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Tuesday, November 6, 2012

Carl Icahn's Move on Netflix Spells Trouble

Posted By on Tue, Nov 6, 2012 at 12:37 PM

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The last thing Netflix needs right now is Carl Icahn, but there he is, his dour puss looming above Los Gatos as he buys up shares in the company and makes noises about how he thinks it should be run.

The trouble is that he has no idea about how it should be run, and all he cares about is pulling in some big coin, possibly by tossing out management, forcing a merger, or making ridiculous cost-cutting demands. That's what he does.

In the '80s, Icahn was known as a "corporate raider." But he and his raider pals, aided and abetted by a compliant business media, have succeeded in getting people to refer to them as "activist shareholders." But raiders they are -- Carl's not about to start passing out fliers or occupying corporate lobbies and chanting about The Man. He's raiding Netflix just as he has done with countless companies, perhaps most famously the storied airline TWA, which, after running it during its most successful period, he stripped down to nothing and then bolted unscathed just before it went bankrupt.

Sometimes, a dose of Icahn is just what a company needs (TWA, for example, wasn't exactly running like a top when Icahn came along). But, especially lately -- and most especially with media-oriented companies -- the sound of Icahn's footfalls is the sound of doom: perhaps for stockholders, perhaps for customers, perhaps for employees, perhaps for management, and perhaps for all of them at once. Perhaps, in fact, for Icahn himself, though his wealth is such that even when he suffers a major loss can't be called "doom."

In 2004, Icahn made his move on Blockbuster, demanding cost-cuts even as the company was ramping up to fight the upstart Netflix. He ultimately took board seats and ousted the company's CEO. After the company went bankrupt in 2010 and was sold for a song to Dish Network, Icahn declared it was the "worst investment" he ever made.

In 2008, he stomped into Yahoo, expecting to force the company to be acquired by Microsoft. He bought up shares, took board seats, and wrote nasty letters to Jerry Yang. The deal never happened, and he lost loads of money, slinking away from the company in 2009.

For three years, up until August 2011, Icahn did battle with Lion's Gate Entertainment, producer of such fare as Mad Men and Tyler Perry's oeuvre. He tried hard to seize control of the company, but ended up dropping his effort and selling his shares as the two sides agreed to drop litigation they had pending against each other. He declared at the end that he hadn't lost money (of course, he gave no details). Well, good for him. Lion's Gate, meanwhile, spent $25 million on legal fees.

Given his history with Internet and media companies, it would probably be best for all concerned -- including Icahn -- if he were to step slowly away from the Netflix.

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Dan Mitchell


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