- The Washington Times - Thursday, May 22, 2008

SAN FRANCISCO (AP) — Yahoo Inc. today postponed a looming showdown for control of its board, giving itself more time to prepare a defense — or negotiate a sale to Microsoft Corp. that would cause activist investor Carl Icahn to call off the mutiny.

The showdown pitting the slumping Internet pioneer’s board against Icahn and other unhappy shareholders was supposed to come to a head at the Sunnyvale-based company’s July 3 annual meeting.

But Yahoo is dragging out the drama by pushing the meeting back to an undetermined date in late July, according to a filing with the Securities and Exchange Commission.

This is the second time Yahoo has postponed its annual meeting, usually held in May or June. The previous delay, announced in March, gave Yahoo more time to explore alternatives to Microsoft’s unsolicited takeover bid, which was withdrawn this month in a pricing disagreement.

Spurred by shareholders upset with Yahoo’s board’s handling of Microsoft’s last offer of $47.5 billion, Icahn has nominated a slate of candidates to replace the current directors — a process known as a proxy contest.

Two other unidentified shareholders intend to nominate themselves to become Yahoo directors, the company disclosed today. A third shareholder plans to submit another opposing sale of directors, according to Yahoo. The company said it believes these three shareholders haven’t met the rules for nominating alternate candidates, meaning they could be disqualified at the annual meeting.

Yahoo already has lost one director with the resignation of Arthur Kozel, whose departure was disclosed today in a separate SEC filing.

Kozel, a former Cisco Systems Inc. executive who was on Yahoo’s board for eight years, had been planning to step down since February so he could move his family to Europe, the SEC filing said. Yahoo doesn’t plan to replace Kozel, leaving its board with nine members.

The postponement of Yahoo’s annual meeting “raises a lot of interesting questions,” said Claudia Allen, a Chicago lawyer specializing in corporate governance issues.

“It could be that they are exploring some other potential transactions, with the most likely one being some sort of deal with Microsoft that satisfies Mr. Icahn,” Allen said.

In its SEC filing, Yahoo said it needs more time to prepare and obtain SEC approval for all the material it plans to file in the upcoming proxy battle.

Icahn didn’t respond to a request for comment about Yahoo’s postponement.

Microsoft and Yahoo have acknowledged they have renewed talks about a possible transaction with Yahoo since Icahn mounted his challenge, although both companies say the discussions so far haven’t included another attempt by Microsoft to buy Yahoo in it entirety.

The two sides had previously parted ways after they couldn’t agree on a sale price, prompting Microsoft Chief Executive Steve Ballmer to withdraw an offer to buy Yahoo for $47.5 billion, or $33 per share. Yahoo CEO Jerry Yang — speaking on behalf of the board — wanted $37 per share, or about $52 billion.

Microsoft has reportedly proposed buying Yahoo’s search technology — an idea that has been panned by many analysts as impractical. The Redmond, Wash.-based software hasn’t ruled out another attempt to buy Yahoo’s entire business in a marriage that Icahn is trying to make happen.

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