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Icahn Praises Yahoo-Microsoft Deal

Industry critics and angry investors have been all over Yahoo for its recently announced search deal with Microsoft, suggesting that the confusing integration of the companies' search assets coupled with the probable delays of months of lobbying and antitrust scrutiny, make it a particularly bad deal for Yahoo. As Sanford C. Bernstein analyst Jeffrey Lindsay said in a research note last week, the deal is "rather like valuing a Picasso on the cost of the canvas and the paint."

Well, activist investor Carl Icahn, who owns 5% of Yahoo, couldn't disagree more. "I think it is an excellent deal, and Yahoo CEO Carol Bartz and her team did an excellent job under the circumstances," Icahn tells BusinessWeek. "I agree with [Microsoft CEO Steve] Ballmer that the deal benefits Yahoo in that Yahoo gets 88% of the search revenues under the agreement." Icahn was a key part of the move to oust Jerry Yang as Yahoo CEO one year ago. He and other Yahoo investors were angry that Yang turned down Microsoft's $45 billion offer to acquire the company in early 2008.

Wall Street responded to the announcement of last week's search pact by sending Yahoo's stock down 14%. Icahn says he can't understand the reasoning behind criticism of the deal. "Yahoo can't afford to continue competing with giants Google (GOOG) and Microsoft," he says, adding that the deal allows Yahoo "to partner with Microsoft against Google, and allows [Yahoo] to focus more and spend more on its content business, which is a tremendous growth area [where] Yahoo has a leg up."

Read the whole story at BusinessWeek »

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