Hedge fund manager details plan to turn Yahoo around

– Revert to the old logo and bring back the iconic old Yahoo billboard on Route 101 into San Francisco “to send a message that the era of Marissa Mayer is now over”.

Yahoo flipped its reorganization plan last week, announcing it would keep its stake in China’s Alibaba but spin off its core Internet business – creating new uncertainties for the struggling tech giant. Canyon feels that the company, by saying it will spend a year to evaluate the spinoff of the core business, is wasting too much time while its business erodes. Investors have concluded that Yahoo’s Internet business is worth next to nothing, largely because its ad revenue has been sinking for years even though marketers have been steadily increasing their spending on digital campaigns. Mayer has just given birth to identical twin girls and is now on a maternal leave. Instead of spinning off Alibaba, the board of directors said Yahoo would now work to spin off Yahoo’s core businesses, keeping the original company as a holding entity for the Alibaba shares.

The plan will also include replacing Mayer with an operations-focused CEO and introducing a strategic partner to guide the company in navigating tax issues. But Jackson vehemently disagrees with that notion, arguing that Mayer just isn’t up to the job. The document was authored by Eric Jackson, a hedge fund manager at SpringOwl Asset Management which owns a tiny slice of Yahoo stock.

Mayer’s total compensation, if she stays for a full five years at Yahoo, will be $365 million, Jackson says in his presentation, citing SEC filings. SpringOwl also said that Yahoo must “aggressively cut costs” to get the most out of the company, including selling the company’s headquarters and eliminating employee perks like free food and company iPhones.

SpringOwl isn’t a major shareholder in Yahoo, but Mr. Jackson said he has met with several of the company’s largest investors to build support for his plan.

Meanwhile, what Canyon Capital wants-to sell Yahoo now-stemmed from Yahoo’s supposed failure in preparing a backup plan for the Alibaba spinoff.

Yahoo has not yet commented on the new turn of events. “Requiring shareholders to continue to wait for definitive action for another year or more – and extending the tenure of senior management” is “simply unacceptable”.

Canyon’s call to sell the business echoes a recent push by activist investor Starboard, which last month urged Yahoo to halt its Alibaba spinoff and find a buyer for the Internet business. However, last week, Chairman Maynard Webb said the board has not approved a sale process but it has “a fiduciary duty to entertain any offers”.