Yahoo Defends No-Sale Decision

A letter to shareholders sent yesterday defends Yahoo's decision to reject Microsoft’s acquisition offer saying it would have put the Internet company at a competitive disadvantage for years to come. Yahoo's refusal to do a deal with Microsoft launched billionaire activist investor Carl Icahn to buy enough shares of the company to support a proxy battle for control of Yahoo’s board.

CEO Jerry Yang and Chairman Roy Bostock sent the letter to shareholders as the company prepares a broad reorganization, according to The Wall Street Journal. Yahoo, expected to announce details of the company’s reorganization tomorrow, will reportedly consolidate  product management and then align those managers with sales teams.

The letter told shareholders that a deal with Microsoft would have been Yahoo at a competitive disadvantage Yahoo is preparing to introduce what Yang and Bostock called "bold plans" at its annual shareholder meeting being held August 1.

In the letter, Yang and Bostock said the deal with Microsoft would have tied their hands in Microsoft’s favor. Microsoft would have received veto power over any potential sale of the company and locked it into a 10-year exclusive search arrangement.

“Our board of directors and management made a great effort -- and conducted in-depth negotiations -- to elicit a feasible proposal from Microsoft that made strategic and financial sense for Yahoo, but without success,” the letter stated. Icahn had accused Yang of sabotaging the deal with Microsoft, according to the WSJ.

The letter also defended Yahoo's deal with Google. Yang and Bostock intend for Yahoo to become “the ‘starting point’ for most users on the internet.”