And the Yahoo Plot Thickens

Just when you thought the Yahoo vs. Microsoft, Microsoft vs. Yahoo, shareholders vs. Yahoo saga had finally come to a whimpering close.

First, I thought, OMG! Then, with the shareholder vote re-count that Yahoo is now providing, it became just ugh.

Yahoo Shareholder Meeting
Yahoo Shareholder Meeting

The quick background: I, like so many others covering this thing, was surprised -- deeply surprised -- that Yahoo's board of directors received an overwhelming amount of support from investors, even though so many had expressed deep dissatisfaction with their performance. Even more surprising -- that chairman Roy Bostock actually saw his support increase from last year's levels when 34 percent of Yahoo investors withheld their support from him. This year, only about 20 percent did so, at least according to those initial results.

So here we are today, with news of "voting irregularities" that makes Florida look like a joke. Word is that Capital Research voted most of its 15 percent stake in Yahoo against CEO Jerry Yang and Bostock. This means, based on the results that Yahoo published originally, that every single other shareholder would have had to have voted their shares in favor of the two. Sure, I was surprised at the results, but that finding would be absolutely jaw-dropping given the travails of the past five months.

Shareholder Eric Jackson, who only personally holds about 100 Yahoo shares, but represents interests with 3.2 million Yahoo shares, wrote about all this on his bloglast night. I spoke with Eric extensively at the meeting -- yes, he was actually in attendance, unlike Gordon Crawford (Capital Research), Bill Miller (Legg Mason), and Carl Icahn (well, Carl Icahn!) who are the major outside shareholders who didn't bother showing up -- and he was just as agitated then as he was last year when he went after then CEO Terry Semel. He writes about the voting shenanigans on his blog, and says roughly 200 million votes mysteriously went missing.

This is a good read: he says only 1,046,095,584 votes out of a possible 1,381,008,071 votes were counted. He writes:

"I call on Yahoo! to immediately appoint a third-party to review and then report back to shareholders exactly how all the 1.4 billion shares outstanding on the June 3rd record date were voted during this election. If the results truly indicate that this board was re-elected, shareholders can and will accept that. But Yahoo! shareholders expect and deserve to know exactly how their shares were voted with accurate numbers."

Well, Eric got his wish late today, and it's a big problem for Yahoo. Yes, the board was re-elected, but the new numbers Yahoo is providing hardly translate into the board mandate I and others conferred upon them after those preliminary results were released on Friday. As an example, instead of an "increase" in support from last year, chairman Roy Bostock saw a significant decline in support, with nearly 40 percent of shareholders withholding their support; board member Ron Burkle originally enjoyed only 18.8 percent support withheld. That number swelled to 37.9 percent. CEO Jerry Yang? Originally it was reported that only 14.6 percent of votes were withheld. Tonight, that figure has blossomed to a stunning 33.7 percent. Gary Wilson went from 18.2 percent withheld to 27.7 percent instead; Arthur Kern: 22.1 percent to 31.7 percent. The complete vote count and update can be found in this link.

The tabulations were done by Broadridge Financial Solutions.

As you might expect, those following all this, particularly in the Microsoft camp, tell me they are "outraged." One told me tonight it's the "the bastardization of (the M&A) process," and asked, "If (Capital Research's) Gordy Crawford didn't complain, would there be a review of the vote? (Yahoo) had five days of press that said the board had all sorts of support. It's a big, big mistake."

A mistake, some in the Microsoft camp tell me, that speaks directly to Yahoo's credibility and why Microsoft ultimately walked from the deal. One source close to Microsoft tells me the company never trusted the numbers it was getting from Yahoo. That was a fact brought home by Yahoo's refusal to acknowledge Microsoft's higher offer, that would take the bid ultimately to $47.5 billion. Something that Roy Bostock again disputed on Friday when he went back over the timeline of the negotiations between the two, saying there was never a higher bid in writing, and why the talks ultimately failed. Microsoft released a statement Friday saying Bostock's statements were another attempt by Yahoo at "revisionist history."

I don't get it. Did Yahoo think no one would notice? That 200 million votes could somehow be hidden? That Gordy Crawford wouldn't notice, or complain? If this were a simple tabulation error (is there such a thing? I guess we should check with the registrar in Palm Beach), then fine. Mistakes happen. But Yahoo ought to step up and say something, rather than merely offer the new, updated numbers with little explanation as to what went wrong. Be indignant! The shareholders who voted, and who are now counted, deserve at least that.

But if this were something nefarious, and the board thought it could get away with it, then they're more deluded than any of us covering the company thought they were.

In the meantime, I have to believe the former until I'm given evidence of the latter. Either way, it's a shame: just when all of us so exhausted covering the day to day vagaries of all this thought we could move on, that Yahoo thought it could finally get down to business? Well, I guess we can't. And neither can Yahoo. At least not yet.

Questions? Comments?