: MSFT).

This morning AP reported that Jerry Yang, CEO and company are lobbying major shareholders to rally support for their position that Yahoo! should get a higher offer or stand alone as an independent company. It seems to me that they are standing on lose ground given that many large and small shareholders alike have already spoken, and they would have taken the deal.

The market has spoken as well, with Yahoo stock losing over a third of it's value recently and nearing $20 per share this morning Icahn is losing 20% of his investment as things look today. This is turning into the battle of the billionaires.

One small problem the billionaire boys in Redmond are not that hot on the deal any more because, as Gates Leaves Microsoft, he Calls Yahoo Deal Unlikely.

I think this whole saga might make a cute Neil Simon play if they would let him into the meetings to take some notes.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I do not own shares in the stocks mentioned in this story.

Jerry Yang, Yahoo! (NASDAQ: YHOO)'s CEO, and the company's chairman Roy Bostock sent a letter to shareholders defending the company's actions following the Microsoft (NASDAQ: MSFT) bid. There was nothing to defend. Those owning the web portal company's stock got slaughtered.

"Our board of directors and management made a great effort -- and conducted in-depth negotiations -- to elicit a feasible proposal from Microsoft that made strategic and financial sense for Yahoo, but without success," the executives wrote, according to The Wall Street Journal.

The comments are bogus on the face of it. Microsoft's offer got as high as $33 toward the end of negotiations. Yahoo! now trades at $22. That number almost certainly factors in two things that the market already knows. One is that Yahoo! plans to reorganize management to make the company more efficient. The other is that Google (NASDAQ: GOOG) will sell some of Yahoo!'s search ads, which should make the process more profitable.

Looking back on the entire Yahoo! and Microsoft mess, there is only one thing to remember. Yahoo! traded at $21.94 a week before the offer. It trades near the same price now. The only reason the company was ever worth more is because Microsoft needed it.

And, now that is over.

Douglas A. McIntyre is an editor at 247wallst.com.

I'm not a shareholder of Yahoo! (NASDAQ: YHOO) but I know many people who are. And, for the most part, they don't like the company's CEO and co-founder, Jerry Yang.

Isn't the CEO supposed to look out for shareholders? Yes, I'm pretty sure this is the goal of the public markets. Then again, when a visionary founder must ultimately manage a global operation, things can get messy.

Well, there's an excellent piece in the NY Times on the topic by Joe Nocera.

Yang had many chances to do a deal with Microsoft (NASDAQ: MSFT), yet, Yahoo is now left with a quirky marketing arrangement with rival Google (NASDAQ: GOOG). Ironically, such a deal is further evidence that Yahoo! is languishing in the marketplace. Although the deal may not even last long, especially in light of the antitrust implications.

No doubt, I can understand that Yang has an emotional pull with his company and its employees, but unfortunately, this can actually cloud judgment. Too often founders hire friends and keep them on board too long. Yahoo! has become a bloated organization (even though Yang said he doesn't want to become a part of Microsoft because he thinks it will lead to bureaucracy).

Something else to consider: Look at Yang's severance plan, which offers substantial benefits for departing Yahoo! employees (in the event of a change-of-control). It's a ticking time bomb, which goes beyond a typical "poison pill."

Simply put, Yang has failed his most important constituency: the shareholders. As a result, he doesn't have much credibility on a go-forward basis. When this happens, the typical outcome is that the CEO must leave.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Microsoft Inc. (NASDAQ: MSFT) was silly for offering Yahoo! ( NASDAQ: YHOO) way too much money to buy the company and finally came to it's senses.

Yahoo! was oh so silly for not accepting over $45 billion and now the stock is down 33%, ironically because the last offer from MSFT was $33 per share. I have no data on the subject, but I have to believe that this is probably one of the richest buyouts of all time to be rejected.

Then comes silly old Carl Icahn thinking he could force Jerry Yang's hand and make him sell out to MSFT at a premium to his average share price reported at $25.00. He has made some shrewd moves over the past 20 years but this does not seem to be one of them today. Instead of making millions on the upside, for now it looks like he will lose as much as he hoped to gain on the downside.

While today's index levels closed up in positive territory, that is only part of the story. The major equity index levels were far higher after the open today. Retail sales rose more than expected but the sell-off we saw earlier in oil did not hold and oil prices took the gas away from us. Fed governor Plosser's comments about "rates need to rise" didn't help matters. Below are today's unofficial closing levels:

• DJIA 12141.58 (+57.81)
• S&P500 1339.87 (+4.38)
• NASDAQ 2404.35 (+10.34)
• 10YR T-NOTE 4.205% (+0.132%)
• Major list of 52-Week Lows
• Top 10 Analyst Calls
• 2008 IPO's up 50% or more

Anheuser-Busch Companies Inc. (NYSE: BUD) shares were up almost 5% by the final minutes of trading at $61.29 after InBev confirmed a $65.00 initial buyout offer for the beer giant last night. Interestingly enough, Berkshire Hathaway, Inc. (NYSE: BRK.A, BRK.B) will have pocketed several hundred million dollars on this if you see his current holdings.

As Paul Foster wrote yesterday, The Wall Street Journal [subscription] is reporting that corporate raider Carl Icahn will seek to replace Yahoo! Inc. (NASDAQ: YHOO) co-founder and CEO Jerry Yang at the company's next shareholders meeting in early August. Although Icahn is generally outspoken and sometimes makes brash statements, he's right on this one. Here's why.

Yang created a 100-day plan in 2007 when he replaced outgoing CEO Terry Semel. It involved finding out why Yahoo! was not as successful as it should be, re-aligning priorities for profit goals and heralding that there were no "sacred cows" when it comes to Yahoo! finding its mojo again. The company -- a year later -- is floundering and has not made any progress in finding profitability growth in the face of Google, Inc. (NASDAQ: GOOG). It's unfortunate that Yahoo! is constantly compared to Google, which reigns supreme in internet search, but that is the sandbox Yahoo! is playing in.

So, if Icahn's bid to control Yahoo!'s board is successful, his first order of business would be to oust Yang, the person responsible for Yahoo!'s unsuccess in the last year and the person who torpedoed Microsoft Corp.'s (NASDAQ: MSFT) bid take over the company earlier this year. Microsoft gave up in May as Yahoo! wanted a $37 per share buyout, which would have valued Yahoo! at over $47 billion.

With information emerging about Yahoo (NASDAQ: YHOO) CEO Jerry Yang's allegedly highly irregular efforts to filibuster acquisition talks with Microsoft (NASDAQ: MSFT). Many observers, including me, have said that if the allegations are true, Yang has no business serving as CEO of the company.

Now Carl Icahn, who has launched a proxy fight for control of the company's board of directors, is joining the chorus of boos.

Icahn told The New York Times that "I don't think anybody ever understood the magnitude of what Yahoo did to do avoid making a deal ... In my opinion, you might have to get rid of Jerry and part of the board to bring back Microsoft."

In a statement, Yahoo rebuked Icahn's criticisms: "Yahoo's board of directors including Jerry Yang has been crystal clear that it would consider any proposal by Microsoft that was in the best interests of its shareholders. ... Mr. Icahn's assertions ignore this clear factual record."

Given the challenges facing the company, battling with Carl Icahn hardly seems like the most productive use of the management team's time. The company's recent performance should have put Yang on the hot seat anyway, and allegations of acting against the best interests of outside shareholders should have that seat boiling. I'd say it's a matter of when and not if Jerry Yang loses power whether that be his CEO title, seat on the board, or both.

When Yahoo (NASDAQ: YHOO) spurned Microsoft (NASDAQ: MSFT)'s offer to acquire the company last month, many shareholders were outraged. Carl Icahn has acquired a stake in the company and he's rattling the proxy fight saber. Meanwhile, Yahoo has been sued by a group of shareholders alleging that the company and its officers and directors breached their fiduciary duty in failing to negotiate in good faith with Microsoft.

Court documents unsealed in Delaware Chancery Court appear to be quite damaging to Yahoo's management. The papers show that Yahoo rebuffed a bid of $40 per share from Microsoft in January of 2007. Bloomberg quotes one of the company's more quotable shareholders, T. Boone Pickens: "Whoever's suing the Yahoo management and board of directors, if they had a $40 offer and didn't take it, they're going to want to cut their throats for being that stupid. Anybody who sued them has got a good lawsuit, I'd say. I'd hate to be on that board of directors right now.''

The shareholder lawsuit alleges that the company's CEO, Jerry Yang used his power "to delay, to refuse to negotiate in good faith and to erect roadblocks."

The complaint alleges that Yang ignored the counsel of compensation consultants in structuring change of control terms for employees, in a deliberate effort to make an acquisition difficult.

If all of this is true, Yang has got to go as Yahoo CEO. Even if it isn't true, the company's performance in recent years is pretty compelling evidence that change is needed. He is probably the number one CEO on the hot seat right now

Yahoo! Inc. (NASDAQ: YHOO) Chief Executive Jerry Yang is bound to cry "uncle" sooner rather than later.

Pressure is mounting on the co-founder of the internet portal to do something -- anything -- to boost Yahoo's moribund share price. Billionaire activist investor Carl Icahn is leading a mutiny among shareholders disappointed that the company couldn't figure out a way to reach an agreement on a deal with Microsoft Corp. (NASDAQ: MSFT). Display advertising is coming under pressure as advertisers shift spending to search or demand steep rate cuts. Board member Edward Kozel today announced his resignation, another indication of management's growing isolation.

Yahoo management is clearly hunkering down. Today, comes word that the company is delaying its annual meeting from July 3 to the end of July. Is that enough time to reach an agreement with Microsoft or a search deal with Google Inc. (NASDAQ: GOOG)? Who knows? But you can bet that the meeting will not occur until there is some "good news" to report.

Meanwhile, Microsoft Chief Executive Steve Ballmer told a technology conference in Moscow that the Yahoo acquisition was not "strategic." Hmm, then why bother doing it? Clearly, Ballmer is posturing to get a better deal with Yahoo. Having Icahn on his side certainly helps.

As for Icahn's threatened proxy fight, the key word here is "threat." The last thing that Icahn wants to do is actually run a company. Operations just aren't his thing. But as he showed with Blockbuster Inc. (NYSE: BBI), Icahn is not afraid to wage proxy contests and win them. In Blockbuster's case, he trounced management. Whether that's a Pyrrhic victory remains to be seen. Shares of Blockbuster have tumbled more than 22% this year and investors are skeptical that buying Circuit City Stores Inc. (NASDAQ: CC) will boost the video-rental firm's lagging fortunes.

So,Yahoo shareholders should hope that Yahoo figures out a way to make Icahn and his allies happy before things get much worse.

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.

MAJOR PAPERS:

• The Wall Street Journal reported that an alliance of cable, Internet and chip titans will announce plans to invest $3.2B in a company that will deliver Web access for laptops and cellphones using WiMax. The venture, valued at over $12B, includes Sprint Nextel Corporation (NYSE: S) and Clearwire Corporation (NASDAQ: CLWR) and will be backed by Comcast Corporation (NASDAQ: CMCSA), Time Warner Cable Inc (NYSE: TWC), Intel Corporation (NASDAQ: INTC) and Google Inc (NASDAQ: GOOG).
• According to people familiar with the matter, Robert Verrone, one of the most zealous commercial real-estate lenders during the industry's boom, will leave Wachovia Corporation (NYSE: WB) within the next week, the Wall Street Journal reported.

WEB SITES:

• Bloomberg reported that the Department of Justice is probing whether UBS AG (NYSE: UBS) helped clients evade American taxes. In an e-mailed statement, the firm said one senior bank employee was "briefly detained" by authorities.
• Bloomberg also reported that Vallejo, California's city council voted to go into bankruptcy. Officials said that after talks with labor unions failed to win salary concessions from police and fire fighters, the city does not have enough money to pay its bills.
• According to a rumor, TechCrunch reported that the Yahoo Inc (NASDAQ: YHOO) board of directors yesterday authorized Yahoo chairman Roy Bostock, rather than CEO Jerry Yang, to call Microsoft Corporation (NASDAQ: MSFT) CEO Steve Ballmer about re-starting negotiations.

The dust is settling after the withdrawn purchase offer of Yahoo Inc. (NASDAQ: YHOO) by Microsoft Corporation (NASDAQ: MSFT). During that fascinating process, speculation ran high as to why Steve Ballmer chose the strategy that he did. People were asking what the probable outcomes could be and what would possibly be created by the acquisition. What I have found to be lacking in the realm of the public keyboard is a synopsis of what exactly Steve Ballmer has accomplished through this seemingly fruitless process.