Court Sheds New Light on Microsoft-Yahoo Dealings

04 June 2008

SUNNYVALE, California: What began as an interesting takeover tussle between two technology titans, is developing into an altogether more intriguing tale with the unveiling of legal papers pertaining to the Microsoft/Yahoo saga.

A Delaware court's ruling to publish parts of a shareholder complaint - filed last month after the Microsoft withdrew a $47.5 billion (€30.4bn; £24.1bn) offer for the web portal - has revealed that the latter's ceo, Jerry Yang, pushed for an employee severance program that made a potential takeover more expensive.

The plan guaranteed a mix of cash and stock payments to all 13,800 Yahoo employees if they were either laid-off or quit after being reassigned to a new job within two years of a Microsoft acquisition.

It would have cost the software business more than $2 billion had it bought the ailing Yahoo, and the lawsuit contends the plan created "huge incentives for a massive employee walkout," an obstacle to any potential deal.

Yahoo was understandably disappointed with the court's decision to publish the papers, but insists the lawsuit's allegations are without merit, according to spokesman Brad Williams.

The company believes the severance program was necessary to retain and attract staff and "in the best interests of shareholders and employees".

The revelations could add considerable grist to the mill of interventionist shareholder Carl Icahn as he plans his strategy to oust the entire Yahoo board at next month's annual meeting.

In addition, the papers shed light on a previous, higher offer Microsoft made for the internet firm in January 2007 that was rejected and not made public.

Data sourced from International Herald Tribune and Adweek (USA); additional content by WARC staff