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New Yahoo! chief faces board struggle

by Olaf de Senerpont Domis  |  Published February 15, 2012 at 5:11 PM
After just five weeks at the helm, Yahoo! Inc. CEO Scott Thompson is getting a taste of the challenges he faces.

Not only is the former PayPal chief tasked with turning Yahoo! around as it struggles to avoid being left in the dust by rivals and manage complex talks to squeeze value out of the company's Asian assets, but now Thompson faces a power struggle in Yahoo!'s boardroom.

Shares of the Sunnyvale, Calif.-based company closed down 1.59%, to $15.12, Wednesday, Feb. 15, after Third Point LLC chief executive and founder Daniel Loeb, one of the company's largest shareholders, unveiled plans to nominate a slate of directors for Yahoo!'s board. This followed reports earlier Tuesday that talks had broken down between Yahoo! and its Asian partners over selling the company's stakes in Alibaba.com Corp. and Yahoo! Japan, valued at roughly $17 billion. Yahoo! shares closed Tuesday at $15.36 each, a 4.7% decrease for the day.

"You could say Thompson definitely has his plate full right now," Susquehanna Financial Group LLLP analyst Herman Leung said.

Loeb, one of Yahoo!'s most vocal critics whose hedge fund holds a 5.6% stake in the company, in a regulatory filing Tuesday afternoon said he was "pleased" about the news Feb. 7 that Yahoo! chairman Roy Bostock (whom Loeb had earlier called a "destroyer of value") and three other board members would not stand for re-election at the company's next annual meeting.

But he said neither the restructured board nor the departure last month of Yahoo! co-founder and former board member Jerry Yang addresses the company's need for media expertise and corporate restructuring.

"Installing the handpicked choices of the current board does nothing to allay investor fears that Yahoo is poised to repeat the errors of its past," wrote Loeb, who in the past has advocated a sale of Yahoo!. "The reluctance of the Board to prioritize shareholder value to date -- evidenced by years of deferring and delaying comprehensive strategic initiatives and missing out on myriad accretive transactions and strategic opportunities -- will no longer be tolerated or endorsed by investors."

Loeb's slate 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.

In a statement issued late Tuesday, Yahoo! said it had discussions with Third Point and other large shareholders about potential nominees for independent directors, and had received several "constructive suggestions" for board additions.

"It is especially disappointing that Mr. Loeb has chosen a potentially disruptive path, just as the company is moving forward under new leadership to aggressively increase the value of Yahoo! for the benefit of all its shareholders," the statement said.

A Third Point representative declined to comment further Wednesday.

While Leung did not view Loeb's move as particularly surprising, he said he did not expect the number of strong candidates the activist investor put forth. As for the breakdown in talks over selling stakes in Yahoo!'s Asian holdings, Leung said Thompson should continue to focus on coming up with a plan to turn the company's operations around and refocus its identity.

"Shareholders want an immediate catalyst, but there really is no rush, because the value of Alibaba will only grow," Leung said. "It is one of the highest valued assets holding up Yahoo!'s stock, so I wouldn't want to sell it if I don't have a really good deal yet."
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Olaf de Senerpont Domis

Bureau chief, West Coast; Editor, venture capital

Olaf de Senerpont Domis, West Coast bureau chief, focuses on venture capital, technology M&A and IPOs, penning the Silicon Valley Special column. Contact



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