Yahoo investor urges change in leadership and strategy

A big Yahoo Inc. investor is asking for a leadership change at the company and pushing for the spinoff of its core Internet business.

“Despite over three years of effort and billions spent on acquisitions, the management team that was hired to turn around the core business has failed to produce acceptable results, in turn causing massive declines in profitability and cash flow,” Starboard Value LP said in a letter released Wednesday. “It appears that investors have lost all confidence in management and the board.”

If leadership changes are not forthcoming, Starboard said, an election may be needed to replace some board members.

Starboard did not mention any names in its letter. Marissa Mayer became chief executive of Yahoo in 2012, and Maynard Webb became chairman in 2013.

In a statement, Yahoo reiterated Mayer’s intentions to unveil details of a reorganization this month when the Sunnyvale, Calif., company announces its fourthquarter results. Mayer has promised to close Yahoo’s least profitable services in a purge that analysts believe could result in hundreds of layoffs.

“Our board and management team engage in and maintain regular, open dialogue with all our shareholders and consistently strive to deliver and to maximize shareholder value,” Yahoo said.

With shares down 35% over the last year, Yahoo faces mounting pressure from unhappy shareholders.

Last month, New York hedge fund SpringOwl Asset Management and Los Angeles investment firm Canyon Capital Advisors outlined steps they said Yahoo should take. SpringOwl wanted Yahoo to lay off 9,000 of its 10,700 workers and eliminate free food for employees. Canyon Capital recommended Yahoo sell its Internet business.

Starboard had also threatened to try to overthrow Yahoo’s board if the company continued with plans to break off its $31-billion stake in China’s Alibaba Group. Yahoo eventually scrapped that plan and instead announced the spinoff of its Internet operations.

Starboard said Wednesday that it thinks Yahoo can improve the performance of the core business and separate its assets.

Yahoo’s stock slid four cents, or 0.1%, to close Wednesday at $32.16.