Yahoo’s long-awaited turnaround could be taking another turn.
The company’s board decided last week to nix the spinoff of its stake in Alibaba and instead attempt a complicated “reverse” spinoff of its core business and its stake in Yahoo Japan. Now, Eric Jackson, managing director of SpringOwl Asset Management, is offering an alternate plan, calling for a new CEO, massive layoffs, no more lavish parties, and getting rid of perks like free food and iPhones for employees.
In January, Yahoo CEO Marissa Mayer originally proposed an elaborate restructuring of the company to spin off its 384 million shares of Alibaba, a move that theoretically would avoid incurring any taxes. But the plan was ultimately scrapped Dec. 9, after it became unclear if the deal would go through tax-free.
In a 99-slide presentation, Jackson laid out a detailed plan to turn around Yahoo’s core business. He argued that Starboard’s proposal to sell the core business would not benefit shareholders, given the low price of Yahoo’s stock, which is down about 30% since the beginning of the year. He also noted that Starboard has incentive to see a quick sale since it acquired half its $200 million stake in Yahoo during the third quarter, “likely when the stock crashed below $28/share.” (Yahoo’s stock was trading above $32 in early afternoon trading on Monday.)
“We would prefer a buy low and sell high approach rather than the reverse,” according to the deck, first published by the Wall Street Journal.
SpringOwl isn’t a major shareholder in Yahoo, but Jackson—who for months has called for Mayer to step down—is publicly putting pressure on its board and is also willing to wage a proxy fight, which will have to be filed by March 26, reports the Journal.
Jackson is criticizing Mayer for Yahoo’s lagging mobile business compared with peers such as Facebook and Twitter; selling Yahoo’s stock instead of investing her own money in the company; spending $2.8 billion to acquire companies that haven’t added value to Yahoo; and other spending he deems unnecessary, including:
- giving an iPhone 6 to every employee, estimated to cost about $9.3 million
- gifting all employees with a Jawbone Up on the first anniversary of her tenure, worth about $2 million
- free food for employees, estimated to cost $450 million over four years
- sponsoring the Met Ball, a cost of about $3 million
- sponsoring Davos, estimated to cost $1 million to $2 million
- throwing lavish parties, including a recent Great Gatsby-themed holiday party in San Francisco that’s estimated to cost $7 million
Jackson believes the company can cut $2 billion in costs by reducing its workforce by 75%. He is also proposing the sale of Yahoo’s Sunnyvale campus (a market value of $1.5 billion to $1.8 billion) and instead lease only the space required for a smaller workforce. To really send a message that the era of Mayer is over, he is also pushing for Yahoo to revert to its old logo.
And to those who believe a turnaround of Yahoo’s core business is impossible—with or without Mayer—Jackson has this to say:
“That’s like watching Shaq [Shaquille O’Neal] shoot a few free throws and concluding it’s impossible for all NBA players to make free throws.”
Yahoo did not immediately reply to a request for comment.