How Peanut Butter Lured Icahn to Yahoo!

The thing that stuck in the craw of most Yahoo! investors wasn't the shock of Microsoft's abrupt termination of the talks two weeks ago, it was a New York Times article. The day after talks broke off, the Times reported that: "People close to Yahoo said that Mr. Yang and his team greeted Microsoft's decision as a victory. High-fives were exchanged Saturday afternoon when they learned Microsoft was backing down."

People close to Yahoo! have sworn to me that this absolutely never happened. But we're not talking about a rumor reported on Joe's Tech Blog here; this is the New York Times. I've spoken to Times reporter Miguel Helft about this detail and he stands by the paper's reporting. Be prepared to hear a lot about high-fives and peanut butter in the next few weeks.

Icahn will get a lot of support from the retail investors and the recent hedge funds and merger/arbs who have piled in to this stock in the past 10 days. John Paulson has already thrown his 50 million Yahoo! shares behind the dissidents.

Icahn's greatest challenge is going to be convincing some of the larger, more skeptical shareholders like Bill Miller of Legg Mason(LM Quote) and the other larger institutional players that he will get them a better price and not weaken Yahoo!'s negotiating position with Microsoft(MSFT Quote). Some have also said he doesn't have enough people with Internet experience on his slate.

In Icahn's first battle with Motorola(MOT Quote) last year, although he got support from several investors (including Brian Posner, who used to run ClearBridge Advisors and is now one of Icahn's nominees for the Yahoo! board), it wasn't enough to get elected. He's got a more enraged shareholder base this time around with Yahoo!, and he's running against a board that's delivered a big fat goose-egg in shareholder returns for the past 4 years. However, he's got to deliver a compelling case for how he and his team will create more shareholder value with or without Microsoft. He can't just run a campaign on the mistakes of the existing board (although there are many).