Yahoo! Inc. YHOO
Three years of failed turnaround have collapsed Yahoo's Core Business; Starboard demands a competitive sale process and leadership change, or it will launch an election contest.
Thesis
Yahoo's $30.5bn market cap is almost entirely explained by its $30bn Alibaba stake plus Yahoo Japan, meaning the market now values the Core Search and Display business at effectively zero. Despite three years and $2.3bn of acquisitions under Marissa Mayer, Core Business adjusted EBITDA is on track to fall 72% from 2012 levels, with EBITDA margin collapsing from ~30% to ~9%, while operating costs have grown by $500m. Starboard argues a sale of the Core Business to strategic or financial buyers — whose interest the Board is allegedly ignoring despite Chairman Maynard Webb's public fiduciary pledge — would be far more tax-efficient than the proposed Core/Yahoo Japan spin. If the Board refuses significant change in management, composition and strategy, Starboard threatens an election contest to replace a majority of directors.
SCQA
Yahoo is a declining internet company whose $30.5bn market cap is almost entirely carried by a $30bn Alibaba stake and its Yahoo Japan interest; the Core Search and Display business is the operating heart.
Under Mayer, Core Business EBITDA is set to drop 72% from 2012 despite $2.3bn of acquisitions and $500m of added costs; the 'Yahoo Stub' trades near zero and the Board is ignoring credible inbound buyers.
Run a real competitive sale process for the Core Business, change management and board composition, and compare sale proceeds against a stand-alone restructuring — or face a proxy contest to replace a majority of directors.
A tax-efficient sale or spin of the Core Business re-rates the Stub from ~zero toward its true value and unlocks the billions of discount currently embedded in Yahoo's share price.
The three reasons
- 1
Yahoo Stub now trades near zero despite $30bn Alibaba stake inside a $30.5bn market cap
- 2
Core Business EBITDA expected to decline 72% vs 2012 despite $2.3bn of acquisitions
- 3
Credible buyers have approached Yahoo but the Board is ignoring the inbound interest
Primary demands
- Run a competitive sale process for the Core Business and engage with inbound buyers
- Replace current management, starting with CEO Marissa Mayer
- Refresh Board composition and strategy
- Abandon reliance on the planned Core Business / Yahoo Japan spin-off as the sole path
- Deeply cut costs, exit unprofitable businesses, overhaul incentive compensation
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Notable slides (4)
Notes
Five-page letter on Starboard letterhead, signed by Jeffrey C. Smith (Managing Member). Single embedded chart on p.2 shows quarterly Core Business Adjusted EBITDA 2012-2015E with a red arrow visual emphasizing the 72% decline. Contains a direct verbatim quote of Chairman Maynard Webb from CNBC (Dec 9 2015) used to expose inconsistency with the Board's alleged stonewalling of buyers. Explicit proxy-contest threat in the closing section pushes this from pure 'letter' toward the pre-proxy stage of Starboard's 2016 Yahoo campaign; classified as follow_up because Starboard had been publicly engaged with Yahoo for over a year. Sum-of-parts logic is informal (Yahoo Stub = market cap minus Alibaba) rather than a full SOP table. No ownership stake disclosed in this document.