August 05, 2008: 09:01 PM EST
SAN FRANCISCO -(Dow Jones)- A recount showing shareholder support for Yahoo Inc.'s (YHOO) top officials was significantly less than first reported could provide ammunition for investor Carl Icahn to push for change when he joins the Internet company's board of directors later this month.
Yahoo on Tuesday acknowledged that errors by an independent intermediary in tabulating board-election votes last week resulted in an understatement of the number of votes withheld, an error that dramatically overestimated the degree of shareholder support for Chief Executive Jerry Yang and Chairman Roy Bostock.
Yahoo said that only 66% of votes were cast in support of Yang, down from the 85% it had previously announced. Bostock received a 60% favorable vote, down from 80%, while Yahoo director Ron Burkle saw his share of supportive votes fall from 81% of votes cast to 62%.
Yahoo did not respond to request for further comment.
The errors didn't change the results of the election, but the scale of the votes withheld is a significant blow for the board, which has been under fire ever since it rejected Microsoft Corp.'s (MSFT) $47.5 billion takeover bid in early May. The company is now under increasing pressure to show investors that it has a plan to grow its online advertising business and boost its slumping stock price.
"It provides ammunition for Microsoft and I think Carl Icahn will use this to his advantage," said Eric Jackson, president of Ironfire Capital, an investment firm that represents investors holding 3.2 million Yahoo shares. "I think he would be smart to push for Bostock's ouster."
Jackson, who criticized Yang and Bostock at the company's annual meeting on Friday, noted that Bostock received a smaller percentage of votes than then-CEO Terry Semel did last year. Semel resigned as Yahoo CEO six days later and eventually stepped down from the company's board in January.
Financial analysts, such as CanaccordAdams' Colin Gillis, also said the new results might give Icahn more clout in key decisions.
"The protest vote was pretty strong," agreed Clayton Moran, analyst at Stanford Group. "It sends clear message that shareholders are unhappy with current course."
Moran said the result suggested the company has two or three quarters to show meaningful progress.
Icahn launched a proxy fight to unseat the board, fire Yang and sell the company to Microsoft, but the billionaire investor and Yahoo struck a deal that granted him and two allies seats on an expanded board. They will be appointed sometime before Aug. 15.
Corporate elections in which candidates run unopposed typically produce extremely lopsided victories for incumbents. It is rare for corporate directors to see withheld vote totals beyond the single digits. Walt Disney Co. (DIS) Chairman and Chief Executive Michael Eisner was pressured to resign after about 45% of voters withheld support during a board election in 2004.
Capital Research Global Investors, which owns about 6% of Yahoo shares, demanded a recount Monday after it became convinced that its opposition to Yahoo's board wasn't accurately reflected in the results released last week.
A Capital Research spokesman declined to comment following the release of the new results.
Broadridge Financial Solutions, the firm responsible for processing shareholder votes, said Tuesday that it had made a mistake that caused it to understate the number of shares that Capital Research intended to cast against some of Yahoo's directors.
Capital Research fund manager Gordon Crawford sharply criticized co-founder Yang and Bostock in May for failing to secure a deal with Microsoft. Microsoft had sweetened its offer in May to $33 per share, but then withdrew it after Yang said he wouldn't sell Yahoo for less than $37 per share.
Yahoo shares have plummeted more than 30% since Microsoft walked away, cutting the Internet company's market value by about $20 billion.
On Tuesday, Yahoo's stock rose 44 cents to $19.82.
-By Scott Morrison; Dow Jones Newswires; 415-765-6118; scott.morrison@ dowjones.com
-By Jay Miller, Dow Jones Newswires; 201-938-2331; firstname.lastname@example.org
Tuesday, August 05, 2008
August 05, 2008: 09:01 PM EST