Yahoo Investors Support Board; CEO Jerry Yang Gets 85% of Votes

By Crayton Harrison and Amy Thomson

Aug. 2 (Bloomberg) -- Yahoo! Inc.'s investors threw their weight behind the Internet company's board yesterday, with 85 percent of votes supporting Chief Executive Officer Jerry Yang after he fought off a proxy fight with Carl Icahn.

Each director received at least 77 percent of the votes cast, Sunnyvale, California-based Yahoo said yesterday after its annual meeting. Icahn was appointed to the board after the vote.

The result gives Yang a boost after he drew criticism for passing up a $47.5 billion takeover offer from Microsoft Corp. Yang, who co-founded the company in 1995 and took over as CEO last year, said yesterday that Yahoo's Internet advertising strategy is on the verge of paying off.

``Yahoo still has pressure to boost its stock,'' said Colin Gillis, an analyst at Canaccord Adams Inc. in New York. While Icahn didn't get the power on the board that he originally sought, his presence ``certainly breaks the status quo.''

Chairman Roy Bostock received about 80 percent of the votes, Yahoo said. Director Arthur Kern received the lowest number, with 78 percent. About 153 million shares were withheld for Yang's re-election, Yahoo said.

The board will expand to 11 members from nine to make room for two of Icahn's nominees, part of an agreement announced last month to placate the investor. The directors will be named by Aug. 15, Yahoo said.

Yahoo, owner of the second most used Internet search engine after Google Inc., fell 9 cents to $19.80 yesterday in Nasdaq Stock Market trading. Microsoft's offer sent Yahoo as high as $29.98 in February, and the software maker at one point bid $33 a share.

`Massive Transformation'

``We are still in the middle of a massive transformation,'' said Yang, 39. ``The Internet is still the only industry, really, that's growing in advertising revenue.''

Chief Financial Officer Blake Jorgensen said Yahoo is seeing sales growth even amid the economic slowdown. Yahoo's balance sheet is ``extremely healthy'' and the company may buy back shares and make acquisitions in years to come, he said.

Bostock said yesterday that Microsoft never made its $33 a share offer in writing, calling it an ``offhand comment'' that was never communicated explicitly to the board. The software maker also didn't talk about regulatory implications of the deal, he said. Yahoo and Microsoft have sparred over what happened during the negotiations.

``Yahoo is attempting to rewrite history yet again with statements that are not supported by the facts,'' Redmond, Washington-based Microsoft said yesterday in an e-mail.

Meeting Goals

Bostock said Yahoo is meeting its goals and credited executives with ``one hell of a performance.''

Some Yahoo shareholders applauded after Eric Jackson of Ironfire Capital LLC asked for Bostock to resign if investors withheld enough votes. Bostock said he won't step down.

More than 100 shareholders attended the meeting and appeared to be outnumbered by empty chairs.

``The event of the summer was a nonevent,'' said Canaccord's Gillis, who has a ``hold'' rating on the stock. The meeting had none of the fireworks that had been expected before the Icahn agreement, he said.

Since Yang took over in June 2007, Yahoo stock is down 30 percent. The company's share of the U.S. Web-search market has dropped 4 points from 25.1 percent, according to researcher ComScore Inc. in Reston, Virginia. Analysts estimate net sales growth will slow to 10 percent this year, the fifth straight annual decline.

Kotick Departs

Director Robert Kotick left as part of the deal with Icahn, Yahoo said.

Former AOL chief Jonathan Miller, who was nominated to fill an opening, isn't allowed to work for Yahoo because he pledged not to join any of Time Warner Inc.'s competitors until next year, the media company said. Miller, 51, left AOL in 2006. Yahoo spokeswoman Diana Wong declined to comment.

Bostock told investors that Yahoo's board was in charge of the talks with Microsoft. Icahn had accused Yang of sabotaging the takeover.

``I want to make it absolutely clear to everyone that the board controlled the process of dealing with Microsoft right from the beginning,'' Bostock said. ``We called the shots and we were deeply involved in every step.''

To contact the reporters on this story: Crayton Harrison in San Jose, California, at tharrison5@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net.