Newest Yahoo agitator has lofty goals

"We believe the above factors could allow Yahoo to receive more than $15 billion upfront from Microsoft for its search business," wrote Curtis Macnguyen, managing partner and founder of Ivory Investment Management. Those factors cited in the letter include ways that Microsoft could eliminate $800 million in duplicate operating costs, among others.

Conveniently tossed aside in this argument is the fact that Microsoft offered $1 billion for Yahoo's search business and a share of future search-advertising revenue back in June, after its attempt to buy the company for $31 a share failed.

Recently, Jeff Lindsay, an analyst with Sanford Bernstein, said that he did not believe Yahoo could get more than $3 billion to $5 billion for the search business, especially in the current economic environment.

Needham & Co. analyst Mark May raises the same question in a note Wednesday. "Is Ivory's assumption of a $15 billion upfront payment by Microsoft too high given Microsoft's previous $1 billion proposal?" he asked.

Ivory Management has made a heavy bet on Yahoo, so it's little wonder what their incentive is. The fund began loading up on the stock in the second quarter, when the shares were still in the mid-to-low-$20s. It bought even more shares in the third quarter - the stock has crashed another 25-30% since then.

Shareholders like Ivory and activist investor Carl Icahn clearly want a profitable exit strategy, but their hopes may have to come down, closer to sea level first.

- Therese Poletti