updated 6/20/2008 5:31:58 PM ET 2008-06-20T21:31:58

Antagonistic investor Carl Icahn became a billionaire by bullying already distressed companies, but his harassment of Yahoo Inc. could leave him with a black eye — and a hole in his wallet — if he's wrong about Microsoft Corp.'s desire to buy the Internet pioneer.

Icahn, 72, has used a combination of guile, gall, grit and gamesmanship to get his way more often than not since he began tormenting vulnerable companies 30 years ago. The conquests helped Icahn build an estimated fortune of $14 billion after starting out on Wall Street with a $4,000 bankroll from his winnings playing poker.

His roll call of stock market successes include profitable showdowns with Marshall Field, Phillips Petroleum, Texaco, USX and, most recently, BEA Systems. There have been flops, too: the now-defunct airline TWA and video rental chain Blockbuster Inc., whose stock has lost nearly two-thirds of its value since Icahn bought a stake in the company in 2005 and muscled his way on to the board of directors.

Having spent more than $1 billion for a 4.3 percent stake in the company, Yahoo represents one of Icahn's biggest bets yet.

The payoff — or possible loss — will hinge largely on the irascible financier's matchmaking skills as he tries to patch up a tiff between two fellow billionaires, Microsoft Chief Executive Steve Ballmer and Yahoo CEO Jerry Yang.

(Msnbc.com is a joint venture of Microsoft and NBC Universal.)

If he can't persuade Ballmer to change his mind and renew his pursuit of Yahoo, Icahn could find himself holding a losing hand as investors bail out of Yahoo's stock.

"There may be some unintended consequences to Icahn's actions that he hasn't fully thought about," said Dennis Carey, senior client partner for Korn/Ferry, which specializes in recruiting chief executives and board directors for corporate boards.

Icahn hasn't returned repeated phone messages left by The Associated Press during the past three weeks.

But it's doubtful Icahn — an avid chess player who majored in philosophy at Princeton University — hasn't considered the risks of his Yahoo gamble, according to his biographer, Mark Stevens, who wrote "King Icahn" in 1993.

"He is always thinking 10 moves ahead of the other guy," said Stevens, who now runs a Rye Brook, N.Y., management consulting firm, MSCO. "He looks at business through the lens of Socrates and Nietzsche as opposed to how it was taught in Harvard Business School."

Yahoo found itself in Icahn's cross hairs after Microsoft withdrew a $47.5 billion takeover offer for one of the Internet's best-known franchises.

Like many investors and analysts, Icahn is convinced Yahoo sale's to Microsoft represents those two companies' best chance to mount a more serious challenge to Internet search and advertising leader Google Inc.

But Ballmer reasoned a takeover wasn't in the cards after Yang told him Yahoo's board didn't want to sell for less than $37 per share, or more than $52 billion.

Unless Ballmer wavers from that stance, Icahn could wind up in a tough spot when Yahoo's annual meeting rolls around Aug. 1.

If Yahoo shareholders are angry enough to oust the company's current board for its handling of Microsoft's takeover bid, Icahn and eight other men that he has nominated as alternative directors could wind up trying to figure out a way to accelerate Yahoo's growth in the booming Internet ad market.

That's a problem that Yang hasn't been able to solve in the year since he took over as CEO from Terry Semel, whose own turnaround efforts had stalled badly.

Icahn has promised to fire Yang and replace him with a more experienced leader in the mold of Google Chairman Eric Schmidt while still trying to lure Ballmer back to the negotiating table.

The uncertainty raised by a boardroom coup might cause Yahoo's stock price to sink, saddling Icahn with substantial losses.

Even if Yahoo's current directors hold on to their jobs, most analysts think Yahoo shares are likely to fall below the prices Icahn paid for them if there's no hope for a Microsoft takeover.

When Icahn began accumulating his stake in Yahoo, the stock was trading between $22.97 and $26.84 — well above its price of $19.18 before Microsoft made its Jan. 31 bid.

Icahn thinks Yahoo might be able to fetch $49.5 billion, or $34.375 per share, from Microsoft. Yahoo shares ended last week at $26.44. Microsoft had no comment about Icahn's suggested target price.

Despite his wealth, Icahn's experience as a child living with modest means in New York's Queens borough still drives him, Stevens said. While growing up, Icahn developed a deep resentment of the elite, an attitude reflected in his acerbic attacks on CEOs and their perceived cronies on corporate boards.

"He used to say he couldn't wait to ruin their golf games at their country clubs and pour vinegar in their martinis," Stevens said.

Yet Stevens thinks Icahn's own ego may have blurred his judgment and caused him to thrust himself into the highly publicized saga between Yahoo and Microsoft.

While Yahoo fits Icahn's preference for targeting companies under shareholder siege, he bought his stake while Yahoo shares were well above their 52-week low of $18.58 — a price that reflected investors' worries that the company is destined to fall further behind Google in the lucrative Internet ad market.

Icahn usually snaps up stock when it's in a trough. "I think he may have blown it this time," Stevens said.

Making Icahn seem even more exposed, technology appears to be a blind spot. He reportedly doesn't like e-mail and his public comments make it clear he doesn't understand the industry jargon.

But Icahn didn't have to be a technophile to help engineer BEA's sale to rival software maker Oracle Corp. for $8.5 billion earlier this year. Oracle had withdrawn an earlier offer of $6.7 billion, or $17 per share, after BEA demanded $21 per share.

Icahn helped resurrect the talks a few weeks later, culminating in Oracle's agreement to pay $19.375 per share — 52 percent above BEA's stock price on the day before Icahn first disclosed his stake in the San Jose-based company.

That deal probably wouldn't have happened without Icahn's involvement, according to a person familiar with the BEA talks. The person wasn't authorized to talk publicly about Icahn's behind-the-scenes role.

Now many market observers are hoping Icahn can bridge the gap separating Microsoft and Yahoo.

"You need someone to make the case for the deal and so far (Icahn) is doing a good job," said Espen Eckbo, director of the Center for Corporate Governance at Dartmouth University's Tuck School of Business. "As a small shareholder, I would be very happy to have him around."

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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