No Fireworks at Yahoo Meeting

The annual gathering featured familiar themes, from hopeful strategies to unhappy shareholders, amid little Microsoft fallout

By Robert D. Hof

It's almost as if the past six months never happened.

Yahoo's (YHOO) much anticipated annual meeting on Aug. 1 left its current board and co-founder and Chief Executive Jerry Yang intact, in control, and still insisting they can return to contention with runaway rival Google (GOOG). Despite rampant shareholder anger that the Internet icon couldn't close any of a series of deals with Microsoft (MSFT) since the software giant's unsolicited $45 billion buyout bid Feb. 1, the long-delayed annual meeting was remarkable mostly for how little happened.

Most of that anger dissipated in late July after activist investor Carl Icahn gave up his proxy fight in return for three Yahoo board seats, including one for himself. Indeed, a year after several Yahoo directors received no-confidence votes from as many as a third of shareholders, no director this time received more than 22% "withhold" votes, which are largely symbolic. Yahoo Chairman Roy Bostock got the most, at about 22%, while 14.6% of shareholders gave Yang withhold votes and 85.4% voted for him.

Criticism from Ironfire Capital

Nonetheless, the vote still indicates that a significant portion of shareholders remain dissatisfied with Yahoo's direction. The most pointed criticisms during the meeting came from Eric Jackson, who runs a Florida-based firm called Ironfire Capital and who led a drive to oust former CEO Terry Semel last year. He called for Bostock and two other directors to step down and for Yang to give up the CEO seat to a more experienced executive. "They're basically saying, 'Believe in us,'" Jackson said after the meeting. "There are too many people who have been there too long and we need new management from outside."

Such sentiment, which was not universal but did draw a few cheers in the crowd when Jackson spoke, keeps Yahoo's board under intense pressure to raise the company's value in tangible ways. Yahoo's stock closed on Aug. 1 at 19.80, its lowest point since just before Microsoft made its unsolicited, $31-a-share bid on Feb. 1. "The heat's on Yahoo," says Jonathan Yarmis, an analyst with AMR Research.

Still, the lack of organized opposition to Yahoo's board and management was apparent at the twice-postponed meeting. Shareholders ended up filling only a fraction of the approximately 600 seats set up in a cavernous ballroom at the Fairmont Hotel in San Jose, south of Yahoo's Silicon Valley headquarters. And not all of them were angry with Yahoo.

Some Shareholders Still Loyal

At least two shareholders during the meeting praised Yahoo, in particular its resistance to Microsoft's various offers, which ranged from a full buyout to a purchase of its search operations. One shareholder before the meeting, Thomas Hillesland of San Ramon, Calif., said he was not a fan of a Microsoft buyout. "A lot of times, you lose the spirit of the original company," he said.