The war of words between eBay's board of directors and investor Carl Icahn is once again on the upswing, as each side sniped at the other in an attempt to convince eBay shareholders to elect their people onto the company's board.
Both sides ratcheted up the pressure by issuing statements over the last several days, attempting to spell out their case against the other side. The battle is over the fate of eBay's PayPal segment. Icahn wants it spun off, while eBay's board and executive said it is valuable and wish to retain it. PayPal was purchased by eBay in 2002 for $1.5 billion, but is now eBay's most profitable segment.
EBay has four people up for election to the board, while Icahn has two.
Icahn's latest March 10 letter to shareholders was a brutal attack on eBay CEO John Donohoe that accused Donohoe of costing the company billions of dollars when he sold controlling interest in Skype to an investment firm called Silver Lake for $1.9 billion, in which fellow eBay board member Marc Andreessen holds an interest. Silver Lake turned around a few years later and sold Skype to Microsoft for $8.5 billion.
"Who can doubt that if eBay were a private company, Donahoe would be fired when the facts were disclosed to the owners? But sadly at many of our public companies, such as eBay, there is a lack of accountability, and transgressions by management are swept under the rug by crony boards. If middle management makes a costly error, they pay the price; if the CEO makes one, too often the 'old boy' board covers it up and gives him a bonus," Icahn wrote.
On March 6 and 7, Andreessen posted blogs attacking and refuting Icahn's claims.
"Carl Icahn has repeatedly alleged both in interviews (1) and in letters (3) that I had some kind of secret information that Microsoft wanted to or intended to buy Skype, and that I improperly usurped that information for my own benefit against the interests of eBay shareholders. I categorically deny these allegations. Mr. Icahn is making up a fake conspiracy theory out of thin air" Andreessen wrote.
Icahn, who owns about 2 percent of eBay's stock, continues to pressure the online commerce site to spin off its highly profitable PayPal segment. The fight heated up last month, when in an extremely long and detailed open letter to eBay shareholders, Icahn trashed several members of the company's board of directors and Donahoe.
In the earlier letter, Icahn pointed out what he called conflicts of interest amongst several board members, whom he insisted resign, and stated that Donahoe was either naive or willfully blind concerning these issues.
"How is it possible for the current board to engage in any meaningful discussions about long-term stockholder value while: at least two board members are directly competing with eBay, one board member is demanding eBay cease hiring the most talented employees, another board member is routinely funding competitors while buying companies from eBay and reaping significant personal riches, at least two board members appear to have put their own financial gain in ongoing conflict with their fiduciary responsibilities to stockholders and the CEO seems to be completely asleep or, even worse, either naive or willfully blind to these grave lapses of accountability and stockholder value destruction," Icahn said in his letter.
EBay responded to the letter by stating it believes the company is best served by keeping PayPal under the eBay umbrella.
"New eBay shareholder Carl Icahn has cherry-picked old news clips and anecdotes out of context to attack the integrity of two of the most respected, accomplished and value-driven technology leaders in Silicon Valley. Marc Andreessen and Scott Cook bring extraordinary insight, expertise and leadership to eBay's board, which is scrupulous in its governance practices and fully transparent with regard to its directors' other affiliations and businesses. And eBay Inc. President and CEO John Donahoe is widely respected for his turnaround of eBay and leadership of the company over the past six years."
