Corporate raider Carl Icahn laid out a five step plan for Yahoo in a letter to Yahoo chairman Roy Bostock today. In brief, Icahn wants to replace Yahoo's poison pill severance package, usher CEO Jerry Yang back into his role as "Chief Yahoo," tell Microsoft that it can have any of Yahoo unless it owns all of it, sell Yahoo, or failing that outsource search to Google. Find the plan in Icahn's own words, below.

Billionaire and activist investor Carl Icahn took his Yahoo obsession to the airwaves with a phone-in interview on CNBC's Fast Money yesterday afternoon. In my attempts to distill the over twelve-minute, rambling dialogue with the anchors on the show, the most interesting thing was how guarded and halting Icahn was about his intentions — he revealed little that he, or one of his assistants, hasn't brought up in his many open letters and other lobbying to unseat CEO Jerry Yang, or answer the question "If you succeed in your proxy battle, who says Microsoft will buy?" So with no money quotes to go with, I threw in everything else.

After meeting at Harvard, Microsoft chairman Bill Gates and CEO Steve Ballmer have been working together for so long, "they often complete each other's sentences," according to sources cited by the Wall Street Journal in a frontpage feature for Gates's last month working full-time at the Redmond software giant. But it wasn't all smiles and sunshine over the years. After handing over the title of CEO to Ballmer, "In meetings Mr. Gates would interject with sarcasm, undermining Mr. Ballmer in front of other executives." And at one point, Gates even pitched a fit!

In a letter responding to corporate raider Carl Icahn's demands that Yahoo rescind a $2.5 billion severance package and restart merger negotiations with Microsoft, Yahoo chairman Roy Bostock writes:

Dear Carl:


We are in receipt of your letter of June 4th and take issue with its content. Your letter seriously misrepresents and manipulates the facts regarding the recent events pertaining to Microsoft and Yahoo!. You rely on, as “facts,” a series of unsubstantiated allegations from a complaint filed in a Delaware court which grossly misstate the very clear record and position established by the Yahoo! Board. Let me elaborate:



You make reference to our employee retention plan but you significantly mischaracterize its purpose and its effect. In fact, you refer to it as a “Poison Pill” which could not be further from the truth. To set the record straight, the employee retention program is designed to protect the Company’s assets and value during a time of uncertainty. The claim that the plan gives each of Yahoo!’s employees “the right to quit his or her job and pocket generous termination benefits at any time during the two years following a takeover...” is just plain wrong. In fact, our plan has a “double trigger” which means that in order for an employee to be eligible for benefits under our plan, there would need to be a change of control AND the employee would need to be terminated “Without Cause” or resign for “Good Reason.” That means that in contrast to your assertions, an employee who simply quits his or her job would receive nothing under our plan.



The retention plan is intended to help us preserve and enhance shareholder value by allowing Yahoo! to continue to attract and retain the industry’s best talent, and to allow employees to stay focused on implementing Yahoo!’s business strategy. In fact, the plan was adopted in order to protect the value of Yahoo! in anticipation of a possible acquisition by Microsoft which would have resulted in a lengthy regulatory review and a significant period of uncertainty for our employees. In adopting this plan, we believe Yahoo! did the right thing for its employees and its shareholders alike.



This plan was fully disclosed at the time of its adoption and should be no surprise to anyone at this point. It was disseminated to employees, publicly filed and extensively covered by the media. Significantly, as you note, Microsoft had indicated that it was prepared to spend $1.5 billion on retention incentives indicating that they too recognized that the retention of Yahoo! employees would have been critical if there had been an acquisition.



Finally, you significantly misrepresent the events of the recent past. Notably, you accuse us of turning down a $40 per share offer and “sabotaging” a $33 per share offer. Again, this is patently untrue. Yahoo!’s Board of Directors has at all times been focused on maximizing shareholder value. As has been well documented, Yahoo! has engaged in thorough discussions with Microsoft over a series of months culminating in Microsoft’s decision to walk away from a potential acquisition of Yahoo!. Throughout this process, which has included an exploration of multiple strategic alternatives with multiple parties, the Board has repeatedly stated that it is open to any transaction, including a sale to Microsoft, as long as it is in the best interests of shareholders.



You seem to be under the impression that somehow Microsoft will come back to the negotiating table for a full acquisition of Yahoo!. This is puzzling as I know you are aware that we have reached out to Microsoft proactively and met with them many times in the last several weeks. During this period, their message to us and to the markets has been and remains that they are not interested in pursuing a full acquisition of Yahoo!.
Conspicuously absent from your letter is any credible plan for Yahoo! other than a repetition of your insistence that the Company should sell itself to Microsoft. Indeed, your stated view that “the only way to salvage Yahoo! in the long if not short run is to merge with Microsoft” demonstrates that you have no other plan and causes one to wonder what exactly would happen to our Company if you and your nominees were to take control of Yahoo!.



Sincerely,
Roy Bostock



Chairman of the Board

Its time for the second match in our single-elimination tournament to find the worst entry-level job in tech. In our first poll, the drudgery of working as a Google online sales and operations manager narrowly edged out the perils of being an Amazon.com support engineer, 53 percent to 47 percent. Today's contest: Getting paid by Microsoft to take angry calls from Vista users all day, vs. fetching coffee in Yahoo's finance operations. Making the contest even harder: If Carl Icahn has his way, both might soon find their paychecks signed by Microsoft CFO Chris Liddell. Vote below.

Yahoo's "poison pill" severance package has corporate raider Carl Icahn twisted in knots. In his latest letter to Yahoo's board, he writes:

In a nine-chapter opus, Vanity Fair clean-up hitter Keenan "Coverline" Mayo and Peter Newcomb pitch the inevitable book deal for an oral history of the Internet. In it are all sorts of unchallenged assertions by various leading lights, from early stories of the Arpanet to Friendster founder Jonathan Abrams complaining about getting friend invites from "Pounce" when he's not taking undue credit for building the first social network. (Six Degrees, anyone?) But what stood out to me were two anecdotes that illustrate the plus ça change, plus c'est la même chose nature of business in America. Namely, the cycle of monopolies which the Internet has done little to stop and will probably spin Google's way next. After the jump, 100 words that changed the world — without the pleasantly distracting Angelina Jolie pop-up ads spewed by the Vanity Fair website.

Sony will open its PlayStation 3 console to to in-game ads from outside agencies, starting with IGA Worldwide. If you want to play on the Xbox, though, you'll still have to go through Microsoft subsidiary Massive. As for Google's in-games ad unit, it's doing really well — at least when you compare it to, say, Google's television and radio advertising projects. [Forbes]

Speaking at Microsoft's TechEd conference in Orlando, Florida, Bill Gates said some stuff about Internet Explorer 8, blah blah blah. More importantly, he rolled out the latest version of Microsoft CEO Steve Ballmer, a Windows-powered machine that waves its arms and shouts "Developers, developers, developers!" It can even throw eggs in order to fend off ruthless Hungarians when necessary. Presumably it can also throw chairs to fend off larger predators like Google. However, any attempts to buy Yahoo inevitably result in a blue screen of death. We hear Steve Ballmer 2.0's first decision was to hire Lloyd Braun.

Details of Yahoo's poison-pill employee severance package, designed to deter a Microsoft aquisition, were revealed with the release of documents from the shareholder lawsuit pending in Delaware courts. Yahoo estimated the cost of post-acquisition layoffs as up to $2.1 billion; raider Carl Icahn, who's trying to force a sale to Microsoft, put the figure at $2.5 billion under the plan, according to the Wall Street Journal. Remarked Icahn, who thinks the details revealed will help him in his question to unseat Yahoo CEO Jerry Yang:

Microsoft employees have logged 2,605 days of riding their bikes to work, with an average commute of 19 miles in a day, since the start of the year in a contest sponsored by the Cascade Bicycle Education Foundation for organizations in the greater Seattle area. That's more than twice as many days and three times as many miles as Amazon.com employees, ranked eleventh behind even the lazy slackers who work in Seattle's municipal government and the academic wankers at the state university. How are Valley companies doing?

The complaint in a shareholder lawsuit against Yahoo unsealed yesterday reads like a whodunit. But my favorite part of the mystery are notes from the call Microsoft CEO Steve Ballmer made to Yahoo CEO Jerry Yang on January 31, the night before Ballmer took Microsoft's merger bid public. At one point, Yang pleads: "You don't lose anything by waiting a week." Ballmer saw right through Yang's delay tactics, saying there was no point in waiting if Yang didn't want to sell the company. See the exchange and the rest of the suit filing embedded below.

If Yahoo outsources search to Google, Microsoft will come screaming to antitrust regulators. How will Microsoft lawyers make their case? They'll let Yahoo docs do the talking. Before Yahoo was for outsourcing its search to Google, Yahoo was against outsourcing its search to Google. To explain why, Yahoo execs prepared a document for an all-hands meeting to be held on January 30. The document is part of the complaint a judge presiding over a shareholder suit against Yahoo released to the public yesterday. It reads:

A judge has unsealed documents in a shareholder lawsuit against Yahoo, the Wall Street Journal reports, and the allegations, now posted online, are explosive. Chiefly, that Microsoft offered to buy Yahoo at $40 a share in January 2007. Then-CEO Terry Semel turned Microsoft down, seeking to strike a commercial partnership instead. Slow progress in negotiating that deal made Microsoft executives impatient, leading to its unsolicited bid at $31 a share. While the plaintiffs, two Michigan pension funds, are presenting that history, it actually explains much about Yahoo's resistance to Microsoft's recent advances.

Hollywood's savvy hustlers have struck again, with Lloyd Braun and Gail Berman convincing Yahoo and Microsoft to hire BermanBraun to produce a content portal for MSN and a contentpole for Yahoo called "Lunacy Report," according to sources cited by All Things Digital. For the ADD-affected with long term memory issues, former Yahoo CEO and Tom Cruise BFF Terry Semel hired Braun to shepherd in Yahoo's reign as a media company, followed by Braun taking the fall for much of Semel's own lunacy before Semel himself was ousted.

Welcome to the Silicon Valley hype cycle: One year, and you're over. That seems to be the consensus on Facebook's vaunted platform, whose one-year anniversary went largely unremarked. The company itself didn't blog about it until today, and sources tell us an open-bar party Facebook held in Palo Alto was low-key to the point of despair. It can't have helped that Google was throwing a massive party in San Francisco the same day to close out its conference for developers. How different a scene from a year ago, when the F8 launch event of Facebook Platform won comparisons of the company to Microsoft and of founder Mark Zuckerberg to Bill Gates.

Weekend King, the low-budget feature written and directed by Microsoft's Bill Levesque and produced by his colleague Brett Bonthron, has had its run at the Victoria Theater extended for three more weeks, playing tomorrow night at 7 p.m. The film won't win any Oscars, but I can see why audiences have responded well: As a comedy of manners set in the Valley, it captures much of the anxiety amongst the legions of post-boom cube dwellers who toil on the peninsula. In an interview at Valleywag hangout Caffe Roma, Levesque and Bonthron admitted the film needed some work in post-production, but were emphatic that it be seen with an audience — joking that I should insert my own laugh track into the screener DVD they provided to mimic the experience.

The Federal Trade Commission says corporate raider Carl Icahn should feel free to buy more large blocks of Yahoo shares. At last count, Icahn already owned 4.3 percent of Yahoo. Shareholders allied with his view on the Microsoft-Yahoo merger — that it should happen — now control at least 31 percent of the company. Too bad for them it seems less likely every day that Microsoft CEO Steve Ballmer — or really, chairman Bill Gates — wants to go back down that road.

Who's the man responsible for cuts to internal spending at Microsoft? Here's a hint: he's feared, hated and respected by Windows developers: Steven Sinofsky, the SVP of Windows and Windows Live development, who's been mooted as a successor to Bill Gates. Sinofsky used to run Microsoft Office development, where he earned a reputation for "making the trains run on time." That landed him in charge of making sure fiascos like Vista never happen again. One problem, though.