Yahoo (YHOO)! Inc. investor Third Point LLC escalated pressure for management change at the Web portal, urging directors to immediately replace Chief Executive Officer Scott Thompson over his misrepresented academic credentials.
Chief Financial Officer Tim Morse or Ross Levinsohn, head of global media, should become interim chief, Third Point CEO Daniel Loeb said in a letter to the company’s board today. Loeb also demanded his slate of directors be added to the board right away, and said one of his representatives, Michael Wolf, should chair the search committee for a permanent CEO.
Loeb’s fresh entreaties come a day after Yahoo director Patti Hart said she would step down amid questions about her role in hiring Thompson, who the company inaccurately said had a computer science degree. Third Point called for Thompson’s removal last week, and Yahoo’s board yesterday said it was setting up a special committee to review the matter.
“Third Point has over $1 billion invested in Yahoo, and we take no joy in witnessing this carnage,” said Loeb, whose fund has $9 billion in assets. “This board’s unchecked value destruction must stop once and for all.”
The fallout marks a setback for Thompson, who joined from EBay Inc. (EBAY) in January and is attempting to revive Yahoo’s growth. He replaced Carol Bartz, who was dismissed in September amid falling sales and market-share losses to Google Inc. and Facebook Inc.
“He’s used the thing that’s come up with Scott as kind of the pawn of the chess match,” said Martin Pyykkonen, an analyst at Wedge Partners Corp. in Greenwood Village, Colorado, in an interview referring to Loeb. “The facts are embarrassing. There’s no question about that.”
Yahoo declined 0.4 percent to $15.30 at the close in New York. The stock has dropped 5.1 percent this year.
“This was a flawed process,” said Colin Gillis, an analyst at BGC Partners in New York who has a hold rating on the stock and doesn’t own it. “What’s happening is that Third Point’s case -- that the board is not functioning effectively -- has been strengthened.”
Sunnyvale, California-based Yahoo said yesterday it formed a committee of three recently appointed independent board members to review Thompson’s academic credentials and the vetting process that preceded his selection as CEO.
Dana Lengkeek, spokeswoman for Yahoo, referred to yesterday’s committee announcement when asked for comment on today’s letter from Loeb.
In a statement yesterday confirming Hart’s planned exit as a director, the Yahoo board said, “we thank Patti for her years of service and wish her all the best.”
The review committee’s chairman is Alfred Amoroso, who joined in February. The other directors on the panel are John Hayes and Thomas McInerney, who both joined in April. The committee has also retained Terry Bird as independent counsel.
The biography for Thompson listed a bachelor’s degree in computer science from Stonehill College in Easton, Massachusetts, a credential that wasn’t offered until four years after he graduated, Third Point said last week.
Yahoo’s board said last week that it would review the matter and “make an appropriate disclosure to shareholders.” The company had earlier called the discrepancy an “inadvertent error” and said it “in no way alters that fact that Mr. Thompson is a highly qualified executive with a successful track record leading large consumer technology companies.”
Loeb also said Hart inflated her degree. Hart is listed in filings as holding a “bachelor’s degree in marketing and economics” from Illinois State University, Loeb said last week. “However, we understand that Ms. Hart’s degree is in business administration. She received a degree in neither marketing nor economics.”
Yahoo said in its response at the time that “Patti Hart holds a bachelor of science degree in business administration with specialties in marketing and economics from Illinois State University.”
Jay Groves, a spokesman for Illinois State, last week corroborated the business administration degree, saying Hart graduated in 1978 with a concentration in economics and marketing.
In a statement yesterday, Hart cited her duties as CEO of International Game Technology (IGT) as the reason she won’t seek re- election to Yahoo’s board. Philip Satre, chairman of International Game Technology, said that after a review, the company’s directors found “no material inconsistencies” in Hart’s academic credentials.
“We will closely monitor future developments at Yahoo and their impact on Patti’s responsibilities to IGT,” Satre said.