Just last week, Yahoo halted its plans to spin off its $30 billion stakes in Chinese company Alibaba Group Holding Limited because of potential tax risks. Instead, the company intends to form new assets within its core businesses.
In the wake of Yahoo's decision, however, investor dissent is escalating.
If Yahoo proceeds with its reorganization, the implementation could take years, investors said. It will further extend the attempts of CEO Marissa Mayer to turn the company around. Mayer has just given birth to identical twin girls and is currently on a maternal leave.
Investor groups strongly oppose giving Mayer more time to show progress on the turnaround, as they say her efforts have not shown any signs of progress so far. Shareholders have sent out proposals to Yahoo's California headquarters to pressure the board into setting a more precise direction for the company.
The End of an Era?
On Dec. 11, Canyon Capital Advisors LLC sent a letter to Yahoo urging the board to find a buyer for the company's core businesses or the entire company itself. The Los Angeles investment firm is one of the top 15 largest shareholders in Yahoo.
SpringOwl Asset Management LLC, another investor, proposed a plan to reduce the number of Yahoo's employees. The plan will also include replacing Mayer with an operations-focused CEO and introducing a strategic partner to guide the company in navigating tax issues.
"I disagree with this notion that Yahoo can't be fixed," said SpringOwl Managing Director Eric Jackson.
In a 99-slide presentation, Jackson proposed cutting as much as $2 billion in Yahoo's annual costs by terminating about 9,000 of the company's 11,900 employees and contractors. The plan also involves eliminating perks such as free food, selling the company's iconic headquarters and leasing back only the space it needs.
Jackson suggested that Yahoo should revert back to its old logo, bring back its iconic billboard along San Francisco's Highway 101 to indicate that Mayer's stint as CEO and her "era is now over."
Jackson calculated that Yahoo could get about $6 billion if its core businesses were sold. He predicted that with cost-cutting and profitability improvements, the core businesses could even amount to at least $24 billion.
Meanwhile, what Canyon Capital wants--to sell Yahoo now--stemmed from Yahoo's supposed failure in preparing a backup plan for the Alibaba spinoff.
Canyon Capital said requiring shareholders to wait for definitive action for another year or more while Yahoo re-evaluates its decisions is "simply unacceptable."
Canyon's call reflects a previous campaign by activist investor Starboard which in November urged Yahoo to find a buyer for its company.
Yahoo has not yet commented on the new turn of events. However, last week, Chairman Maynard Webb said the board has not approved a sale process but it has "a fiduciary duty to entertain any offers."
Photo : Pan Yu Liu | Flickr