What should Yahoo do with itself? Investors have different ideas

An investment fund with a stake in Yahoo (Hanover: YHO.HA – news) called Monday for the struggling Internet firm to slash more than 80 percent of its workforce and replace chief executive Marissa Mayer.

Starboard hasn’t yet issued a public response to Yahoo’s new proposal to spin off the core business and didn’t immediately respond to a request for comment. Yahoo shelved plans to spin off its stake in Chinese e-commerce giant Alibaba Group Holding Ltd last Wednesday, under pressure from investors – including activist Starboard Value – anxious about billions of dollars in tax liabilities that could weigh on the value of the entity. The investor wrote that Yahoo needs to start selling parts of its business off now or risk a further decline in the worth of the company.

“I disagree with this notion that Yahoo can’t be fixed”, said Eric Jackson, managing director of SpringOwl, which has $300 million in assets under management, including an unspecified stake in Yahoo.

SpringOwl, a NY hedge fund, has sent a 99-page presentation to Yahoo’s board that calls for the company to lay off 9,000 of its 10,700 workers and eliminate free food for employees to help save $2 billion annually.

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. The Journal story said another fund, SpringOwl Asset Management, was also criticizing the Yahoo restructuring.

Jackson’s firm also proposes Yahoo cut 9,000 positions and drop its staffing to 3,000 full-time employees and contractors; bring in Liberty Media as a partner; a sale and leaseback of its Sunnyvale property; get out of the search business; and focus on creating more mobile apps for Finance and Sports.

Canyon Capital wants Yahoo to sell its Internet business instead of spinning it off. With cost cutting and improvements to profitability, he predicts it could eventually be acquired for more than $24 billion.

Yahoo management should be “re-cast”, according to SpringOwl.

Yahoo scrapped the Alibaba spin-off after another shareholder, Starboard Value, threatened an attempt to overthrow the board if the company stuck to that plan.

If we’ve said it once, we’ve said it too many times, Marissa Mayer is not having a great time running things over at Yahoo (YHOO).

“We do not understand the board’s continued support of the company’s senior management team, given its track record”, Canyon Capital wrote.

SpringOwl’s sentiment contrasts with that of Starboard Value, the activist investor that prompted Yahoo to announce last week that it was pursuing a different course.

If Yahoo proceeds with its reorganization, the implementation could take years, investors said.