Attending the Olympics as Yahoo's CEO is just one of many prideful reasons Yang could be holding onto his corner office. Now that Icahn has folded, it's unlikely he'll be voted off the board by shareholders at an upcoming annual meeting on August 1, held a week before the Olympics open. But the now-ended proxy battle explains Yang's hedging. Would he attend the events as a has-been who was beaten by Microsoft and Carl Icahn? He may be indecisive, but that choice is pretty clear.

(Photoillustration by Lou Beach/Wall Street Journal)

Today's news became a foregone conclusion when Legg Mason portfolio manager Bill Miller announced he would side with Yahoo against Icahn last week. Some were even expecting today's result as soon as Yahoo rejected Microsoft and Icahn's joint offer a earlier this month. That offer — which if accepted would have sold Yahoo's search to Microsoft and given the rest of the company to Icahn — was Icahn's fatal overreach.

Still, it's disappointing. Not because any of us hoped Icahn would walk away with control of Yahoo's board. But after six months of this saga, we all deserved a riotous, raucous Yahoo shareholders meeting. Maybe we'll still get one — but we'll miss Icahn's technological malaprops. (Illustration by Jackson West/Photo by AP/Lennihan)

Yang deserves to celebrate his victory over Icahn, but he should be more cautious. Wall Street didn't like it much when the New York Times reported he started a round of high-fives after Microsoft first withdrew its last $33 dollar per share offer to buy the entire company, and if tie-wearing, side-part-combing Silicon Alley Insider editor Henry Blodget is a fair stand-in, Wall Street wants Yang to act his age, not his ZIP code. Blodget's response to Yang's memo: "Hi, guys?' That's the address to 10,000-plus global Yahoos? Man, Silicon Valley really IS a different universe." The full transcript, below.

Hi guys.

In addition to the recent emails you’ve been getting from me, I wanted to update you on everything that we’ve been doing to fight this proxy battle on multiple fronts.

The Board, the senior leadership team, and I have been visiting with stockholders and financial industry analysts to articulate the continuing efforts to maximize the value of Yahoo!.

You’ve also probably seen the letters we’ve sent to our stockholders outlining why we believe our current Board can best represent the interests of all stockholders, and that the Icahn/Microsoft agenda threatens to destroy stockholder value.

We’ve also increasingly seen stories in the media that reflect an understanding of our position.

Today, I’m excited to tell you that we’re launching an advertising campaign online on our homepage as a way to continue to make our case to stockholders.

With one of the largest audiences on the Internet, we’re taking full advantage of the power of our network to remind our stockholders why voting for Carl Icahn’s board of directors is a bad choice.

I hope you’ll take a minute to check it out.

With all of this is going on, I know all of you have been working very hard to support our strategic objectives.

I’m incredibly proud of the unwavering focus that I’ve witnessed from so many of you in the face of the onslaught of opinions directed at our company.

In this and many other ways, I’m inspired by Yahoo! on a daily basis as you look for ways to make the experience for our users, advertisers, partners, and developers even better.

We’ll continue to keep you updated. And I look forward to talking with all of you next Wednesday at our All-Hands Meeting.

Thanks for all you’re doing for Yahoo!.

Why would respectable Web industry executives like former Yahoo COO Dan Rosensweig, former Fox Interactive boss Ross Levinsohn, or Levinsohn's partner at Velocity Interactive, ex-AOL CEO Jon Miller — the kind of names shareholders would trust — sign up with Icahn just in time to get replaced by Microsoft's Kevin Johnson? And why would they jinx their chances at a getting named to the plum job by Yang itself — a far more comfortable coronation? That's why those names never showed up in an Icahn press release. It's also why Icahn's board slate is filled by a bunch of no-names and Mark Cuban, whose feud with Yahoo is now nearing a decade in age.

So, what did Carl Icahn really do wrong? Buy his first share of Yahoo.

(Photoillustration by Jackson West; photo of Icahn by AP/Mark Lennihan)

We believe the current Board acted with care and diligence when evaluating Microsoft's offers. If Microsoft wants to acquire Yahoo, it can make the terms and conditions of its offer public. If Yahoo shareholders support it, I am confident the Board of Yahoo will accept it."

Miller's decision effectively reduces Icahn's chances of winning his proxy fight to almost zero. Which is really a shame, in a way, because after months of mealymouthed he-said, she-said, Yang only this week finally strapped on his shitkickers and had some developers do what Yahoo does best: create a website to campaign for his cause. The site's banner — a quote from Icahn that reads: "It’s hard to understand these technology companies" — mocks Icahn in a way we're used to from the Daily Show. Or maybe the Swift Boat Veterans.

• Yahoo will sell if Microsoft makes a $33 offer.
• Yahoo will sell just its search if Microsoft makes an off ther that "provides real value to our stockholders and resolves the substantial execution and operational risks associated with the separation of our search and display businesses."
• "Mr. Icahn can’t make up his mind about what he thinks will work for Yahoo!" Mostly because he's just in this for a quick buck.
• "Vote your WHITE Proxy Card"

Dear Fellow Stockholder:

The recently-formed Carl Icahn-Microsoft alliance continues to make misleading statements about their plans for Yahoo!. Your Board of Directors believes strongly that the Icahn-Microsoft agenda — as presented to us jointly last week — will destroy stockholder value at Yahoo!, serving only their very narrow special interests, clearly not your interests.

Your Board continues to work to maximize value for you and is taking the following steps to do so:

• Moving forward with our strategic plan and strategies to lead in online advertising — with both search and display;
• Preparing to implement our recently signed commercial agreement with Google that will increase cash flow;
• Continuing to explore other ways to unlock value and return value to you such as unlocking the value of our Asia assets; and
• Remaining open to negotiating a value creating transaction (including with Microsoft) that provides real and certain value — not just the possibility of value.

In contrast, let’s review Carl Icahn’s brief involvement with the Company to date.
Carl Icahn bought his stock two months ago for an estimated average cost of less than $25 per share. He is well-known as a corporate agitator with a short-term approach to his investments . His short-term approach gives Mr. Icahn a strong incentive to strike any deal with Microsoft that enables him to recover his investment and get back his money quickly, even a deal that does not provide full and fair value to you. Is that in the interests of all stockholders? Clearly, it is not.
Mr. Icahn has severely handicapped himself in his ability to negotiate a favorable transaction with Microsoft . Why?

• Mr. Icahn has made it clear that his only objective is to sell part or all of Yahoo! to Microsoft. That fact, combined with his lack of an operating plan going forward, means that he will have no leverage to negotiate a fair deal with Microsoft. He has set himself up for failure.
• Second, Mr. Icahn and his slate lack the working knowledge of Yahoo! and its Internet business needed to do two things that are required to successfully deliver a value-enhancing transaction for Yahoo! stockholders. First, they do not have the detailed knowledge to negotiate a complex restructuring of a large, innovative high technology company in a rapidly changing environment. Second, they do not have the hands-on experience to manage and lead Yahoo! during the approximately one year period estimated to be required to gain regulatory approval for a deal or to manage and lead the remainder of the Company (non-search) after a transaction is completed. Don’t take our word for that. Mr. Icahn will be calling the shots if his slate wins and yet Mr. Icahn himself told the Wall Street Journal last fall: “Technology hasn’t really been one of the things I’ve focused on too much before” and “It’s hard to understand these technology companies.” That’s why you need a knowledgeable, experienced and independent board to represent your interests vis-a-vis Microsoft.

Mr. Icahn can’t make up his mind about what he thinks will work for Yahoo! . He bought his position believing that he could bring Microsoft back to buy all of Yahoo!, at one point suggesting we publicly offer to sell Yahoo! to Microsoft for $34.375. But he didn’t do enough due diligence to determine what your Board already knew: that it was Microsoft’s decision to walk away and that it had rebuffed repeated efforts by your independent directors to get a whole company acquisition back on the table. Recognizing that a sale to Microsoft might not be an option, Mr. Icahn said as an alternative that we should enter into an agreement with Google (which we were already negotiating and subsequently signed), and that we should walk away from Microsoft’s search-only proposal (which we did after careful evaluation of that proposal). Then, in an extraordinary flip flop, Mr. Icahn teamed up with Microsoft and embraced their latest joint search-only proposal — even though it involved significant execution and operational risks and was fraught with flaws that made the “headline value” asserted by Microsoft and Mr. Icahn more illusion than reality.

How can Yahoo! stockholders trust Mr. Icahn to deliver what he claims he can deliver when his actions have been so contradictory —and when all he has delivered so far is a risky proposal of questionable value from his new friends at Microsoft? Yes, the Microsoft/Icahn proposal is somewhat of an improvement over Microsoft’s last search-only proposal, but no one should confuse a modestly improved offer with a good offer. The Icahn/Microsoft proposal was more “smoke and mirrors” than objective reality.
Now let’s turn to the recent marriage of convenience between Microsoft and Mr. Icahn.

This “odd couple” collaboration — between two parties with keenly different agendas — is indeed perplexing. Why does Mr. Icahn believe he can count on Microsoft to complete a transaction? Certainly Microsoft is a well-respected and successful company and we have been clear that we are fully prepared to do a deal with them. But Microsoft’s flip flops and inconsistencies over the past five months are so stupefying that one can only conclude that Microsoft was never fully committed to acquiring Yahoo! either because:

• Microsoft can’t decide what is and isn’t strategically important to its online business;
  or
• Microsoft is more interested in destabilizing a key competitor so that it can either enhance its competitive position or buy our highly valuable search business — and the enormously desirable intellectual property associated with it — at a bargain basement price.

Microsoft desperately needs to improve the performance of its online services business (consisting of its search and display assets) which, cumulatively since 2003, has lost money despite billions of dollars of investment. And yet Mr. Icahn would ignore this track record and its implications for his fellow Yahoo! stockholders, swallowing a deal that leaves Yahoo!’s future dependent, in part, on Microsoft’s ability to monetize search. And, as Mr. Icahn has himself pointed out , it would eliminate any opportunity we may have to sell the entire Company for an attractive premium.

In contrast to the conflicting and confusing statements emanating from the Icahn-Microsoft alliance, your Board and management have been crystal clear about our position.

First, we will sell the entire Company to Microsoft for $33 per share or more if Microsoft will negotiate a transaction that delivers certainty of value and certainty of closing . This is the simplest, most straightforward way to maximize value for you.

Second, we remain open to selling only search to Microsoft as long as it provides real value to our stockholders and resolves the substantial execution and operational risks associated with the separation of our search and display businesses .

Third, your Board takes seriously its obligation to examine all value-creating steps it could take and continues to actively examine many of these now, including a potential spin-off of our Asia assets and a return of cash to stockholders . These are steps Yahoo! could take, if we determine they are feasible and in our stockholders’ best interests, without any “help” from Microsoft or Mr. Icahn. But they are complex steps that require care and prudence. These should not be adopted simply because Mr. Icahn and Microsoft are trying to dress up Microsoft’s inadequate search-only proposal.

While your Board continues to evaluate the foregoing avenues, your current Board and management continue to execute on our strategy to grow the value of our unique collection of assets . That strategy is working and we believe it can result in substantial double digit growth in operating cash flow as we move forward. Our recently executed search advertising agreement with Google reflects our commitment to achieving our strategic goals, while preserving flexibility to pursue a sale of the Company or even, on the right terms, a sale of our search business.

Please compare and contrast the straightforward, responsible actions and positions of your Board of Directors with the behavior of Mr. Icahn and Microsoft.
There you have the situation, as we see it, put as simply and clearly as we can. We believe the Icahn slate and agenda present significant risk to your investment in Yahoo!. We believe you

cannot count on Microsoft to bail out Mr. Icahn’s misguided agenda, at least not on terms that are in the best interests of Yahoo! stockholders.

In contrast, your Board remains fully prepared to represent your interests aggressively and conscientiously in the effort to maximize value — whether that takes the form of negotiating a transaction that provides full and fair value, with certainty; finding other ways to unlock and return value to you; or moving forward with our accelerated strategies to lead in online advertising.

Your Board of Directors remains committed to maximizing stockholder value. It is — and will remain — our number one priority. Do not be fooled into thinking otherwise by Carl Icahn.

We strongly urge you to vote your WHITE Proxy Card today for your current Board of Directors.
Thank you for your support.

Roy Bostock
Jerry Yang

How low do things have to go before workers start treating their office like a public toilet? This low: A sign posted in a bathroom at Yahoo headquarters in Sunnyvale accuses employees of urinating in porcelain receptacles not meant for such output.

One Yahoo employee who photographed the sign and posted it to Flickr, Micah Laaker, blames corporate raider Carl Icahn "for allowing things to devolve so much that this is what execs, visitors, and employees now see in our corporate restrooms." Another, Zach Graves, posted the same sign to the Yahoo-owned photo-sharing site, but thinks it was just a "lame joke." Joke or not, the sign doesn't suggest Yahoos have much respect for their coworkers. (Photo by basictheory)

Yang simply does not want to sell of his search business wholesale and wants a second chance to try to revive Yahoo, with him or people picked by him and the board, despite his inability to do so thus far. He would sell Yahoo whole if that’s the only choice.

But while Yang "simply does not want to sell of his search business" Microsoft said yesterday that

Mr. Bostock called Steve Ballmer’s office to arrange a call. On that subsequent call, Mr. Bostock told Mr. Ballmer that “with substantial guarantees on the table and an increase in the TAC (traffic acquisition cost) rate, there are the pillars of a search only deal to be done.”

After hardly participating in negotiations with Microsoft at all during the first few months of this ordeal — and subsequently watching Yang blow the negotiations — Bostock now seems to be the only guy at Yahoo talking to Microsoft. Problem is, he can't convince the co-founder and CEO Yang to go along with any of his ideas. What with corporate raider Carl Icahn trying to have his way too, no wonder Microsoft wants a new Yahoo board and new Yahoo management. Microsoft CEO Steve Ballmer can be a little tyrannical, but he's no Kim Jong-il in need of six-party talks. (We would love to see him wearing the shades.)

To all the Yahoos:

To: all-worldwide@yahoo-inc.com
From: jerry
Subject: over the weekend — joint microsoft/carl icahn proposal
yahoos,
on friday evening, our board received a search and restructuring proposal from microsoft and carl icahn.
in essence, this proposal would hand over to microsoft yahoo!’s search business and the rest of the business to carl icahn. our board rejected this for a number of reasons, that boil down to a determination that this deal would be disadvantageous to yahoo! stockholders. with our annual meeting quickly approaching on august 1, i want to give you an idea of what to expect over the coming days and weeks.
proposals and attacks by microsoft and carl icahn leading up to our meeting are likely to get even more contentious.
i know this could is distracting at the very least. but i know that we can count on all of you to continue to focus on what we do best — transforming the experiences of our users, advertisers, publishers and developers. i also realize that you, and our customers and partners, may have additional questions. to address these, below is a brief faq that should help.
please be assured that the board, the management team, and i are all focused on doing what’s best for the business and our stockholders. we are prepared to let our stockholders, not microsoft and carl icahn, decide what is in their best interests. and we look forward to the upcoming vote at our stockholder meeting.
thank you for your hard work and commitment to yahoo!.
jerry
**********************
Questions and Answers for Employees
Is Yahoo!’s management now considering selling off search and splitting up the company?

• Microsoft and Carl Icahn made a joint proposal for restructuring Yahoo! which included the acquisition of Yahoo!’s search business by Microsoft.
• Yahoo!’s Board rejected the proposal, concluding that delivering our search business to Microsoft on terms that would be disadvantageous to Yahoo! stockholders does not make sense.
• We remain committed to being a principal in algorithmic and paid search and believe that financial benefits from our announced agreement with Google will allow Yahoo! to advance its ability to compete in the convergence of display and search advertising by allowing us to accelerate investment in sponsored search, display and web search businesses in parallel.

Does Yahoo! believe that being a principal in both search and display is the best way to maximize stockholder value?

• We believe that the convergence of search and display is the next major development in the evolution of the rapidly changing online advertising industry.
• Our strategies — including our recently announced agreement with Google — are specifically designed to capitalize on this convergence.

What exactly did Microsoft and Carl Icahn propose to Yahoo!?

• Microsoft and Carl Icahn jointly proposed a complex restructuring of Yahoo! that would include the acquisition of Yahoo!’s search business by Microsoft.
• The Microsoft/Icahn proposal would require the immediate replacement of the current Board and removal of the top management team at Yahoo!. The Yahoo! Board believes these moves would destabilize Yahoo! during the up to the one year it would take to gain regulatory approval for this deal.
• Yahoo!’s Board of Directors determined that accepting the proposal is not in the best interests of its stockholders.

As an employee, what can I do to support Yahoo! during this time?

• We ask that you continue to focus on what we do best — transforming the experiences of our users, advertisers, publishers and developers, all while enhancing our leadership position in the online marketplace.

Additional Customer / Partner Questions and Answers
With all the commotion surrounding the Microsoft/Icahn proposal, as a customer/partner — should I be concerned that Yahoo! is taking its eye off the ball?

• Yahoo! is very focused on continuing to provide its customers and partners with the high-quality level of service and attention that they have come to expect from all Yahoo! employees, including management.
• While this public volley can be challenging for everyone, it does nothing to change Yahoo!’s fundamental commitment to maintaining the highest standards of service.

Is Yahoo!’s management now considering selling off search and splitting up the company?

• Yahoo!’s Board rejected the joint Microsoft/Icahn restructuring proposal that would have included the acquisition of its search business by Microsoft.
• Yahoo! remains committed to being a principal in algorithmic and paid search and believes that the financial benefits of our announced agreement with Google will allow Yahoo! to advance its ability to compete in the convergence of display and search advertising by allowing us to accelerate investment in sponsored search, display and web search businesses in parallel.

What exactly did Microsoft and Carl Icahn propose to Yahoo!?

• Microsoft and Carl Icahn jointly proposed a complex restructuring of Yahoo! that would include the acquisition of Yahoo!’s search business by Microsoft.
• The Microsoft/Icahn proposal would require the immediate replacement of the current Board and removal of the top management team at Yahoo!. The Yahoo! Board believes these moves would destabilize Yahoo! during the up to the one year it would take to gain regulatory approval for this deal.
• Yahoo!’s Board of Directors determined that accepting the proposal is not in the best interests of its stockholders.

To all the Yahoos' bosses:

To: all-svps-and-above@yahoo-inc.com
From: jerry
Subject: joint microsoft/carl icahn proposal
leaders,
as you are aware by now, the board rejected a search and restructuring proposal that was brought jointly by microsoft and carl icahn. our board was given less than 24 hours to respond. we again made clear that we very much remain open to considering proposals to maximize stockholder value. i think you will agree that the opportunistic microsoft/icahn proposal is not the way to do that.
following this email to you, i will be sending an email to all yahoos which will include a brief q&a. for your use, below are a few talking points to help guide your discussions with your teams.
jerry
*********
Talking Points

• The last few months and weeks have certainly been challenging, and the waters are not likely to calm before our stockholder meeting on August 1.
• We cannot allow ourselves to be distracted by the back-and-forth with external parties.
• For this reason, it’s more critical than ever that we let our board and management focus on these external issues and keep our attention where it must be — delivering for our users, advertisers, publishers and developers.
• In this way, we each play a very significant role in the future of Yahoo!.
• This weekend the Yahoo! Board rejected a joint proposal that Microsoft and investor Carl Icahn sent on Friday evening and gave the Board less than 24 hours to respond.
• After reviewing the proposal with its legal and financial advisers, Yahoo!’s Board of Directors determined that accepting the proposal was not in the best interests of its stockholders.
• We did not believe that the joint Microsoft/Carl Icahn proposal had the best interests of Yahoo!’s stockholders in mind.
• Microsoft and Mr. Icahn are trying to dismantle the Company and deliver our search business to Microsoft on terms that would be disadvantageous to Yahoo! stockholders.
• Our Board is prepared to let stockholders, not Microsoft and Carl Icahn, decide what is in their best interests.