The Icahn Lift

This segment was originally broadcast on March 9, 2008. It was updated on Aug. 8, 2008.

It takes a certain breed of stock market investor, the kind with lots of money and lots of guts, to thrive in queasy times like these, when the market keeps losing altitude. Carl Icahn is one of that breed.

He has a knack for turning someone else's loss into profit for himself. But he can also help others improve their bottom line through the so-called "Icahn Lift," an upward bounce that often happens when he starts buying a beleaguered stock.

When we first broadcast our story on Icahn in March 2007, the subprime mortgage crisis and recession fears were just beginning to take a toll on the markets. With the Dow Jones down by more than 10 percent this year, most investors are tearing their hair out. But not Icahn. As correspondent Lesley Stahl found out he has a habit of pouncing when everyone else is losing their shirts.

Icahn, who works in a skyscraper suite overlooking New York's Central Park, called it a "tough day."

"I think I lost today," he told Stahl.

Actually, he lost big: well over $150 million that one afternoon. But when Stahl spoke with him a few days later, Icahn told her, "No big deal!"

He lives by the mogul's credo: never let 'em see you sweat. "I was buying that day," he said. "I mean, seriously, I was very happy about that."

"You looked like you were…frazzled and…," Stahl pointed out.

"Well, I'm always frazzled. I mean, look at now, I combed my hair. But I'm always got so much going on. And I enjoy that," he said.

One of his biggest holdings, Motorola, plunged 19 percent that day. But Icahn, the ultimate risk taker, was gobbling up more shares in the company.

Motorola is a perfect example of how Icahn operates. First he chooses a company he thinks is poorly run and trading below value. Two years ago he started buying up millions of shares of Motorola; now he controls over a billion dollars worth of stock.

As he usually does, he's been making demands in order to jolt up the sagging stock price. His first demand was to dump the CEO; that happened in December. Then, he demanded a break up the company.

His goal is always the same: to reap a hefty a profit for himself.

He's been successful, say Wall Streeters, because he's intimidating and relentless.

"With me I think generally they take the attitude: 'Try to make peace, try to work with him, because he's not going away,'" Icahn explained.

"Is it 'cause you have so much money?" Stahl asked.

"Well, and they know my nature," he replied.

Asked what his nature is, Icahn told Stahl, "That I'm not going away. That I'm an obsessive guy. That I'm comin' here, I've done it, and there's no way I'm leaving till they do something."

He's been hunting down vulnerable corporate prey since the 1980s, when he was reviled as a black hat corporate raider.

"Why do people say you're the man everybody loves to hate?" Stahl asked Icahn in 1986, after he had taken over TWA.

"Love to hate. You're hurting my feelings," he told Stahl.

He was seen as ruthless because he fired people, slashed salaries, and cut routes. And as the company went into bankruptcy, he siphoned off money for himself.

"I own it. It's my money. I worry about the bottom line. Because if I lose, I'm answerable to my bank account," Icahn said.

Back then when Icahn targeted a company, management would often pay him so-called "greenmail" just to go away. But that kind of shakedown isn't tolerated anymore.

Today, he's called an "activist" because when he targets a company and makes money, so do the other shareholders. That's the "Icahn lift."

Fortune Magazine says he may be making more money for shareholders than anyone else on the planet.

His most recent success came when software giant Oracle bought its competitor BEA Systems. Icahn, a major stockholder in BEA, coerced Oracle into raising its bid.

Icahn told Stahl he made about $300 million on the deal. "But I took a risk. I mean I took a risk, but hey, how about the other shareholders? All the shareholders made a - if you add up what they made, you're talkin' two billion, three billion the shareholders made," he said.

Now - all of a sudden - he's Robin Hood, making money for the little guy, and crusading for ways to make American companies more competitive. He says we're losing our edge because U.S. corporations are bloated with heavy bureaucracies and rampant waste.

"There are very few companies - I couldn't go into it - I'm not a manager - and knock off 30 percent of costs. Just cost of waste. Just waste. Now, why is that a problem? Because that's why one of the problems in our competing. This is a specter coming, because we can't compete with Asia. And we still walk around with our head in the sand," Icahn said.

He gets really worked up over fat CEO paychecks and bonuses even when the company loses money.

"You do seem to have special contempt for CEOs as a category, as a group," Stahl remarked.

"I have no contempt for 'em," Icahn said.

"You've called them morons. What do you mean you don't have contempt for them?" Stahl asked.

"That is unfair," Icahn said. "I have a metaphor: that the guy that gets in to the company, he moves up the ladder. He's like the fraternity president in college. He's the guy you like. He's always there when you need a buddy. He doesn't make waves. You never know where, you can't ever figure out when he's studying because he's always at the eating club or fraternity when you go over there. And that's the guy that moves up the ladder in the corporate world."

"You really think that's who becomes the CEO?" Stahl asked.

"In many cases, absolutely," Icahn said. "Now, are there great CEOs? Yes. I mean, I want to make it clear there are a lot of exceptions."

He says that too often boards of directors don't hold management's feet to the fire. So, other investors often call on him to step in. "Hey, I get calls all day from smart guys, hedge funds and all, 'Come, Carl, Why don't you look at this one?'" Icahn said.

He loves a good fight, no doubt about it.

For one, many of his paintings in his office hallways depict battles. Many a CEO has passed by the bloody scenes of a warrior vanquishing his enemies as they head to a meeting with Icahn.

"Does it tell me something about you is what I'm trying to figure out?" Stahl asked.

"Not really. Sends a slight message to people who come," Icahn said.

"With the sword in the hand?" Stahl asked.

"Yeah," Icahn told her.

Even as a kid, his mother said he was like Genghis Khan. He was an only child growing up during the Depression in Far Rockaway, part of Queens, New York.

"My father said, 'Son, look you have no talent.' Really. I said, 'Well thanks Dad, thanks for making me feel good about that,'" Icahn recalled.

Clearly, Mr. Icahn didn't "get" his son, who was smart and ambitious.

Icahn got into Princeton and paid for half his tuition with his winnings at the poker table. "I was always very good - I don't know if you call it talent or whatever, I was always good at making money," Icahn said.

Was he ever: now he's the 24th richest man in the United States, said to be worth $14 billion.

He's married to Gail Golden, his second wife and former assistant. Because he is such a workaholic, Gail says they have little time to enjoy the money he's made.

Icahn says they have a yacht but that they don't use it much. He also says they have a lot of houses but that they don't go there often.

"Can she have anything she wants?" Stahl asked.

"She takes it," Icahn said, laughing. "She doesn't ask me, you know."

So how do they spend their money? More and more on philanthropy, like building a track and field stadium for the schoolchildren of New York City, and building two charter schools in poor neighborhoods in the Bronx. These are overseen by Icahn's foundations, which Gail runs.

Golden works in the office, and so does his son, 28-year-old Brett.

Brett, an analyst at the Icahn firm, plays chess with his dad on the weekends, for money of course. And recently, Brett began winning.

"Beat the hell out of me. I tell them how you beat the hell out of me," Icahn said.

"Oh, no, no, he's too good. He's too good. He just says that because he wants to get odds," Brett said.

"That's bull, he beats me," Icahn insisted.

"I heard that you went out and hired somebody to teach you to play better so you can beat him again," Stahl asked.

"Yeah, I did," Icahn admitted. "I got a Grand Master."

Icahn, along with his son and the 40 other analysts and lawyers in the firm, work long hours looking for more companies to target.

They also work on Icahn's $8 billion hedge fund. To get into it, investors have to pony up a minimum of $25 million. After the fund had been averaging gains of 30 percent a year, it slid to just 7 percent last year.

Asked if anyone has questioned whether he is losing the touch, Icahn told Stahl, "Nobody calls me - they don't call me. I don't know."

"Can we read anything, though, into just 7 percent?" Stahl asked.

"Some years you're going to make 70 percent, some years you're going to make 7 percent. You should always do better than the market, and you shouldn't lose," Icahn told her.

But he doesn't always win at everything. He actually lost a big one recently when he moved against the multi-media mammoth Time Warner, growling that the stock price had barely budged since the merger with AOL.

He wanted the respected CEO Richard Parsons replaced, along with all the other directors, and the company split into four parts. Icahn didn't get his way. It was David vs. Goliath, and Goliath won.

"There are people who say that you got in over your head with Time Warner. That you didn't understand that business," Stahl remarked.

"It's a little bit of he who laughs last. I mean, well you know, maybe I made a mistake but I made $300 million on it. So is that too bad? Okay. I mean you know, so I guess I was wrong," he said.

He was wrong in the shareholders' eyes: they backed CEO Richard Parsons, who had argued that Icahn didn't care about the quality of the company's movies or magazines - or its people.

"Did you care about the products or the people?" Stahl asked.

"I do care about the people, I do care it, but I care about it in a macro way 'cause I see our country going off a cliff. Okay? And I feel bad about it," Icahn replied.

"I'm asking you this because one of the big raps against you is that what Carl Icahn wants to do is go in and get a fast, quick profit out of the company. And he doesn't think down the road," Stahl said.

"Yeah, but I can only talk facts," Icahn replied. "In every company we've gone into that we get control, we put millions and millions of dollars into them."

It's true: sometimes he takes over bankrupt companies, like a chain of Nevada casinos, puts millions into them and turns them around. But more often, he buys up a stock, agitates to get the price up - the Icahn lift - and gets out.

"I make money. Nothing wrong with that. That's what I want to do. That's what I'm here to do. That's what I enjoy," he told Stahl.

"You tell me you're a shareholder activist," Stahl said.

"I don't say - the name is the same. An activist is the same as a raider. You call it whatever you want. A rose by any other name," Icahn said.

Icahn said he hasn't changed "one iota."

"I'm still doing the same thing. I go in, buy a lot of stock in an undervalued company. It helps the other shareholders a great deal. But I'm not putting myself in a cloak and saying, 'Oh, shareholders, you know, I'm doing a great job for you,'" Icahn told Stahl.

"You don't do it for the other shareholders, you do it for you - but it does happen to raise all the boats?" Stahl asked.

"It helps," Icahn replied. "It helps the shareholders immensely."

Icahn also hopes to help shareholders with his latest move. As a big holder of stock in Yahoo, Icahn was outraged when the internet search company spurned takeover bids from Microsoft that he felt would enrich shareholders. Now, he's forced his way onto the Yahoo board to keep the pressure on for a sale.

But even Carl Icahn can't insulate himself entirely from the market's mood swings. Remember all that Motorola stock he bought? It continues to sink in price, despite the company agreeing to changes Icahn demanded.
Produced By Karen Sughrue