With a growing number of investors demanding a sale to Microsoft Corp. [MSFT], embattled web search engine Yahoo! Inc. [YHOO] on Thursday, May 16, rejected Carl Icahn's attempts to seize control of the company's board and force a deal.

In an open letter to Icahn, who launched a proxy battle on Thursday, Yahoo! chairman Roy Bostock said the activist investor had revealed a `` significant misunderstanding'' about the Microsoft talks in his letter earlier in the day.

Icahn revealed that he was seeking to invest as much as $2.5 billion in Yahoo! stock and began a proxy fight to have his own slate or 10 directors elected to the company's board. He and some other investors want the company to reopen talks with Microsoft, which earlier this month withdrew it $47.5 billion offer for the company.

For the full story, go to TheDeal.com

Spending a billion dollars and finding 10 friends to run as candidates for Yahoo! Inc.'s board of directors was fairly easy for Carl Icahn. Things get tricky now.

With his announcement Thursday, May 15, that he had formed a slate to stage a proxy fight for control of Yahoo!, Icahn served notice that the company has some more explaining to do for allowing Microsoft Corp. to walk away from its $33 a share, $47.5 billion takeover offer.

In a news release announcing his slate of candidates for Sunnyvale, Calif.-based Yahoo!'s board, Icahn disclosed he has purchased 59 million shares, or 4.2% of the outstanding shares, with a current value of $1.6 billion and has sought clearance from the Federal Trade Commission to acquire up to $2.5 billion worth of Yahoo! stock. He criticized Yahoo! for acting "irrationally" in rejecting Microsoft's offers, saying it was "unconscionable" that it did not allow shareholders the opportunity to accept its offer.

For the full story, visit TheDeal.com

The announcement Thursday that IAC/InterActiveCorp [IACI] unit Ask.com will buy Lexico Publishing Group LLC was chock full of data about its target's strong and growing reach. Lexico, which owns the very popular Dictionary.com, Thesaurus.com, and Reference.com domain names, has a growth rate that is three times that of the global search market, Ask.com said, and will make Ask.com the ninth-largest Web property in the world, ahead of even Facebook Inc.

But there were a few problems with this announcement, including some of the data that Ask.com left out, namely its less impressive ranking in the market -- search -- that it is supposedly serving. As this story and others that were underwhelmed by the Lexico purchase stress, Ask.com holds a fifth-place ranking in search, behind not only Google Inc. [GOOG], Yahoo! Inc. [YHOO] and Microsoft Corp. [MSFT] but also Time Warner Inc.'s [TWX] AOL.

And the company appears to have a confused strategy -- or at least a confusing way of articulating its strategy -- for catching up. News of the Lexico purchase follows its move just two months ago to back away from efforts to take on Google and instead develop a niche of answering women's questions on such topics as recipes and children's homework.

Which begs the question: Do women consult dictionaries and thesauruses more than men? Or is Ask.com behaving like the fifth-place player it is, with every right to throw a lot of different things against the proverbial wall to see what will stick? Some of the latest comments from Ask.com CEO Jim Safka suggest the later. As Forbes notes, Safka said that Ask.com had "erroneously communicated" in March that it was focused on becoming a site for women.

None of this should take away from the Lexico purchase, which, judging by the popularity of the domain names alone, appears to be a strong one. It's just hard to say how much of a difference it will make for a company that so many in the field have already written off. - Andrea Orr

See May 15 announcement on Lexico purchase from Ask.com
See May 15 story on Ask.com from Forbes.com
See March 5 story on Ask.com from MSNBC.com
See March 5 post on Ask.com from SearchEngineLand.com

Oracle Corp. [ORCL] got little attention for its acquisition of insurance software maker AdminServer earlier this week, but according to a report from Novarica, the deal could heat up M&A activity in the insurance software sector, with IBM Corp. [IBM], SAP AG [SAP] and Microsoft Corp. [MSFT] all would-be buyers.

Novarica calls the Oracle purchase "a significant departure from the pattern of acquisitions seen in recent years and may set a new wave of insurance software M&A." While the acquisition of AdminServer was so small that Oracle did not have to disclose the price, Novarica says a host of other companies are more likely to become targets in the wake of Oracle's purchase.

"Though there have been many acquisitions over the past three years of insurance software companies, the vast majority of them have been either fire sales, sales of companies that have peaked or sales of companies with less than $10 million in revenue," Novarica reports. - Andrea Orr

See May 13 announcement from Oracle on AdminServer acquisition

In its ongoing efforts to replace the entire board of directors of chipmaker Micrel Inc. [MCRL], Obrem Capital Management LLC on Thursday urged Micrel to come clean with its shareholders and release some information that will lay out the company's "record of dramatically missing forecasts."

Specifically, Obrem, which holds about 15% of Micrel stock, asked Micrel to share information from previous shareholder meetings. It said the content of those meetings would show the company's track record for missing forecasts by large margins and for dismissing potential business combinations that could have enhanced the company's value.

Obrem also cited a Wednesday story from DealReporter on Micrel that stated, "The presence of 70-year-old CEO and founder Raymond Zinn has always served as a major impediment for suitors as Zinn has never been a seller." (Tech Confidential noted this last month.)

The immediate reaction to Obrem was underwhelming. But Micrel did get another boost, with Proxy Governance Inc. joining three other independent proxy advisory firms in recommending shareholders vote against all of Obrem's proposals at a special meeting to be held on May 20. - Andrea Orr

See May 15 announcement from Obrem
See May 15 statement on Obrem and Micrel from Proxy Governance
See May 13 story on RiskMetrics report from TheDeal.com
See April 9 post on Zinn from Tech Confidential
See March 27 story on Obrem and Micrel from TheDeal.com

Back in February, when Microsoft Corp. [MSFT] first made a pass at Yahoo! Inc. [YHOO], there was some hand-wringing in Silicon Valley about what it would mean for startups if one of its golden tickets to acquisition went away. While an acquisition of Yahoo! would conceivably remove one of the more able and somewhat active buyers from the game, the consensus that emerged was that good companies would continue to be acquired and the loss of Yahoo! would not be a huge setback.

Helping to pick up the slack, some pundits argued, would be traditional media companies, who up to that point had not jumped head-first into Internet property acquisitions. It turns out they were right. CBS Corp.'s [CBS] $1.8 billion deal to acquire Cnet Networks Inc.[CNET] and Comcast Corp.'s [CMCSA] pickup of business social networking property Plaxo Inc. both suggest there will be other, less traditional buyers of Internet properties and startups.

With Carl Icahn helping to put Yahoo! back in play by starting a proxy fight for control of its board of directors, the announcement of these deals couldn't come at a better time for startups. - David Shabelman

See Feb. 6 story in Tech Confidential
See May 15 post from Dealscape
See May 15 post from Corporate Dealmaker

Signaling that he wants to invest up to $2.5 billion, activist investor Carl Icahn launched Thursday, May 15, a proxy contest at Yahoo! Inc., nominating 10 directors in the hopes of negotiating a successful merger with Microsoft Corp.

In a letter addressed to Yahoo! chairman Roy Bostock, Icahn said: "It is clear to me that the board of directors of Yahoo! has acted irrationally and lost the faith of shareholders and Microsoft."

He called Microsoft's $33-per-share offer price a "superior alternative" to the company's standalone prospects and pointed out that the offer represented a 72% premium to Yahoo!'s closing price of $19.18 ahead of the offer. Microsoft originally put forth a $31 per share offer and, after increasing the bid but being repeatedly rebuffed, withdrew its $47.5 billion bid May 3.

For the full story, go to TheDeal.com

Venture capital-backed social networking company Plaxo Inc. agreed Wednesday, May 14, to be bought by Comcast Corp. [CMCSA] as the cable operator looks to broaden its range of services.

While the country's biggest cable TV company and No. 2 broadband Internet supplier did not reveal the terms of the deal, a number of media outlets have pegged the price at $145 million to $175 million.

Plaxo offers technology that helps users more easily share contact information, photos or personal Web-site information. The Mountain View, Calif.-based company is credited with forging the social networking craze with technology that helps people use their address books to connect online, paving the way for the likes of Facebook and others.

For the full story, go to TheDeal.com

CBS Corp. [CBS] on Thursday, May 15, unveiled plans to buy for nearly $1.8 billion Cnet Networks Inc. [CNET], an online media company that has for months been under fire from activist investors.

Terms of the deal call for the New York-based media giant to pay $11.50 per share, a premium of nearly 45% to San Francisco-based Cnet's Wednesday close of $7.95, according to a statement.

"CBS and CNET Networks will have significant additional exposure to the fastest- growing advertising sector and can accelerate our growth through a number of new content, promotion and advertising initiatives," CBS president and chief executive Leslie Moonves said in the statement.

For the full story, go to TheDeal.com

The IPO market has been about as quiet as a mouse around Christmas. So it was somewhat surprising to run into news Wednesday that business software maker Metastorm Inc. has filed papers for an initial public offering. Jefferies & Co. and Oppenheimer & Co. will act as joint bookrunners for the offering.

Metastorm's software helps companies align their strategy, analysis and execution. The company's products were deployed to 1,150 customers in 37 countries at the end of 2007, including 39 of the Fortune 100 companies across a wide range of industries, including business services, financial services, government, healthcare, manufacturing and retail. It posted net income of $585,000 in 2007 on revenues of $59.7 million, a 42% increase from 2006 revenues of $42 million.

Metastorm raised $39 million in two funding rounds. Among the company's investors are UBS Capital Americas II LP, Ironside Ventures and 3i Group plc, which together invested $20 million in the company in 2001. Dresdner Kleinwort Wasserstein (now Dresdner Kleinwort) invested another $4 million later that year. The company raised $15 million in 1999 in a round led by Sandler Capital Management and Riggs Capital Partners. In 2005 it merged with CommerceQuest, a partner company of Internet Capital Group Inc., which maintains a large stake in the combined company.

No terms of the offering were disclosed, but timing of a deal most likely will depend on market conditions, which have been anything but friendly. - David Shabelman

See May 14 press release from Metastorm
See Metastorm profile from Renaissance Capital's IPOhome.com

BrightSource Energy Inc. on Wednesday recharged its balance sheet with a $115 million Series C round earmarked for accelerating the startup's delivery of solar power to utilities.

Oakland, Calif.-based BrightSource received the third round funding from a group including VantagePoint Venture Partners, the company's initial investor, as well as Google.org (Google Inc.'s philanthropic arm), BP Alternative Energy, StatoilHydro Venture and Black River Asset Management LLC.

For the full story, go to TheDeal.com

Will he or won't he? That's the question of the day surrounding Yahoo! Inc. [YHOO] amid speculation that Carl Icahn could be close to staging a proxy fight for control of the company's board of directors. A formal announcement of his plans could come as early as Wednesday, according to reports, just ahead of a Thursday filing deadline for Yahoo!'s annual meeting July 3.

Icahn probably would not go to all the trouble of amassing a 3.5% stake in Yahoo! if he wasn't intent on pursuing a proxy battle, though there are a number of potential roadblocks that could thwart him.

The biggest appears to be whether Micorosoft Corp. [MSFT] would still be interested in acquiring Yahoo! should Icahn take over the board. All indications are that the company has moved on, though it's entirely possible Microsoft is just posturing and would gladly come back to the negotiating table if it could acquire Yahoo! for $33 a share, or $47.5 billion, its last offer price.

Analysts at Stifel, Nicolaus & Co. contend that even if Icahn wins a proxy fight, the process could be damaging.

"In our view a successful proxy battle is a bit like a scorched-earth policy -- you may win the battle, but what you ultimately win will be so damaged that it wasn't worth fighting for," analysts George Askew and Scott Devitt wrote in a research note Wednesday. "We believe this is why Microsoft didn't pursue a proxy battle, and we don't think the software giant's view will change with Carl Icahn doing the dirty work."

Icahn also must take into account what Yahoo!'s response to a proxy might be, especially when you consider the company already was planning for Microsoft to start a proxy fight if the two sides couldn't reach a friendly agreement. Yahoo!'s most likely course of action would be to revive the much-discussed plan to outsource its search advertising to Google Inc. [GOOG] or to renew talks on a deal to acquire AOL LLC.

There's little doubt that shareholders would back Icahn's efforts at taking over Yahoo!. But what's more important is whether Icahn has the backing of Microsoft and whether Yahoo! can erect enough stumbling blocks to thwart his efforts. - David Shabelman

See May 14 story on Icahn's stake from TheDeal.com
See May 14 post on Icahn and Yahoo! shareholders from DealBook
See May 13 post on Icahn from BusinessWeek