Under pressure from activist investor Starboard Value LP, Yahoo CEO Marissa Mayer is expected to offer new details on her turnaround plan during the company’s earnings conference call on Tuesday. Mayer will outline cost-cutting efforts and provide fresh insight on how the company is evaluating potential acquisitions, according to a Wall Street Journal report Sunday, citing a person briefed on the plan.
In particular, Yahoo is said to be considering acquiring one or more prominent technology startups with a portion of the $5.8 billion windfall it gained from the initial public offering of Chinese e-commerce giant Alibaba Group last month.
A Yahoo spokesperson on Monday declined to comment on the report.
Mayer has pursued an aggressive acquisition strategy during her two-plus years in charge of Yahoo, but most of the more than 40 purchases have been of startups to gain talent and technology to bolster its offerings in areas like social media, video and mobile. The biggest deal to date has been the $1.1 billion acquisition of blogging platform Tumblr last year.
After taking a stake in Yahoo last month, Starboard Value urged the Yahoo CEO in a letter to explore a merger with AOL, reduce costs and consider splitting off its core business from its Asian assets, which also include an equity stake in Yahoo Japan. Mayer has previously been said to look unfavorably at an AOL tie-up, questioning the value of joining the two portals.
Starboard has also called for a halt to Yahoo’s current acquisition strategy, which it argues have delivered little value to shareholders. In addition to the acquisitions, Mayer has sought to revive growth at Yahoo by revamping its main Web properties and mobile apps, launching a series of digital magazines, and embracing new ad trends like native advertising.
But so far the moves have not spurred growing revenues, with sales falling in four of the five last quarters. Display advertising in particular has been a weakness -- with sales dropping 7% in the second quarter, and expected to fall by about the same percentage in the current quarter.
To help reverse that pattern, Yahoo last week named former Washington Post Chief Revenue Officer Kevin Gentzel as head of ad sales for North America. Gentzel, whose background includes 13 years at Forbes magazine, brings solid relations with Madison Avenue.
“It’s a big job he’s taking,” Shaun Farrar, VP, director of digital media innovation at Havas Media, told MediaPost, speaking of Gentzel. “He's one of a handful of folks that probably possess the skills, and the passion and the drive, to be able to turn that ship around.”
Myers herself has often stated that turning around Yahoo is a multi-year effort. But the pressure to do so more quickly has only intensified with activist investor Starboard pushing for rapid change. On the cost-cutting front, Yahoo this month laid off almost 500 employees in India and Jordan by consolidating operations in its foreign offices.
For the third quarter, Wall Street analysts expect Yahoo to report net revenue of $1.05 billion -- down slightly from a year ago, and roughly flat with the prior quarter.