Yahoo's latest moves baffle some
SAN FRANCISCO -- Even as Yahoo rolls out a fresh batch of social and mobile products and services, its strategic moves continue to baffle investors and analysts alike.
And at least one major shareholder isn't happy. Hedge fund manager Daniel Loeb, in a letter to Yahoo's board on Friday, pushed for the ouster of director and company co-founder Jerry Yang. Loeb, who owns a 5.2% slice of Yahoo through a fund called Third Point, asserts that Yang has too many conflicts of interest.
Chief among them is Loeb's contention that Yang is in discussions with several buyout firms about joining forces to acquire a controlling stake in Yahoo. Loeb's letter names the Blackstone Group, KKR, Providence Equity Partners, Silver Lake Partners and Texas Pacific Group as firms talking to Yang, who co-founded Yahoo in 1995 with David Filo.
Yang had no comment.
The shareholder hullabaloo is just the latest distraction for the scuffling Internet pioneer. Though the online display ad market is growing in the U.S.— especially in the sale of targeted ads based on unique data — Yahoo badly lags behind Facebook and Google. At the same time, Yahoo made "no strides forward in the dominant technology trends — social, mobile and cloud. And, if anything, they've lost even more ground," says Jonathan Yarmis, an independent tech analyst.
In September, Yahoo booted Carol Bartz as CEO after she failed to reverse its flagging fortunes despite 2½ years on the job. Then the board hired investment bankers Goldman Sachs Group and Allen & Co. to help the company explore its strategic options. In recent months, Yahoo has padded its editorial ranks, stealing key execs from CBS Interactive. Last week, the company bought online ad network Interclick for $270 million and bolstered its mobile and social efforts.
The confluence of seemingly conflicting strategies has confounded followers of the Internet company, inspiring the latest parlor game in Silicon Valley: What, exactly, is Yahoo's end game?
"Good question," says a perplexed Michael Gartenberg, an analyst at Gartner.
Yahoo's answer is that the board is exploring a wide range of options. "We can assure all Yahoo shareholders that whatever the outcome of the strategic review process may be, it will serve the best interests of all the company's shareholders," the company said in a statement late Friday.
In a Sept. 23 memo to employees, Yang, Filo and Yahoo Chairman Roy Bostock said the search is on for a full-time CEO and that company advisers are fielding offers from potential business partners. USA TODAY obtained a copy of the memo.
In the weeks since Bartz was bounced, Yahoo has had a flurry of activity under interim CEO Tim Morse. Last month, it announced a content-sharing and distribution partnership with ABC News and rolled out more than a dozen original Web series featuring actors such as Morgan Spurlock and Judy Greer.
But the purchase of Interclick — which reaches more than 120 million unique users a month, according to market researcher ComScore — is a head-scratcher because Yahoo already owns ad network BlueLithium, which has not panned out, analysts say.
"The challenge for Yahoo is to do a better job integrating Interclick into the technology stack than it has done in integrating previous media purchases, including Right Media and BlueLithium," says Kevin Lee, CEO of market researcher Didit.
