Third Point CEO Daniel Loeb seems to have gotten just about everything he could want from the settlement agreement with Yahoo, disclosed today in an SEC filing. Yahoo agreed to pay Third Point $4M to compensate for its campaign to gain four board seats. Loeb settled for three, including one for himself. In return, Loeb and his colleagues signed a stand-still agreement: They can’t collectively own more than 10% of Yahoo’s voting shares – Third Point already has 5.8%. Also, if the group’s holdings fall below 2%, then they have to resign from the board. Loeb also said he wouldn’t engage in a proxy campaign, or even disparage the company, its directors “or any person who has served as an officer or director of Yahoo!.” That presumably ends Loeb’s effort to investigate how Yahoo came to misrepresent former CEO Scott Thompson’s bachelors’ degree. Meanwhile, Thompson — who just served as CEO for four months — agreed to give up unvested equity awards as well as severance compensation. He does get to keep a cash bonus and restricted stock provided to him when he signed on. Everyone agreed not to disparage Thompson as long as he reciprocates by not trash-talking the company or anyone there.
UPDATE, 12:31 PM: The Wall Street Journal is reporting that Yahoo CEO Scott Thompson told the board over the weekend that he has been diagnosed with thyroid cancer. The WSJ says the disclosure might have impacted the company’s decision to accept Thompson’s resignation. The report adds that Thompson began telling colleagues as early as Friday that he was stepping down. Meanwhile, CNNMoney is reporting that Thompson could owe up to $7 million in upfront bonus money he received when he was hired in January.
PREVIOUS, SUNDAY PM: It’s official: Thompson’s four-month reign is over, following the disclosure that he misrepresented his bachelors’ degree. He “has left the Company,” Yahoo says — and the board has a deal with Third Point CEO Daniel Loeb, who has abandoned his proxy fight. Ross Levinsohn replaces Thompson as interim chief executive “effective immediately.” Roy Bostock has stepped down as Non-Executive Chairman, replaced by Fred Amoroso. In addition, hedge fund manager Loeb and two allies — media consultant Michael Wolf and restructuring expert Harry Wilson — will join the board on Wednesday. Former NBCUniversal CEO Jeff Zucker won’t be with them. With only three board seats going to Loeb’s group, Zucker says he agreed to step aside “to quickly facilitate a settlement.”
Here’s the announcement:
Things are still in flux — the Yahoo board is meeting this morning to discuss, AllThingsD reports. Still, the ability of hedge fund manager Daniel Loeb to force Yahoo’s hand raises big questions about the company’s strategic direction. For now, it seems that Global Media Head Ross Levinsohn will step in as interim CEO after Thompson resigns for “personal reasons.” He got the job in January, but has been under fire since early this month when Loeb disclosed that Thompson had misrepresented his bachelors’ degree, something that Yahoo apparently hadn’t double checked. The company initially said it was an “inadvertent” mistake. Loeb, whose Third Point investment firm owns 5.8% of Yahoo shares, was already waging a proxy fight to have himself and three colleagues — former NBCUniversal chief Jeff Zucker, media consultant Michael Wolf, and corporate restructuring specialist Harry Wilson — named to the board. AllThingsD says that in a plan under discussion, five Yahoo directors will leave immediately clearing the way for Loeb, Wolf and Wilson; Zucker will withdraw. Loeb has been urging the company to clarify its mission and simplify its structure to focus more on its media assets. Loeb wants the company to add to its 40% stake in Chinese Internet company Alibaba Holding Group — the company has been looking to raise cash by selling some of its shares. For the most part, though, Loeb has attacked Yahoo’s management for stiff-arming shareholders such …
Third Point CEO Daniel Loeb, who controls 5.8% of Yahoo’s shares, continues to punch away at the Yahoo board — which seems to already be on the ropes following the disclosure that Thompson misrepresented his bachelor’s degree. This morning Loeb sent directors a letter urging them to place himself and three colleagues (including former NBCUniversal chief Jeff Zucker) on Yahoo’s board. He wants them to name an interim CEO to replace Thompson. And he wants one of his allies, media consultant Michael Wolf, to chair a search committee to find a full time replacement. “Third Point has over $1 billion invested in Yahoo! and we take no joy in witnessing this carnage,” Loeb writes. “This Board’s unchecked value destruction must stop once and for all.”
UPDATE, 12:40 PM: Yahoo‘s board has announced it has formed a special committee to review CEO Scott Thompson’s academic credentials and how they were disclosed during the hiring process. It has brought on an independent counsel to help with the review. “The special committee and the entire Board appreciate the urgency of the situation and the special committee will therefore conduct the review in an independent, thorough and expeditious manner,” the company said. “The Board intends to make the appropriate disclosures to shareholders promptly upon completion of the review.”
PREVIOUS, 12:03 PM: It looks like dissident investor Daniel Loeb and his Third Point has struck a nerve at Yahoo. Bloomberg says Patti Hart was on the committee charged with vetting CEO Scott Thompson for the company, which admitted it inaccurately described Thompson’s college credentials after he was hired away from eBay. Loeb wanted Thompson fired Monday, and said yesterday he was entitled to inspect books and records tied to the board’s decision to hire Thompson, as well as other material that would shed light on the naming of directors Hart, Peter Liguori, John Hayes, Thomas McInerney, Maynard Webb Jr, and Fred Amoroso. Loeb is lobbying to be named to the board along with restructuring expert Harry Wilson, media consultant Michael Wolf, and former NBCUniversal CEO Jeff Zucker. Yahoo says it is reviewing the matter.
This is the next shoe to drop after the board didn’t go along with the demand by Third Point chief Daniel Loeb to fire Yahoo CEO Scott Thompson by noon ET today. The hedge fund manager. who controls 5.8% of Yahoo shares, says that Delaware General Corporation Law entitles him to inspect books and records beginning September 1 tied to the board’s decision to hire Thompson, as well as other material that would shed light on the naming of directors Patti Hart, Peter Liguori, John Hayes, Thomas McInerney, Maynard Webb Jr, and Fred Amoroso. The dissident shareholder has hired law firms Willkie Farr & Gallagher and Bouchard Margules & Friedlander to conduct the inspection on his behalf.
UPDATE, 12:45 PM: Here’s Yahoo’s response to Daniel Loeb: “As we have previously said, the board is reviewing this matter and, upon completion of its review, will make an appropriate disclosure to shareholders.”
PREVIOUS, 12:11 PM: Third Point CEO Daniel Loeb, who owns 5.8% of Yahoo‘s stock, made his demand following the revelation yesterday that the company’s proxy and web site inaccurately described Thompson’s college credential. Yahoo said that he had a bachelor’s degree in accounting and computer science from Stonehill College. But it acknowledged that it made an “inadvertent error” after Loeb checked and discovered that the school didn’t offer a computer science major when Thompson graduated. Loeb says today, in a letter to the board, that the company’s response was “the height of arrogance” — belittling the likelihood that Thompson misrepresented his qualifications, and that the board didn’t double check his information. “Mr. Thompson and the Board should make no mistake: this is a big deal,” Loeb says. “CEOs have been terminated for less at other companies.” He wants the board to fire Thompson “for cause immediately given his demonstrable unsuitability to remain Chief Executive Officer and a director of Yahoo!” If that’s not done by noon ET on Monday,
This isn’t a huge scandal, but it does provide Third Point CEO Daniel Loeb — who owns 5.8% of Yahoo shares — with some fodder for his campaign to shake up the company’s board. It seems that Yahoo’s draft proxy statement and web site say that CEO Scott Thompson earned a bachelor’s degree from Stonehill College in “accounting and computer science.” But Loeb says in a letter today to the board that when he checked, ”Stonehill College informed us that it did not begin awarding computer science degrees until 1983 — four years after Mr. Thompson graduated.” Loeb adds that if Thompson “embellished his academic credentials we think that it 1) undermines his credibility as a technology expert and 2) reflects poorly on the character of the CEO who has been tasked with leading Yahoo! at this critical juncture.”
Yahoo admits that “there was an inadvertent error that stated Mr. Thompson also holds a degree in computer science.” His degree is in business administration with a major in accounting. “This in no way alters that fact that Mr. Thompson is a highly qualified executive with a successful track record leading large consumer technology companies,” Yahoo says.
UPDATE, 3:10 PM: Scott Thompson gave analysts fair warning that they’re in for a roller-coaster ride while he deals with the rot he found at Yahoo after he landed the top job in January. Following his recent 2,000 layoffs, Thompson says he plans to pull the plug on some unnamed technologies, consolidate several business lines, and focus R&D on Yahoo-owned businesses as opposed to initiatives like the one to create platforms for outside publishers. The company “has been doing way too much for too long and has only been doing a few things really well.” Thompson added that Yahoo needs to be “clearer going forward about what we won’t do”, noting that the company “had way too many people for the output” from its businesses. He offered few specifics about what he wants to do, but said while Yahoo doesn’t have to re-invent itself he intends to ”re-invent the experiences our users have” with its most popular websites and services. Notably, Yahoo has to “get good real fast” in mobile services and devices. “Over time we will earn the right to pursue new growth opportunities.”
There’s one more corporate casualty at Yahoo following this week’s 2,000 layoffs: Chief Product Officer Blake Irving, whose operation was hit hard by the sackings, resigned. He opposed CEO Scott Thompson’s decision to let 14% of the company’s workforce go without first articulating a strategy, according to AllThingsD which first reported Irving’s departure. Many of the layoffs were in the engineering and research focused Labs operation. Irving’s also said to dispute corporate plans to dump at least parts of its ad technology and search businesses. Thompson will discuss his corporate vision at a company-wide meeting on Tuesday. A memo about the meeting said it would focus on “core media and communications,” “platforms” and “data,” Reuters says. “The immediate next step for all of us is to get clear on our goals, and then take action and move,” Thompson said in the memo. Yahoo shares are down 10.5% over the last 12 months.
The layoff of “what could be thousands of employees” would come ahead of an announcement the following week of a restructuring at Yahoo, according to the Wall Street Journal’s All Things D blog. The same blog said this was coming earlier this month. The latest report says most of the cuts from the 14,000-plus work force would come in the products, research and marketing divisions and were decided upon during meetings between CEO Scott Thompson and top management held earlier this week. The overhaul, which the report says will turn the struggling Internet giant into a media- and advertising-focused company, isn’t unexpected: Yahoo is struggling to chart a new course amid turmoil at the top with the firing last year of Carol Bartz as CEO and the resignation from the board of co-founder Jerry Yang. Its stock is down 8.1% over the last 12 months, and 15.6% over the last three years.
The damage could be “in the thousands” and could take place by the end of this month, AllThingsD reports. The website says that Yahoo CEO Scott Thompson is targeting the company’s large products organization, as well as “public relations and marketing, research, marginal businesses and weaker regional efforts.” Thompson wants to concentrate on growth businesses, and has hired Boston Consulting Group to help him chart the company’s course. He’s under a lot of pressure to give an adrenaline jolt to the Web content and search company, whose stock is down 14.8% over the last 12 months. Last month, hedge fund Third Point launched a campaign to elect four of its own candidates — including former NBCUniversal chief Jeff Zucker — to the board. “Installing the hand-picked choices of the current board does nothing to allay investor fears that Yahoo is poised to repeat the errors of its past,” the hedge fund said. Yahoo said that Third Point was on a “potentially disruptive path, just as the Company is moving forward under new leadership to aggressively increase the value of Yahoo! for the benefit of all of its shareholders.”
In a letter to shareholders today, Bostock said he and three other Yahoo board members — HP’s Vyomesh Joshi as well as Arthur Kern and Gary Wilson — will not seek re-election at the next shareholders meeting. He also said that former Rovi CEO Alfred Amoroso and LiveOps chairman and former eBay COO Maynard Webb are joining the board, meaning all the directors will have joined since 2010. Yahoo remains on the hunt for more independent directors. The moves are part of initiatives taken to refresh the lagging company. They hired Scott Thompson as CEO to replace the ousted Carol Bartz, who was fired in September. Soon after Thompson arrived, co-founder Jerry Yang resigned from the board. Bostock, who has been chairman since 2008, also addressed the progress of the company’s strategic review to boost value to shareholders — a review that has sparked plenty of speculation over whether Yahoo will put itself up for sale. From the letter:
As part of this review, we have pursued a wide range of discussions with potential partners. We have engaged with potential investors and reviewed proposals concerning an equity investment in the Company, although at this time there have not been any proposals which have been deemed by the Committee to be attractive to our shareholders. We are also in active discussions with our partners in Asia regarding the possibility of restructuring our holdings in Alibaba Group and Yahoo! Japan.
Seems like nothing surprises investors anymore when it comes to Yahoo, which may explain why the company’s shares are nearly flat in after-hours trading despite its lackluster 4Q report. The company came in with net earnings of $296M, down 5% vs the same period last year, on revenues of $1.17B, down 3%. The revenue figure — which doesn’t include traffic acquisition costs — was just slightly lower than the consensus estimate of $1.19B, and diluted earnings, at 24 cents a share, were right on target. The company says that the declines were partly due to a $48M reimbursement it made to Microsoft as part of their search business revenue share agreement. But Yahoo adds that revenue for its display and search ads also fell in 4Q. Newly named CEO Scott Thompson is looking forward, saying that this year he will align resources to bring “innovative new products and experiences to both our users and advertisers.”
Scott Thompson will receive an annual salary of $1 million as Yahoo’s new president and CEO, the company said in a Security and Exchange Commission filing today. His total deal with bonuses and grants could reach as high as $27 million during his first year with the struggling Internet giant. Yahoo said the former PayPal chief will be eligible for a bonus twice his salary each year, along with an annual equity grant with a 2012 target value of $11 million. One-time items include a $1.5 million cash bonus, an inducement grant of $5 million and a grant of restricted stock units with a value of $6.5 million. Meanwhile, the Wall Street Journal is reporting that Yahoo has hired a search firm to identify possible additions — and likely replacements — to the board of directors. The group that includes chairman Roy Bostock and co-founder Jerry Yang has been criticized by shareholders as the company contemplates its future. Today’s SEC filing also said Yahoo has increased the size of its board from nine to 10 members, adding Thompson as a director.
UPDATE: New Yahoo CEO Scott Thompson Joins Strategic Review Effort As Company Vows To Stay Publicly Traded
UPDATE, 7:35 AM: Chairman Roy Bostock said in a conference call that Yahoo handed the CEO job to Scott Thompson, a technology guy from PayPal, instead of to a turnaround or media specialist because “the key to success in advertising is providing a great customer experience.” He added that ”Scott knows how to reach out to [advertisers] and learn what they need and what they want.” Bostock wouldn’t discuss Yahoo’s strategic review — except to note that “the primary focus will be on the core business” and that Thompson will be part of the review process. Bostock did say, though, that he expects Yahoo to remain publicly traded. The possibility of going private “is a moot issue as far as I’m concerned.”
As one might expect, the new CEO stuck with broad generalities. “It’s too early for me to have any informed opinions” about the display ad business, Thompson said. His top priorities will be to “grow shareholder value and top-line growth.” Yahoo’s “core assets are stronger than people believe.” Thompson plans to study usage statistics. “Down in the data we’ll find ways to compete and innovate that the world hasn’t seen yet.” He says the changes in the Web over the next five years are “hard to imagine,” but “we’ll be back to innovation and disruptive content” including on mobile devices.
PREVIOUS, 6:19 AM: Yahoo has been driving to become one of the Web’s leading ad-supported content providers, but it turned the top job over to an executive with a deep resume in technology. Scott Thompson was PayPal’s Chief Technology Officer before becoming its President. Before that he was EVP technology solutions at Inovant, a Visa subsidiary that oversees the company’s global technology. He also was Chief Information Officer of Barclays Global Investors, and worked with Coopers and Lybrand to help provide information technology to financial services companies.