‘Yahoo worker plan obscene'

[hari]

Billionaire investor Carl Icahn, seeking control of Yahoo Inc, said an employee-severance policy that would make a takeover of the company more costly was `obscene' and shouldn't be legal.

The programme enacted after an acquisition bid by Microsoft Corp, boosts severance pay for workers if their jobs are eliminated after a change of control. The policy, described by Yahoo as an attempt to keep employees and enhance shareholder value, is an ``insult to your intelligence,'' Icahn said yesterday at the New York Financial Writers' Association dinner.

Icahn is fighting to revive a Microsoft takeover of Yahoo, which he called a ``a marriage made in heaven.'' The worker policy goes into effect either if a company buys Yahoo or if Icahn replaces the board, which may hamper his efforts to oust Yahoo's directors at the next shareholder meeting on Aug 1. Still, Icahn said yesterday he would continue his fight.

``Yahoo has done terribly,'' said Icahn, 72. ``The board has done an abysmal job.''

Yahoo spokeswoman Tracy Schmaler and Microsoft spokesman Frank Shaw had no immediate comments.

Microsoft, which dropped its $47.5 billion bid, last month after Yahoo demanded more money, is now exploring a deal to acquire part of the company, such as its search engine.

Yahoo's investors would be ``screwed'' by such a deal, Icahn said yesterday. Only a full acquisition would let Yahoo or Microsoft compete with Google Inc., which dominates the Internet search market. Competition with Google is ``over'' without the deal, he said.

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The companies are vying for a bigger share of the online advertising market, valued at $41 billion last year by Piper Jaffray Cos.

Yahoo based in Sunnyvale, California, dropped 18 cents to $26.40 yesterday in Nasdaq Stock Market trading. The stock has climbed 13 percent this year. Redmond, Washington-based Microsoft, down 22 per cent this year, rose 18 cents to $27.89.

Icahn has said the Yahoo employee plan would be a poison pill for a buyer, costing $2.4 billion. He also seeks to find a replacement for Jerry Yang, the company's co-founder, who became chief executive officer last year.

``I've never seen shareholders so irate,'' he said yesterday in an interview with Bloomberg Television.

Yahoo said the $2.4 billion figure, from a litigation filing against the company, was taken out of context. The actual payout may be between $514 million and $845 million, depending on what assumptions are used, Yahoo said.

Other Battles

Icahn also has pressured Motorola Inc to spin off its phone business, winning executive support for the plan earlier this year. At Biogen Idec Inc, the board is fending off Icahn's attempt to replace members and push the world's largest maker of drugs for multiple sclerosis to find a buyer.

The investor also has led fights against companies such as drugmaker ImClone Systems Inc, frequently urging them to sell part or all of their businesses to revive sagging share prices.

Icahn proposes to replace Yahoo's board with his own slate, which includes former Viacom Inc chief Frank Biondi Jr and Dallas Mavericks basketball team owner Mark Cuban.

He owned 10 million Yahoo shares and options to acquire 49 million more as of May 15. Hedge-fund manager John Paulson and BP Capital LLC Chairman T Boone Pickens are backing Icahn's plans.

Microsoft had sought the acquisition to bolster its Internet search engine, which ranks third in U.S. queries behind Google and Yahoo. Google handled almost two-thirds of Internet searches in the US in April, according to research firm ComScore Inc.

Microsoft may now try to buy Yahoo's search unit by itself, people familiar with the talks said last month. Icahn said a deal for less than the entire company would value Yahoo at less than the $33 and would ``entrench'' Yang and the board.