Carl Icahn, who took a large stake in Yahoo! (YHOO) along with board seats, has started to sell his shares. He seems to have come to the same conclusion that Wall St. has. The Yahoo! restructuring is a failure and it not likely to get any better. Icahn has sold about 13 million share in a few days.
Ichan invested in Yahoo! in the hope that the company would be sold to Microsoft (MSFT) for something close to the $33 that the world’s largest software company offered over a year ago.
Icahn gambled that even if there was no sale that Yahoo! could get a rich deal to combine its search engine business with Microsoft’s. All Yaho0! got was a modest contract with Microsoft and the portal company’s shares have fallen over the last three months while much of the tech and internet sectors have done well in the stock market.
Yahoo! is really left with only one business now that Microsoft has begun to manage its search operations. That business is display advertising which has been badly hurt by the recession. There is some evidence that display will not make a strong recovery when the downturn ends. Search is almost universally regarded as a more efficient way to reach customers online.
Yahoo! gambled that it could remain independent and bring in new management to tap the firm’s unrealized potential. Unfortunately, the potential was never there.
Douglas A. McIntyre
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