As Yahoo Turns: Shareholder Mutiny Begins Another Soap Opera

Marissa Mayer: FILE - In this Jan. 7, 2014, file photo, Yahoo president and CEO Marissa Mayer speaks during the International Consumer Electronics Show in Las Vegas. Yahoo’s stock is up Thursday, March 24, 2016, before the opening bell on a report that an activist shareholder will launch a campaign to replace its board.
AP Photo/Julie Jacobson

SAN FRANCISCO — Shareholder rebellions at Yahoo are becoming like presidential elections — they are happening every four years.

Activist investor Starboard Value launched a widely anticipated mutiny Thursday in a letter announcing its intent to overthrow Yahoo CEO Marissa Mayer and the rest of the company’s board. It marks the opening salvo in a battle for control of Yahoo Inc. that could drag into the summer.

This is the third attempted coup at Yahoo since 2008, all led by different shareholders fed up with different management teams’ fruitless attempts to turn around the company.

The two previous uprisings in 2008 and 2012 culminated in Yahoo giving board seats to the dissident shareholders. The unrest also contributed to the departures of two of Yahoo’s previous CEOs, company co-founder Jerry Yang and Scott Thompson.

Now, Mayer’s job is in jeopardy as a prolonged revenue slump at Yahoo deepens nearly four years into her reign as CEO.

“We have been extremely disappointed with Yahoo’s dismal financial performance, poor management execution, egregious compensation and hiring practices, and general lack of accountability,” Starboard CEO Jeffrey Smith wrote in Thursday’s letter.

As part of a process known as a proxy fight, Starboard nominated nine alternative candidates to oppose Mayer and Yahoo’s other current directors at the company’s annual shareholder meeting in June.

The list of alternatives includes Smith, who has been publicly skewering Yahoo for the past 18 months in an attempt to pressure Mayer into taking drastic steps that he believes will boost the company’s stock price.

Starboard, which owns a 1.7 percent stake in Yahoo, engineered a 2014 proxy battle that tossed out the entire board of Darden Restaurants Inc., the owner of Olive Garden.

In a statement, Yahoo said it would review Starboard’s nominees and respond “in due course.” The Sunnyvale, California, company snubbed Smith’s request for representation on its board two weeks ago when it appointed two directors with no ties to Starboard.

The tussle with Starboard comes at a pivotal time for Yahoo. The current board is currently wrestling with a decision to sell Yahoo’s Internet operations to a list of bidders that could include Verizon Communications, AT&T Inc. and Comcast Corp., or stick to Mayer’s latest plan to revive the company.

Mayer is in the process of laying off 15 percent of Yahoo’s workforce and closing unprofitable services, while trying to pull off a complicated maneuver that would spin off Yahoo’s Internet operations into a newly created company.

If the split is successful, Yahoo would then be left with highly prized stakes in China’s Alibaba Group and Yahoo Japan. Those holdings are the main reason that Yahoo’s stock has more than doubled since the company hired Mayer away from Google in July 2012.

But the stock has dropped by about 30 percent in the past 15 months, driven by a downturn in Alibaba’s shares as well as a loss of investor confidence in Mayer.

“I can’t believe she is still there,” said Phil Davis, CEO of PSW Investments, which sold its holdings in Yahoo in 2013. “They just make bad decision after bad decision over and over again. You almost think anybody else would be an improvement.”

After subtracting its ad commissions, Yahoo’s annual revenue has fallen from $5.4 billion in 2008 to $4.1 billion last year with another decline projected for this year. The erosion has occurred even though advertisers have been steadily boosting their digital spending, but most of that money has been flowing to Google and Facebook.

While continuing to back Mayer, Yahoo’s board last month hired three investment banks to help evaluate potential bidders. Analysts have estimated that Yahoo’s Internet operations, including popular email, sports and finance services, could fetch anywhere from $4 billion to $8 billion in an auction.

BGC Financial analyst Colin Gillis expects Starboard to push for the sale with the backing of most Yahoo shareholders.

“A lot of people want to see Yahoo’s value to be unlocked via a sale, but this board seems to lack some urgency in getting that done,” Gillis said. “This (proxy fight) should help keep the board honest.”

Written by Michael Liedtke of Associated Press

(Source: MSN)

Verizon CEO Confirms Interest in Buying Yahoo

Lowell McAdam, Verizon CEO, speaking on Dec. 8, 2015.
Provided by Justin Solomon/CNBC

Verizon Communications chairman and CEO Lowell McAdam spoke with Jim Cramer of CNBC’s “Mad Money” on Friday, and confirmed the company is considering a bid for Yahoo.

McAdam previously announced the company’s strategy as being broken into three tiers: having great connectivity, owning platforms to drive traffic to its network, and owning content that supports its ecosystem.

This week, Yahoo’s earnings report confirmed the company’s dour prospects, and renewed questions about CEO Marissa Mayer’s strategy. The company is shrinking headcount and cutting expenses, and also said it was mulling strategic alternatives—corporate code for selling assets or cutting a merger deal.

When Cramer asked if Verizon would consider adding Yahoo to its three-tier strategy, McAdams responded “We have to understand the trends. But then at the right price, I think marrying up some of their assets with AOL and the leadership would be good.”

In May 2015, Verizon entered an agreement to buy AOL for $4.4 billion. McAdam said since the purchase, Verizon’s approach has been to keep AOL separate from the core company.

“We put this in an incubator almost and we have been feeding the information from our money subscribers into the AOL engine,” McAdam said.

So while the CEO is not ready to declare victory yet, he stated that adding additional media pieces into AOL might make sense and allow Verizon to turn it into something special.

Yahoo Going Back to the Drawing Board with Alibaba Spinoff

Marissa Mayer: FILE - In this Jan. 7, 2014, file photo, Yahoo president and CEO Marissa Mayer speaks during the International Consumer Electronics Show in Las Vegas. Yahoo announced Wednesday, Dec. 9, 2015, it is scrapping its original plan to spin off its prized stake in China’s Alibaba Group and will instead break off the rest of its business into a new company.
AP Photo/Julie Jacobson

SAN FRANCISCO — Yahoo’s long-running identity crisis is spiraling in a new direction now that the company is abandoning a year’s work on a tax-dodging spinoff to pursue an alternative path that will carve off its Internet business instead.

The about-face announced Wednesday opens another chapter in the dysfunctional drama that has been swirling around Yahoo for most of the past decade and raises more questions about the fate of websites and mobile applications used by hundreds of millions of people around the world.

Many of Yahoo’s 10,700 employees may also be fretting about their job security, with CEO Marissa Mayer promising to announce plans for a cost-cutting reorganization late next month and many analysts speculating that the company’s Internet business will be sold if the latest overhaul doesn’t bear fruit quickly.

The uncertainty and reshuffling threaten to cause more distractions at a time when Yahoo already is struggling to keep up in the race for digital advertising with bigger rivals such as Google and Facebook and nimbler startups. It also may raise more doubts about whether Mayer will be able to turn around Yahoo, even though company Chairman Maynard Webb said Wednesday that the board of directors remains in her corner after three-and-half years on the job.

“The bottom line is the saga continues,” Macquarie Securities analyst Ben Schachter wrote in a Wednesday note titled “The Never-Ending Story.”

The latest twists revolve around Yahoo’s efforts to avoid paying taxes on a $1 billion investment that it made a decade ago in one of China’s hottest Internet companies, Alibaba Group. That investment is now worth $32 billion, far more than the rest of Yahoo’s operations.

Yahoo began this year by drawing up plans to spin off the Alibaba stake into a separate holding company called Aabaco in what was supposed to be a tax-free move. But the Internal Revenue Service jeopardized the plan by refusing to guarantee the Alibaba spinoff would quality for a tax exemption.

Under mounting shareholder pressure, Yahoo scrapped that spinoff Wednesday and said that it will instead try to break off everything but the Alibaba holdings into another company. That process could be even more complicated than the original spinoff and take more than a year before Yahoo shareholders get stock in a newly formed company that has yet to be named.

“This means they have squandered an entire year and now it’s going to take another year while the core business continues to get weaker,” BGC Financial analyst Colin Gillis said.

With Yahoo hanging in limbo, prospective bidders could emerge for the company’s Internet operations, which Wall Street has been valuing at next to nothing amid a decline in revenue. Analysts believe Yahoo’s websites, mobile applications, ad services and well-known brand eventually could be worth $3 billion to $5 billion to a list of suitors that could include AT&T Inc., Verizon Communications, Comcast Corp., IAC/InterActiveCorp and private equity firms that specialized in buying troubled companies.

Webb, though, emphasized there are no plans to sell Yahoo’s Internet business. “We believe that we are tremendously undervalued and we think the best path to unlocking that value is by separating the Alibaba assets from our operating businesses and also turning around the performance in our operating business,” Webb said during a Wednesday conference call.

Those remarks seemed to disappoint investors hoping that Yahoo’s latest change in course might be a precursor to a sale. Yahoo’s stock fell $1.19, or 3.4 percent, to $33.67 in Wednesday’s afternoon trading. As Wall Street’s frustration with Yahoo’s follies has grown, the company’s stock has fallen by about 33 percent so far this year.

Yahoo’s board met last week to review Mayer’s stalled turnaround attempts, as well as whether to move ahead with the previously planned Alibaba spinoff. Although the board unanimously voted in favor of dropping the spinoff, it emerged from last week’s meeting with one less director. The company disclosed Wednesday that Paypal co-founder Max Levchin, a director recruited by Mayer, is resigning from the board to concentrate on running his latest financial services startup.

Mayer said she believes Yahoo’s Internet business in significantly better shape than when she arrived, largely because it is pulling in more traffic and advertising in the increasingly important smartphone and tablet market. Even so, Yahoo’s net revenue declined by 8 percent from the prior year in the third quarter and an even steeper decline is forecast for the current quarter ending in December.

When Yahoo announces those fourth-quarter results next month, Mayer also plans to unveil a shake-up that is supposed to jettison the company’s least profitable products and likely will lead to layoffs.

It will be the latest overhaul of a company that is now on its fifth full-time CEO in the past decade, all of whom have struggled to define what Yahoo’s mission should be. In the backdrop, Yahoo also has had to ward off a hostile takeover bid from Microsoft Corp. and quell shareholder uprisings spearheaded by activist investors Carl Icahn and Daniel Loeb. Another activist shareholder, Jeff Smith of the New York hedge fund Starboard Value, had threatened to lead a mutiny if Yahoo’s board hadn’t backed off from the Alibaba spinoff.

“The narrative around Yahoo and our valuation is complicated,” Mayer said Wednesday during an appearance on the financial news channel CNBC.

The handling of the Alibaba stake is crucial to Yahoo shareholders because of the money involved. If Yahoo is taxed on its gains from the fortuitous investment negotiated by co-founder Jerry Yang, the bill would exceed more than $10 billion.

Yahoo also owns a stake in Yahoo Japan that’s worth $7 billion to $8 billion. The revised plan calls for the Yahoo Japan holdings to move into the new company that will house its Internet operations.

Written by Michael Liedtke of Associated Press

(Source: MSN)

Yahoo Shares Spike on Report Company May Sell Core Assets

Provided by CNBC

Shares in Yahoo jumped 5.6 percent in after-hours trading on the back of a Wall Street Journal report that the troubled company’s board was mulling the sale of its core Internet business.

The WSJ reported that Yahoo’s board would hold a series of meetings from Wednesday to Friday, where it would discuss whether to proceed with the spin-off of more than $30 billion in Alibaba shares, hoist a for-sale sign over Yahoo’s core online businesses or both.

Shortly after the report, more than 300,000 Yahoo shares changed hands, pushing the stock up 5.6 percent to $35.60. The shares had closed near flat at $33.71.

Yahoo chief executive Marissa Mayer is now in the fourth year of her turnaround effort, which faces headwinds ranging from the departure of key executives to uncertainty over the taxation of the massive Alibaba spin-off.

Yahoo declined to comment on the report.

Written by CNBC

(Source: CNBC)