Who knew? Yahoo finally grew a pair

The ongoing epistolary smackdown between Yahoo and Carl Icahn reached a new low on Thursday, with the latest missive sent by the company to its shareholders.

The letter seeks to convince holders of Yahoo stock that the company is in good hands, and management is wise and deliberate and looking out for its best interest.

There's a great line in the film The Untouchables, when Sean Connery bluntly informs an under-armed assailant that you don't bring a knife to a gunfight. It looks as if the mild-mannered Yahooers finally picked up on that bit of folk wisdom.

Here are some of the choice excerpts, along with my requisite two cents.

• "Mr. Icahn has made it clear that his only objective is to sell part or all of Yahoo to Microsoft. That fact, combined with his lack of an operating plan going forward, means that he will have no leverage to negotiate a fair deal with Microsoft. He has set himself up for failure."

Translation: Icahn's a short-termer with no idea what he wants to do--other than make a quick buck. And since Icahn has no idea how to manage Yahoo's business, he's got a snowball's chance of making a good deal, since Microsoft will have all the leverage in any prospective negotiation.

•  "Mr. Icahn will be calling the shots, if his slate wins, and yet Mr. Icahn himself told The Wall Street Journal last fall: "Technology hasn't really been one of the things I've focused on too much before" and "It's hard to understand these technology companies." That's why you need a knowledgeable, experienced, and independent board to represent your interests vis-a-vis Microsoft."

Kudos to the PR muckety-muck who convinced management to go for the jugular. This is so much more delish than the usual pabulum churned out by the spinmeisters. The above paragraph is a polite way of calling Icahn a technical illiterate who has, at best, a shallow understanding of how an Internet business ought to run. They should have gone the extra step and dissed him as a greenmailer without a clue.

•  "How can Yahoo stockholders trust Mr. Icahn to deliver what he claims he can deliver when his actions have been so contradictory--and when all he has delivered so far is a risky proposal of questionable value from his new friends at Microsoft?"

He couldn't make up his mind about whether Yahoo would be better off being sold in toto or in part to Microsoft. Later on, he suggests that Yahoo dump Microsoft's search-only offer and instead pursue the Google alternative, which Yahoo was already negotiating, thank you very much. The guy blows with the wind. Do you really want to trust your company to a flip-flopper?

•  "Certainly, Microsoft is a well-respected and successful company, and we have been clear that we are fully prepared to do a deal with them. But Microsoft's flip-flops and inconsistencies over the past five months are so stupefying that one can only conclude that Microsoft was never fully committed to acquiring Yahoo, either, because:"

•  "Microsoft can't decide what is and isn't strategically important to its online business;"

or

•  "Microsoft is more interested in destabilizing a key competitor so that it can either enhance its competitive position or buy our highly valuable search business--and the enormously desirable intellectual property associated with it--at a bargain basement price."

And Steve Ballmer thought he was going to scrape by without at least (dis)honorable mention? Think again. A lot has been made of the strategic predicament faced by Yahoo because of poor execution in the market. How about Microsoft's poor execution as a negotiating partner?

Jerry Yang and Roy Bostock either believe Microsoft's brain trust is incompetent when it comes to M&A--or simply malevolent. There is a school of thought which believes that Microsoft's real aim is to drag this out in order to embarrass and weaken Yahoo to the point where fed-up shareholders can't take it any longer and scream for a deal at any price. I don't believe in conspiracy theories, so I'm left puzzled by the spectacular incompetence of Ballmer's minions in pursuing a deal with Yahoo.

Kara Swisher of The Wall Street Journal's All Things Digital had it right when she noted last week that now everyone concerned in this months-long melodrama hates each other even more than before.

Congratulations, guys. This is even more fun than A-Rod and Madonna. Can't wait to see what tomorrow might bring.