Yahoo CEO Bartz Confronts Impatient Investors at Meeting
Chairman Roy Bostock voiced his support for Bartz, and stockholders approved Bartz’s and Bostock’s re-election to the board with about 80 percent of the votes. Other directors got at least 90 percent, according to the results Yahoo announced at the meeting in Santa Clara, California.
“The hard-won progress that we have made is why this board is very supportive of Carol and the management team,” Bostock said in his opening remarks to shareholders. “I want to make it very clear about that support. We are confident that Yahoo is headed in the right direction.”
Investors, including some at the meeting, have expressed frustration with Yahoo’s growth prospects and the way it has handled Asian assets that analysts say may make up more than half its value. Under Bartz, who is more than halfway through her contract, Yahoo has slashed costs with job cuts and a partnership with Microsoft Corp. (MSFT) Still, Yahoo’s U.S. search market share has stalled at about 16 percent since December, according to ComScore Inc.
“Some of the longer-term shareholders have been very patient,” Ryan Jacob, portfolio manager of the Jacob Internet Fund in Los Angeles, said in a phone interview before the meeting. “That patience is slowly coming to an end.”
Yahoo fell 15 cents to $15.08 at 4 p.m. New York time on the Nasdaq Stock Market. Shares of the Sunnyvale, California-based company have gained 1.7 percent since last year’s meeting, compared with a 21 percent jump in the technology-laden Nasdaq Composite Index. The Nasdaq Composite’s gain has outpaced Yahoo’s by almost three times since Bartz was named CEO in January 2009.
“The honeymoon’s long over,” said Colin Gillis, an analyst with BGC Partners LP in New York. He rates the stock a hold and doesn’t own it. “While the company is turning around, the competition continues to grow in the space.”
Dana Lengkeek, a spokeswoman for Yahoo, declined to comment.
The company’s Asian assets, including stakes in China’s Alibaba Group Holding Ltd. and Yahoo Japan Corp. (4689), give the company a value of about $25 a share, said Adam Seessel, a portfolio manager of the RiverPark/Gravity Long-Biased Fund, which has about $10 million under management. Yahoo’s turnaround effort may take time, he said.
“The stock price will tell you that no one thinks anything good is going to happen to Yahoo,” Seessel said.
Other investors, such as Greenlight Capital Inc.’s David Einhorn, also have said the company’s Asian holdings make it an attractive investment. Greenlight announced earlier this year that it had acquired a stake in Yahoo, saying its most valuable asset was its stake in Alibaba Group.
Alibaba Group, which owns e-commerce businesses in China, helps Yahoo investors benefit from growth in the world’s largest Internet market. Yahoo’s 43 percent holding in Alibaba may account for as much as three-fourths of Yahoo’s market capitalization, according to analysts including Sandeep Aggarwal of Caris & Co. in San Francisco. Japan’s Softbank Corp. also owns a stake in Alibaba.
Yahoo shares have fallen 19 percent since the company revealed in a regulatory filing last month that Alibaba Group had transferred its online-payments unit, Alipay, to a Chinese company mostly owned by Alibaba CEO Jack Ma. The shift, which helped Alipay comply with foreign-ownership restrictions in China, fueled concern that Yahoo’s stake would lose value.
Yahoo, Alibaba and Softbank said in a joint statement this week they are making “substantive” progress toward an agreement on Alipay about compensation for the loss of the unit. Bartz said during today’s meeting she is encouraged with the progress of the talks with Alibaba, without giving more details.
The company is also considering ways to get more value from Yahoo Japan, Chief Financial Officer Tim Morse said last month. Options include spinning it off or creating a tracking stock, he said.
As Bartz’s team works on Yahoo’s Asia assets, she also faces increasing competition for the company’s main business, which includes the home page, e-mail service and news features. Yahoo, which makes money selling ads that run alongside its services, is the fourth-most visited website in the world, dropping from No. 3 last year, according to ComScore. Google Inc. (GOOG) remains No. 1, followed by Microsoft and Facebook Inc.
Yahoo’s sales dropped 13 percent from 2008 to 2010, while Google’s rose 35 percent. Google’s share of U.S. search was more than four times Yahoo’s in May, according to ComScore. Bartz, aiming to reduce costs, outsourced some search technology in an agreement with Microsoft that got under way last year. Ad sales tied to the searches haven’t met expectations, something both companies are working to rectify, Bartz said earlier this year.
The company, which has sold some businesses under Bartz, has been trying to improve its offerings to consumers and advertisers. Yahoo unveiled a new search service earlier this year that gives answers to users as they type, called Search Direct. The company’s original video content boosted its programs’ audience size by 80 percent in the first quarter, with time spent doubling on that service.
Still, social-networking site Facebook, which Bartz said last year is a bigger competitor than Google, is set to overtake Yahoo this year for the biggest share of the U.S. online display-advertising market, according to EMarketer Inc.
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