Yahoo! Inc. (YHOO) Chief Executive Officer Marissa Mayer has embarked on a strategy review that may result in a reversal of plans to restructure operations and return billions of dollars in cash to shareholders.
The review could mean that the company alters plans to return to shareholders the proceeds from the sale of Yahoo’s stake in Alibaba Group Holding Ltd., Sunnyvale, California-based Yahoo said yesterday in a regulatory filing.
“Mayer is engaging in a review of the company’s business strategy to enhance long term shareholder value,” Yahoo said in the filing. The review will cover Yahoo’s “growth and acquisition strategy, the restructuring plan the company began implementing in the second quarter of 2012, and the company’s cash position and planned capital allocation strategy.”
Mayer, who joined last month as CEO, is trying to drive a turnaround at a company that suffered three straight years of sales declines as Google Inc. and Facebook Inc. did a better job attracting users and advertisers. On her watch, the company may use at least part of the cash from the Alibaba Group deal to improve products and build new ones, said Ron Josey, an analyst at ThinkEquity LLC in New York, who rates the stock a hold.
“She has a license to do what she wants,” he said. “CEO Mayer didn’t come to Yahoo to sort of just wind down assets and return cash to shareholders. I believe she has a longer-term view.”
The shares dropped 5.4 percent to $15.15 at the close in New York, the biggest decline since Oct. 31. The stock has decreased 6.1 percent this year.
Alibaba Group, China’s largest e-commerce provider, said in May that it would repurchase about 20 percent of itself from Yahoo for about $7.1 billion. Yahoo, set to receive at least $6.3 billion in cash from the deal, said at the time that it would return “substantially all” of the cash proceeds, after taxes, to shareholders.
Mayer also is exploring whether to proceed with plans outlined in April to cut about 2,000 jobs and reorganize the company. The announcement was made under then-CEO Scott Thompson, who left in May after failing to correct inaccuracies in his academic record.
While Yahoo is using the review to find ways to step up growth, the prospect of further strategy shifts may prove unsettling for some shareholders, Josey said.
“This is something that has been front and center among investors for the longest time,” he said. “We’re in a transitionary period. Nothing is set in stone. But it just brings a concern about what is the future, where is the company going.”
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