Yahoo! defends strategy after Loeb's attack

The board of Yahoo! Inc. Wednesday, May 2, continued to tout its accomplishments over the past several months and urged shareholders to reject an activist slate of board nominees put forth by hedge fund Third Point LLC.

In a letter to shareholders, Sunnyvale, Calif.-based Yahoo! pointed to its appointment in January of former PayPal chief Scott Thompson as CEO, its revamped board of directors, a new business strategy focused on commerce and media and a streamlined corporate structure as evidence of the progress it has made in turning the company around.

"We are confident that when you assess our new board's qualifications against Third Point's slate, you will come to the same conclusion that we did -- that this is the right board with the right mix of skills and experience to lead the company forward to create value for shareholders," Yahoo! said.

New York-based Third Point and its CEO, Daniel Loeb, unveiled a dissident slate of nominees in mid-February. Loeb's list of nominees includes himself; Harry Wilson, CEO of corporate turnaround and restructuring boutique Maeva Group LLC and a former Blackstone Group LP principal; Michael Wolf, who heads Activate Inc., a consulting firm for media companies; and former NBC Universal chief Jeff Zucker.

Yahoo! in March nominated three new directors and at the same time rejected all but one of the nominees -- Wilson -- on Loeb's slate.

Yahoo! said it offered a board seat to Wilson and one other nominee, assuming the company and Third Point could agree on whom it would be. Loeb rejected this, according to Yahoo!, and argued that he must be granted a directorship.

"The board continues to believe that Mr. Loeb himself does not bring the relevant skill set and experience to the board, particularly in comparison to the candidates selected by the board," Yahoo! said. A spokesman for Third Point did not respond to a request for comment Wednesday.

Both Yahoo! and Third Point have created websites promoting their causes ahead of the shareholder meeting: www.yahooforward.com and www.valueyahoo.com, respectively.

Yahoo! reported its first full quarter financial results with Thompson at the helm on April 17. Revenue was flat at $1.07 billion but Yahoo!'s earnings beat Wall Street estimates.

During the conference call detailing the results, Thompson said Yahoo! would be shutting down or "transitioning" 50 of its properties "that don't contribute to the core interest" to help it focus on products like its mail, finance and sports offerings.

Industry watchers are still awaiting a clear strategy to revive Yahoo!, which has a large user base but has fallen behind rivals in most areas where it once held a leading position. That said, some are hopeful that Thompson is moving in the right direction.

"While business trends remain weak versus the internet industry (but more stable), management seems to be more decisive," wrote Bank of America Merrill Lynch analyst Justin Post in a research note issued after Yahoo!'s first quarter earnings release. "It seems management ha a better strategy to find growth than 90 days ago."

Yahoo! shares closed at $15.66, an increase of less than 1%, Wednesday afternoon.

Yahoo! has not set a date for its 2012 shareholder meeting; last year it was held on June 23.