SAN FRANCISCO (AP) – Yahoo CEO Marissa Mayer is facing her biggest business decision since she left Google two-and-a-half years ago to lead its struggling rival: how to manage Yahoo’s most valuable asset, a 15 percent stake in Chinese Internet star Alibaba Group worth nearly $37 billion.
“This is a defining moment for her,” says Eric Jackson, managing partner of hedge fund Ironfire Capital, a long-time Yahoo shareholder. “Marissa has a chance to really boost the stock if she plays her cards right.”
Mayer has promised to outline her Alibaba plans on or before Jan. 27, when the company will release its fourth-quarter earnings. Most investors are hoping Mayer will spin off the Alibaba stake to ease Yahoo’s tax bill after the company sells those holdings. Mayer also is under pressure to return windfalls from Yahoo’s Asian investments to shareholders instead of plowing more money into an acquisition strategy that some think hasn’t paid off.
Activist investor Jeffrey Smith has threatened to lead a shareholder rebellion aimed at ousting Mayer if she proposes a plan that doesn’t maximize Yahoo’s tax savings or risks squandering money on far-flung acquisitions.
“Such actions would be a clear indication to us that significant leadership change is required at Yahoo,” Smith wrote in a Jan. 8 letter to Mayer. Smith controls 7.7 million Yahoo shares – a 0.8 percent stake – through Starboard Value LP. The New York hedge fund last year reshuffled the board of directors at Olive Garden owner Darden Restaurants and in 2012, Smith unsuccessfully tried to shake up AOL Inc. In this go-round, Smith is urging Mayer to merge with AOL as part of Yahoo’s spin-off of its Asian investments, and then launch $1 billion in cost cuts, most likely laying off thousands of workers. Smith isn’t keen on Mayer buying anything besides AOL because she has already spent $1.7 billion on a grab-bag of more than three dozen acquisitions that haven’t yet helped lift Yahoo’s revenue.