Yahoo 'is about to have a massive heart attack from obesity,' says shareholder attacking the company
In it, he recommends firing chief executive Marissa Mayer, who after four years and $3 billion worth of acquisitions, has presided over a 33% drop in its shares over the last year.
Business Insider caught up with Jackson over the phone Monday afternoon, and his message was pretty simple - Yahoo's board must act now. Yesterday would've been even better.
"The patient is about to have a massive heart attack from obesity and has to be taken care of immediately," he said on a phone call.
Of course, that doesn't mean that any kind of medicine will do.
Starboard Value, another hedge fund with a stake in Yahoo, has suggested that the company chop up its core business of email, web properties and search - a business some on Wall Street have valued at next to nothing - and sell it for parts.
What Jackson and his fund have proposed, though, is quite the opposite. They believe that Yahoo's core business is seriously undervalued, and that other shareholders support that assessment.
That doesn't make their plan any less dramatic though. Yahoo has been in a "delusional" state since former CEO Carol Bartz left the company in 2011, according to Jackson, and that means big changes are required.
"We don't expect Yahoo to become the next Facebook," Jackson told Business Insider. He does, however, believe it is comparable to what Tim Armstrong was holding when he sold AOL to Verizon. AOL was valued at 7x EBITDA, while Yahoo is only valued at around 2.2x without its Asian stakes taxed at 38%.
If the board accepts Jackson's plan or something similar, it will mean serious belt tightening in every aspect of Yahoo's operations.
The plan goes like this:
- Replace Mayer with an operator;
- replace a number of the board's directors;
- bring in a partner that understands digital media;
- reduce headcount to 3,000 employees;
- double down on winners like Yahoo Finance and Sports;
- give up on losers like Yahoo search and Mayer's M&A acquisitions;
- buy back $10 billion worth of stock;
- sell and leaseback its headquarters in Sunnyvale;
- and the most important (and perhaps hardest) of all "look for other value creation opportunities."
"We haven't gotten a response from the board or management yet," Jackson said," but think a lot of the shareholders are pleased that there's another plan out there."
As for whether or not Mayer would go willingly in the event that Jackson's plan gains support, that's another matter.
"I don't think anyone knows - even the people who work closest with her, wouldn't be able to answer that question. There are lots of people who can speculate."