Yahoo's management has filed a presentation to shareholders aiming to cast doubt on Microsoft's sincerity in negotiating to buy the company, while defending its own actions.
Yahoo's board of directors face a shareholder vote on August 1 that could see them ousted if activist investor Carl Icahn has his way. The presentation offers Yahoo management's defence that their handling of the Microsoft negotiations was correct and that they should remain in their posts.
The 32-page presentation details extensive talks with Microsoft that appeared to be moving forward until an abrupt end. In fact, the timeline shows what appear to be negotiating tactics aimed at buying Yahoo without further discussion of price.
According to Yahoo's timeline, Microsoft and Yahoo representatives first met on February 26 to begin negotiations. By March, the two companies were talking about regulatory issues, but Yahoo insists it asked for information that was never delivered, a sign the internet company said shows that Microsoft was not serious about the negotiations.
On April 5, Microsoft threatened a proxy battle and a reduced price for Yahoo if the agreement wasn't concluded in three weeks on Microsoft's terms. Soon after, Yahoo sent a letter to Microsoft that it was open to a deal but not at the proposed $31 per share.
Yahoo then revealed events in the days leading up to Microsoft pulling the plug on the deal. According to Yahoo, on May 2, "Microsoft orally states that it is willing to pay $33 per share" but the "Microsoft representative tells Yahoo representative not to come back at $38". A day later, Yahoo proposed $37 per share and "Microsoft withdraws its proposal hours after the meeting".
The presentation also details why Microsoft's offer for Yahoo's search assets was not good for Yahoo, and defends management's decision to enter a deal with Google instead. Yahoo said it expects $250m to $450m in incremental operating cash flow during the first year of the Google agreement but no meaningful change in its operating cash flow or profitability in the Microsoft case, despite an offer of a $1bn up-front cash payment by Microsoft.
The Microsoft deal would put Yahoo at the mercy of Microsoft's ability to monetise search, which hasn't been competitive with Google, Yahoo said. Ultimately, the Microsoft deal would put Yahoo out of the search business. Microsoft could not immediately be reached for comment.
Yahoo spent the remainder of the presentation defending management's record and strategy to turn Yahoo into a more highly profitable company.
It also called Icahn's solution to re-enter talks with Microsoft "not the right answer". Yahoo then went on to sling mud at Icahn's investment record in a slide that shows 15 companies in which the investor has been involved with recently, most of them showing sharp declines in their share prices.