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How Peanut Butter Lured Icahn to Yahoo!

They say that a butterfly flapping its wings in Asia can start a hurricane in West Africa.

Hurricane Carl arrived on the doorsteps of Yahoo!'s (YHOO - Get Report) offices Thursday, complete with his slate of 10 nominees to unseat Yahoo!'s entire board at the July 3 annual meeting. (And Icahn's entrance is no longer the latest twist in the Microhoo saga, as Microsoft approached Yahoo! with a new proposal on Sunday.)

The butterfly who started the chain of events that led to this is Brad Garlinghouse, a senior Yahoo! executive who penned the "Peanut Butter Manifesto" in November 2006.

Someone, not Brad himself, leaked the memo to Kevin Delaney of the Wall Street Journal and it put all of Yahoo!'s dirty laundry on the front page.

Garlinghouse wrote this memo (in the same vein as Jerry Maguire) which he sent internally to rally the troops. He criticized the company for spreading itself too thin and urged it to focus more: "We want to do everything and be everything - to everyone."

A few weeks prior to this memo's debut, I wrote a blog post criticizing Terry Semel for not be responsible for Yahoo!'s post-bubble turnaround, but as someone who was more along for the ride. Anemic traffic to my blog suddenly shot up. I also saw a wave of comments on the post from current or former Yahoo! employees agreeing with me.

The Peanut Butter memo seemed to be a cry for help. I expected that some activist hedge fund, like Icahn, Jana Partners, or Relational Investors, would be interested in Yahoo! because of its traffic, brand, and great properties overseas combined with an ineffective board and management.

They never came.

Next Yahoo! announced a December 2006 reorganization to show it was as nimble as ever. It was cosmetic. Meanwhile people kept pouring in their comments to my blog postings on what was wrong with Yahoo!, often referring to the Peanut Butter Manifesto as a final straw and suggesting action needed to be taken. I was inspired to start my own activism against the Internet giant.
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