Yahoo (NASDAQ:YHOO) is being set up for a palace revolution by hedge fund Starboard Value which on Thursday insisted the entire board be axed and replaced by its own picks, including Starboard managing partner Jeffrey C Smith.
Activist shareholder Smith described the drastic action as necessary following an “atrocious”, “appalling” financial track record, and added that Yahoo's predictions that it would turn around after a notable low point in the third quarter of 2014, “[earnings] actually fell 47% year-over-year”.
Once one of the kings of the tech scene, Yahoo has struggled to find its niche in an evolving digital world and under current chief executive Marissa Mayer, its attempts to find inroads in sectors including online media have failed.
“[W]e have been extremely disappointed with Yahoo’s dismal financial performance, poor management execution, egregious compensation and hiring practices, and general lack of accountability and oversight by the Board,” wrote Smith in a letter to fellow shareholders. “We believe the board clearly lacks the leadership, objectivity, and perspective needed to make decisions that are in the best interests of shareholders,” Smith stated.
Following a string of losses in new business units including news and video – the latter resulting in a $42mln writedown last year – Yahoo is attempting to sell off its core business and retain only its main moneymaking proposition: a stake in Chinese e-commerce business Alibaba.
Starboard owns 1.7% of the company, an investment of approximately $570m, Smith wrote. He estimates the value of the company less Alibaba (called the “Yahoo stub” by traders) at near zero.
Yahoo shares were down 0.14% at $34.75. Still, the stock is at high levels not seen since early December.