1. Yahoo! Run by Yahoos
Court documents unsealed on Monday indicate
used a puffer-fish defense as it attempted to fend off unwelcome overtures from a hungry
In its effort to avoid getting gobbled up, Yahoo! inflated its employee severance package, adding anywhere between $462 million and $2.1 billion to its price tag, according to the documents. These documents allege that Yahoo! was deliberately sticking it to Microsoft, which made a $44.6 billion public bid for the company on Feb. 1.
While not technically a poison pill, many on the Street, including billionaire investor and Yahoo! activist shareholder Carl Icahn, believe that the package was disingenuous and would hurt Microsoft should a buyout take place. Icahn said on
Wednesday that the package provides Yahoo! employees, an important prize for Microsoft, with incentives to leave.
Yahoo! spokesman Brad Williams told
The Wall Street Journal
Tuesday that the inflated package was designed to help Yahoo! keep "the industry's best talent." The move, along with a combination of dithering and stonewalling by CEO Jerry Yang, has helped push Microsoft away from the negotiating table. Withdrawing his offer on May 3, Microsoft CEO Steve Ballmer griped that Yahoo! wouldn't acquiesce "despite our best efforts, including raising our bid by roughly $5 billion."
Beefing up the severance package would be slick were it not so transparent. After all, for the moment Yang gets to keep his company and provide a nice cushion for his employees -- all, of course, at shareholders' expense.
To make matters worse, the court complaint also alleged that former CEO Terry Semel rebuffed a January 2007 $40-a-share offer from Microsoft. If that's true, then management has even more explaining to do, given that shares were trading below $30 then, as they have been for the past month.
A cadre of Wall Street hot shots, including Icahn and legendary oil-and-gas man T. Boone Pickens, has been yelling at Yahoo! and Yang for failing to take the Microsoft deal. On Tuesday, Icahn made clear his intention to
show Yang the door should he manage to replace the current Yahoo! board.
Uneager to face the billionaire insurrection, Yahoo! on May 23 postponed its shareholder meeting until Aug. 1.
Then on Wednesday, in a great effort to distract people with shiny things, Yahoo! President Susan Decker announced that the company is still in talks with Microsoft and has scored, among other mundane items, an advertising contract with
"I'm very cynical about many of the boards and CEOs in this country, but even I am amazed at the lengths that Jerry Yang and the board went to entrench themselves in this situation," Icahn told the
Wall Street Journal
as he announced his intent to replace Yang.
Dumb-o-meter score: 95. Yang made $1 for his services in 2007, and his severance package totals a whopping $2. Even at that piddling rate, he may be overpaid.
2. Dow-ards Drop Defamation Suit
On Monday, two former
executives admitted that Dow hadn't been lying when it accused them of trying to sell the company without permission.
Former Chief Financial Officer J. Pedro Reinhard, along with head of Dow's specialty plastics and chemicals segments Romeo Kreinberg came clean about their underhanded dealings when they settled defamation claims against their former employer.
In an April 12, 2007, press release announcing Reinhard and Greenberg's termination, Dow said the pair had gone behind management's back to sell the company to a group of Omani investors.
Chairman and CEO Andrew Liveris said at the time, "We are greatly saddened by the disrespect shown by our former colleagues." Dow proceeded to sue Reinhard and Greenberg for breach of fiduciary duty and other faux pas. The crafty execs then turned the tables with a defamation countersuit. They claimed Liveris felt threatened and used the old "They tried to sell the company while I wasn't looking" excuse to show the duplicitous duo the door.
According to court documents,
Chairman and CEO Jamie Dimon had alerted Liveris to the clandestine salesmanship. JPMorgan had been working with the buyout consortium, at first without knowing that Liveris hadn't been clued in to the deal. Kohlberg Kravis Roberts co-founder Henry Kravis had also been informally approached about joining the gang of Dow buyers but turned down the offer.
As part of the settlement, Reinhard and Kreinberg will hold on to some of the money they made while serving Dow, and the company (perhaps grudgingly) acknowledged the pair's "substantial contributions to Dow over their lengthy and illustrious careers."
Dumb-o-meter score: 93. For their part, "Mr. Reinhard and Mr. Kreinberg agree it would have been appropriate to have informed the CEO and the Board of the LBO discussions," Dow Chemical said in a Monday press release.
3. Enron's Half-Penance
Enron Creditors Recovery
, the post-meltdown version of former creative-accounting practitioner
, reported Monday that it paid out more than $6 billion in the past month to its creditors. More than half a decade after its spectacular collapse, the company has now repaid about half of what it owes, it said.
For readers with short memories, Enron has over the past decade turned from near-mythic industrial titan to legendary symbol of fraud and corporate malfeasance. The electricity, natural gas, pulp and paper and communication company collapsed in 2001. It left among the debris thousands of lost jobs, more than $60 billion in blown market capitalization and over $2 billion in demolished employee pension plans.
As part of its penance, the company paid $4.17 billion to holders of unsecured and guaranty claims on Monday. That figure was added to a May 13 payment of $1.87 billion to newly allowed unsecured and guaranty claims resulting from a settlement with
. Enron had sued Citi and 10 other banks in 2003, alleging that the bank had helped Enron hide its soggy balance sheet from creditors.
President and Chairman of Enron Creditors Recovery John J. Ray III said Enron's creditors had received "significantly more than originally was anticipated under the plan." Enron Creditors Recovery also said it has returned about $20.59 billion to creditors since 2004. That's nearly triple the original estimate, it said.
Maybe someone should go back and check the numbers. You know, just to be on the safe side.
Dumb-o-meter score: 91. C'mon. It's Enron.
4. FedEx Unties Kinko's
dropped its Kinko's surname this week in a move that vaporized one of the most recognized names in retail photocopying.
By FedEx's own account, the divorce will be costly. The shipping company announced Monday that it would be changing its name to FedEx Office, and would be taking a charge of $891 million, or $2.22 a share, largely to rid itself of the Kinko's brand. FedEx had paid $2.4 billion for Kinko's business in late 2003.
The rebranding -- or rather, de-branding -- strategy will remind customers that FedEx is about "excellent customer service, quality and reliability," the company said in a press release. Apparently, "Kinko's" had come to signify something other than excellence.
Only time will tell whether customers will take any more comfort in the idea of going to the "Office" than they did in going to "Kinko's" -- both names connote fluorescent lights and impersonal bureaucracy. It's equally uncertain, now that FedEx has dropped the Kinko's moniker, whether customers will even know that they can make copies at the rechristened stores.
To clarify matters, CEO Brian Philips said, "We are a back office for small businesses and a branch office for medium to large businesses and mobile professionals."
While customers try to figure out what happened to their least-favorite copy shop, FedEx is setting up to lose money in the fourth quarter, thanks to the impairment charges.
Dumb-o-meter score: 82. So seriously, where are we going to make copies now? At work?
5. We Ain't Heavy, We're Lehman Brothers
We're fine, it's cool, no liquidity trouble here,
appeared to say Wednesday, when
The Wall Street Journal
reported the brokerage was
"large amounts" of its stock.
On the same day, Merrill Lynch analyst Guy Moszkowski upgraded Lehman to buy, saying negativity around the name is now priced in. The actions together may have helped save Lehman from staggering declines in share price earlier in the week. The company lost more than 20% of its value, as the
on Tuesday said that the company is preparing to raise around $4 billion in capital and report its first quarterly loss since coming public.
Cynics might say that Lehman's Wednesday buyback was an attempt to stanch the bleeding as rumors and bearish proclamations from the likes of Greenlight Capital principal David Einhorn and a recent record 13% short interest pressured the stock.
Normally, a share repurchase indicates management is confident about a company's future prospects. But Lehman said it bought shares merely for stock option grants. In what may be double-reverse psychology, management appears to be downplaying what should be a bullish signal for investors.
To say the least, it's puzzling when a reputable firm buys its own stock while at the same time it contemplates issuing new equity. And Lehman's exposure to the toxic credit and mortgage markets is giving many Wall Streeters pause.
To justify his buy rating, Moszkowski said that concerns that Lehman may go the way of
are "unfounded," thanks to its access to funds provided by the
Dumb-o-meter score: 78. Talk about a buy signal!