Activist investment firm Starboard Value LP has urged Yahoo Inc. to undertake a “major overhaul” of its operations by cutting costs and narrowing the firm’s business focus.
While the spinoff of Yahoo’s stake in Chinese e-commerce giant Alibaba was “a good first step”, the US internet firm needs to do much more to unlock value for shareholders, Starboard wrote in a letter to Yahoo Chief Executive Marissa Mayer on Monday, Agence France-Presse reported.
In January, Yahoo announced a plan to create a new unit that would allow it to spin off its Alibaba holdings — estimated at US$40 billion at the time — in a tax-free transaction.
This deal suggested Yahoo’s core business — excluding its stake in Yahoo Japan — was worth little or nothing, based on its share value, AFP noted.
But Starboard says the value Yahoo’s core business could be boosted by some US$11 billion by taking certain steps.
The shareholder firm called for a tax-free spin-off of the Yahoo Japan stake and other measures, including an end to the less profitable businesses and a focus on promising areas.
“We believe the time has come for Yahoo’s management and board to narrow Yahoo’s focus to areas where it can demonstrate a high return on investment and sustainable competitive advantages,” Starboard was quoted as saying in its letter.
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