Yahoo Hedges Bets, Microsoft Launches Proxy Fight

Yahoo and Microsoft continue in their tug of war for control. Yahoo wants to remain independent in spite of its financial woes. Microsoft wants a better Internet and search presence. Companies like Google, eager to beat search rivals off the playing field, continue to circle, looking for a way into the fight. Who will win? It's still anyone's game.

Yahoo made a move this week to protect its employees. This was more than just good public relations, it was essential for a company who claims to care so much about “its people”. The filing of two new severance package plans means that no matter which version of the Big Bad Wolf gains control of Yahoo, the employees won't be left holding the bag.

The new severance packages guarantee all full time employees a combination salary and health benefits for a range of time based on job level within the company. The longer an employee has been there and the higher they are in rank, the more “time” they will get paid for. This means the CEO will receive 24 months pay plus benefits, and the least senior full time employees will receive at least 4 months pay, with other employees falling in along that time line.

The timing for the severance change filing couldn't be better, as employee morale is flagging in the face of Microsoft upping the ante in their battle for control. By launching a proxy fight for Yahoo, Microsoft achieves two things: they get what they want (most likely) for a cheaper price, and they get to bring their offer past the resisting Yahoo board and into the laps of shareholders.

This means that Microsoft will save millions through a proxy bid as opposed to increasing their offer to what the board thinks Yahoo is worth. It also means a takeover is practically guaranteed, as two recent shareholder lawsuits indicated that shareholders are more than eager to turn their dud investment into a cash cow by allowing Microsoft to buy them out.

Sure, the aggressive move may drive some of Yahoo's key employees to bail out before the takeover can be completed, but Microsoft may think of that as a good thing - cleaning out the old in favor of the new. This would give them a window of opportunity to add their own mix of Microsoft loyal staff without having to fire anyone to do so. Is this a done deal? Far from it. but Microsoft is certainly aggressively closing the gap.

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