• Silicon Alley Insider, Thursday, June 12, 2008 11:15 AM

Silicon Alley Insider's Henry Blodget is all but convinced that Carl Icahn will lose his proxy battle (and hundreds of millions of dollars) against Yahoo. Aside from the fact that the billionaire investor has no real plan other than to sell the Web giant to a company that no longer wants it, Blodget points out that things have changed for Microsoft since it lodged a $45 billion takeover bid for Yahoo in early February.

For starters, it's lost interest in the deal, possibly due to shareholder and internal pressure, but the market for online display ads has also deteriorated since then. Meanwhile, Microsoft's stock has slid 10%. That, coupled with the staunch opposition to the deal among many inside the company, makes it even less likely that the software giant would consider buying Yahoo for anything more than $30 per share, Blodget says. Microsoft CEO Steve Ballmer doesn't want to pay a price that would send company shares down even further. "And we don't see the club Icahn is going to wave to make Microsoft change this," he says.

Meanwhile, Icahn's Yahoo profit, which Blodget estimates was $120 million a few weeks ago, is shrinking fast. If Icahn were to lose the proxy battle and Yahoo fails to pull a Google deal, then Yahoo's stock price is likely to fall to the low $20s. Even if he wins the fight, Blodget thinks the best Icahn can do is a Microsoft deal for about $27-$28 per share. Ouch.

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