Marissa Mayer’s tenure as Yahoo CEO was dealt a blow Thursday after an activist investor suggested Yahoo should halt an Alibaba spinoff and instead focus on selling its core web portal business.
SunTrust Robinson Humphrey Internet equity analyst Robert Peck said on CNBC Thursday that there’s “a good chance (Mayer) will not be (CEO) in a year. … We would argue that the heat from investors is increasing on her.”
His comments came after the market closed Thursday and after a Forbes magazine article, out earlier in the day, asked in the headline whether these were “The Last Days of Marissa Mayer?” Elsewhere The Wall Street Journal said that it may be time for Mayer “to throw in the towel.”
In his story, Forbes‘ Miguel Helft notes that Mayer inherited a tough situation” who “was supposed to be smart enough to figure a way out.”
The situation at Yahoo is currently “a little rough,” said BGC Partners senior technology analyst Colin Gillis in an interview. But he suggested that some of the difficulty may be that Mayer “is not a turnaround CEO … (and) she doesn’t have restructuring experience.”
Shares of Yahoo (YHOO) closed down 1.08% to $32.62 Thursday after a morning rise to $33.50. That’s a bit worse than what the Nasdaq did for the day — a 0.03% decline.
Starboard Value, which owns nearly 1% of Yahoo shares, called Yahoo’s plan to spinoff its more than $20 billion in Alibaba (BABA) shares too risky in a letter dated Thursday and delivered to Yahoo board chairman Maynard Webb and Yahoo CEO Marissa Mayer and the company’s board of directors.
Details of the letter were first reported by The Wall Street Journal.
Last month, during a conference call with analysts after the release of Yahoo’s third quarter earnings, Mayer said the company planned the spinoff of its 15% stake in the Chinese etailing giant to happen early next year.
Instead, Starboard Value managing member Jeffrey Smith said, Yahoo should explore the sale of its “core Search and Display advertising businesses … and leave Yahoo’s ownership stakes in Alibaba Group and Yahoo Japan in the existing corporate entity.”
Such a move would improve the ability of Yahoo’s Internet business to “better recruit and retain talent,” he said. “Yahoo is the only Silicon Valley company we know that currently has a stock price almost entirely driven by the value of an entity outside of its control. Yahoo is at a disadvantage in recruiting the best talent because its stock price performance does not reflect the performance of Yahoo employees, but rather the performance of Alibaba Group.”
Smith noted that he had offered to join Yahoo’s board to assist the company. Yahoo declined comment on Starboard Value’s letter.
SunTrust Robinson Humphrey’s Peck agreed that a pause in the Alibaba spin-off would give Yahoo’s executive time time to “reassess and see what other options are actually out there. … to maximize shareholder value.”
But Gillis advises against the Starboard option — “It will take too long,” he said. — and recommends continuing the move to spin-off the Alibaba stake. “Once you start breaking it apart, each bit can shine on its own,” he said.
After that, Yahoo’s core business “will become an interesting target for private equity,” Gillis said. That would allow Yahoo to get “out of the public eye and on stable footing.”
Peck agreed that Yahoo’s core business could be enticing to private equity investors or to a media or telecom buyer.
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