Bloomberg News

Yahoo’s Shakeup Puts Pressure on Directors to Sell Asian Assets

February 09, 2012

Feb. 8 (Bloomberg) -- Yahoo! Inc.’s board shakeup that led to the departure of Chairman Roy Bostock adds to pressure on the company to sell Asian assets valued at more than $10 billion and reverse the sales slump that’s plagued management since 2008.

Yahoo added two new board members and announced the departure of four others, including Bostock, who won’t stand for re-election at the company’s shareholder meeting this year. Yesterday’s overhaul means all of Yahoo’s directors will have joined in the past two years, generating optimism that new officials will be more aggressive about revamping the company.

Under Bostock and co-founder Jerry Yang, who severed ties to Yahoo last month, the company has faced criticism for spurning a takeover offer by Microsoft Corp., losing search- market share to Google Inc. and failing to extract value from Asian assets, including a stake in Alibaba Group Holding Ltd. The board, aiming to please investors, may make more of an effort to sell the Asian investments, said Herman Leung, an analyst at Susquehanna International Group in San Francisco.

“With Jerry gone and now Bostock gone, it’s kind of a changing of regime in its entirety -- something needs to happen with the Asian assets,” said Leung, who rates the stock “neutral.” “There are no more excuses.”

Yahoo, the largest U.S. Web portal, embarked on a review of its strategic options in September, following the ouster of Chief Executive Officer Carol Bartz. It weighed proposals for equity investments without receiving an attractive offer, Yahoo said yesterday in a statement.

Talks Continue

The company also said it continues to discuss a possible sale of its holdings in Asian assets and that it’s devoting “significant resources to these discussions.” Yahoo has minority stakes in Yahoo Japan and Alibaba, the biggest e- commerce company in China.

The value of those assets is about $11.5 billion, according to Sameet Sinha, an analyst at B. Riley & Co. in San Francisco. The current board may aim to announce a deal to sell the assets before the shareholders’ meeting, he said. Yahoo hasn’t announced the timing for this year’s meeting, though it typically occurs in June.

Shares of Sunnyvale, California-based Yahoo gained less than 1 percent to $15.83 at the close in New York yesterday. The stock has dropped 1.9 percent this year.

Yahoo is searching for more independent directors, an effort being led by board member Patti Hart, CEO of International Game Technology Inc. Yahoo didn’t name a chairman to replace Bostock yesterday.

Fresh Outlook

“We believe that this reconfigured board, with a fresh set of perspectives and diverse set of skills, will enable the company to move forward even more aggressively,” Yahoo said in the statement.

Alfred Amoroso, a former International Business Machines Corp. executive who served as CEO of Rovi Corp., and Maynard Webb, EBay Inc.’s ex-chief operating officer, will join the board. Besides Bostock, directors Gary Wilson, Arthur Kern and Vyomesh Joshi won’t seek re-election.

Amoroso ran Rovi, a provider of digital home-entertainment products, through the end of 2011. He helped transform it from a company that offered digital-rights management for CDs and DVDs into one focused on video distribution. Amoroso also was CEO of META Group Inc. and CrossWorlds Software Inc., and served as a member of IBM’s worldwide management committee.

‘Logical Choice’

He has significant experience in the business of digital content, said Michael Olson, a media analyst at Piper Jaffray in Minneapolis. “Given Yahoo is pointing to an increased focus on content, Fred would be a logical choice for the board.”

Webb has been chairman of LiveOps Inc., a provider of call- center technology, since 2006 and served as CEO until July 2011. He also was a senior vice president and chief information officer at Gateway Inc. Webb is known throughout Silicon Valley for his deep technical knowledge and ability to execute, said Douglas Carlisle, managing director at Menlo Ventures, who recruited Webb to LiveOps in 2006.

“He’s a guy with a lot of experience running very large and complex Web properties from an operations perspective,” said Carlisle, who still serves on the LiveOps board with Webb. “He’s very highly regarded around the Valley as someone who is very good at getting things done.”

Bostock’s tenure as chairman was tainted by market-share declines, management upheaval and the rejection of a $47.5 billion takeover bid from Microsoft in 2008. Yahoo’s market value is now $19.6 billion, less than half the offer price.

Demanded Resignation

While Yang, a Yahoo co-founder and then CEO, handled much of the negotiations with Microsoft, it was Bostock who co-signed a letter announcing that takeover talks were over. The company said Microsoft’s bid was “not in the best interests of Yahoo stockholders.”

Yahoo investor Third Point LLC ramped up pressure on the company’s board last September, when the firm increased its stake and reiterated a demand that Bostock step down. Daniel Loeb, CEO of Third Point, said he told Bostock and Yang in a phone conversation that he planned to “pursue whatever efforts were necessary to remove Mr. Bostock from the board,” according to a filing. The dialogue ended when “Bostock terminated the call,” Loeb said.

Bostock’s departure follows that of Yang, who resigned from the board and all other positions at the company last month. Scott Thompson, the new CEO, joins from EBay, where he served as president of the company’s PayPal unit.

Better Chances?

“The more of the men who turned down the Microsoft deal leave, the better a chance is we get an Asian deal done faster,” said Laura Martin, an analyst at Needham & Co. in Pasadena, California. She recommends buying the shares, which she doesn’t own herself.

The year after the failed Microsoft takeover, Yahoo brought in Bartz as CEO to help drive a turnaround. When she struggled to revive revenue and Yahoo’s stock price, Bostock fired her by phone on Sept. 6. Sales have declined for the past three straight years.

“We all take pride in the fact that we are positioning Yahoo for success in the future,” Bostock said in yesterday’s statement. “I have every expectation that under Scott’s leadership, working together with the reconstituted board, the company will thrive for many years to come.”

--With assistance from Douglas MacMillan and Cliff Edwards in San Francisco. Editors: Nick Turner, Tom Giles

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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