Icahn Should Hang It Up: Activist

From the moment he launched his proxy fight last year, after Yahoo! turned down Microsoft's $34 a share verbal offer, investors were skeptical of Icahn. They perceived him as a quick flip artist wanting to juice the stock from $23 to over $30, without technology experience to effectively advise the company as a director.

Because he lacked support from institutional investors, Icahn knew his proxy fight might fail to get any of his nominees elected when put to a vote. Therefore, he accepted three seats on the board as a compromise. If you can't win against the wildly unpopular Yahoo! board after making a mess of the Microsoft negotiations last year, what does that say?

Icahn says he helped select Carol Bartz for the top job. Really? Wouldn't Jerry Yang have done it anyway? After all, it was Jerry who offered Terry Semel the top job in 2001. It was Jerry who got to be CEO in 2007, when he told his board he wanted it. And, it was Jerry who knew Carol from Cisco's(CSCO Quote) board and, by Carol's account, offered her the job.

Icahn's friend, Frank Biondi, got to hitch a ride on to Yahoo!'s board on Icahn's coattails. Biondi also joined Yahoo!'s compensation committee and approved Bartz's employment contract. This is the contract that will pay Carol $187 million for four years of work, if she hangs around that long, maxes out her possible annual bonuses, and if Yahoo!'s stock price rises above $25 for 20 consecutive trading days before 2016. That's a good deal for Carol -- not so great for Yahoo! shareholders.

We know that Icahn Partners' investors didn't get a great deal on Carl's involvement with Yahoo! over the last year. However, Icahn, Biondi, and Chapple seem to have done pretty well. According to Yahoo!'s proxy filing, the day these three men were elected to the Yahoo! board, Yahoo! gave each an option to purchase common stock with a grant data fair value of about $250,000 and restricted stock units with a grant date fair value of about $200,000.

This half-a-million-dollar payment went to them personally. Nowhere in the filing does it say that this money went back to Icahn Partners, which funded the expenses related to the proxy contest -- which most estimate cost at least $1 million.

In that same proxy filing, Yahoo! disclosed that, last year, "transactions in the ordinary course of business between the Company and entities for which the following directors served as an executive officer, employee or substantial owner, or an immediate family member of an executive officer of such entity" included "Mr. Icahn". No more information is given, but it would be interesting to know just what transactions were conducted, with whom, for how much, and for what services.

To most outsiders, it appears as though Icahn was summarily ignored by the parties around Yahoo! before and after he was elected to the board. He assumed that he could force a shotgun marriage between Microsoft and Yahoo! He assumed his initial $23-a-share investment could be quickly goosed to $32 or higher. He was wrong.