Associated Press 05.14.08, 8:30 AM ET
NEW YORK -
The chance that billionaire investor Carl Icahn will initiate a proxy fight to oust Yahoo Inc.'s board is high and one that the Internet portal fears as it may lead to a deal with Microsoft Corp., an analyst said Wednesday.
"With the deadline to submit a new slate of directors approaching fast and the specter of an activist shareholder hovering over their heads, Yahoo is likely to try to play its best hand yet to derail any attempt to sell the company," Jefferies & Co. analyst Youssef H. Squali said in a note to clients.
Icahn, who currently owns about 3.6 percent of Yahoo according to published reports, would have to submit an alternative slate of directors by Thursday if he wants to battle the company's board at the July 3 annual meeting.
To counter Icahn, Yahoo could announce a search deal with Google Inc. or resume talks with Time Warner Inc.'s AOL unit or News Corp.'s MySpace unit, though the latter two do not provide better alternatives, Squali said.
A Google deal would help now but damage Yahoo's long-term prospects, he said.
Squali rates shares of Yahoo "Buy" and has a $30 price target, implying he expects the stock to rise about 13 percent over Tuesday's $26.56 close.
For 2008, Squali expects Yahoo to earn 76 cents per share. Analysts polled by Thomson Financial expect, on average, earnings of 46 cents per share.
Shares of Yahoo rose 21 cents to $26.77 in premarket trading.
