DealBook: Activist Investor to Step Down From Yahoo Board

Steve Marcus/ReutersDaniel S. Loeb, founder of Third Point, at a conference in Las Vegas last year.

2:09 p.m. | Updated To add Third Point’s earnings from its investment in Yahoo and include Yahoo’s afternoon share price.

The activist investor Daniel S. Loeb is parting ways with Yahoo.

Mr. Loeb, whose campaign to change Yahoo culminated in the appointment last year of Marissa Mayer as the company’s chief executive, has submitted his resignation from the board, Yahoo said Monday.

Two other directors originally nominated by Mr. Loeb’s firm, Harry J. Wilson and Michael J. Wolf, are also stepping down. The resignations, effective July 31, will leave Yahoo with a seven-member board, the company said.

In addition, Yahoo has agreed to buy 40 million shares of its stock from Mr. Loeb’s firm, Third Point, at a price of $29.11 a share, the closing price on Friday. That will leave Third Point with about 20 million Yahoo shares, or less than 2 percent of the common stock outstanding.

Third Point, which initially disclosed a 5.15 percent stake in Yahoo in September 2011, more than doubled its investment in less than two years. It initially paid about $509 million for 40 million shares, which it sold on Monday for $1.16 billion.

Yahoo’s stock fell more than 4 percent in trading on Monday, dipping below $28 a share in afternoon trading.

The hiring of Ms. Mayer from Google last July was considered a coup for Yahoo, an aging technology company in need of a fresh direction. She has overseen a string of acquisitions since then, including the $1.1 billion deal for Tumblr in May.

“Since our board’s rigorous search led us to hire Marissa Mayer as C.E.O., Yahoo’s stock price has nearly doubled, delivering significant value for shareholders,” Mr. Loeb said in a statement.

Ms. Mayer’s appointment came after a hard-fought campaign by Mr. Loeb that led to the ouster of the previous chief executive, Scott Thompson, in May of last year.

Yahoo said Monday that Max Levchin, a co-founder of PayPal, would remain on the board. His appointment in December was supported by both Third Point and the board.

The share repurchase plan announced Monday is part of Yahoo’s previously announced plan to buy $1.9 billion of stock, the company said.

“Daniel Loeb had the vision to see Yahoo for its immense potential — the potential to return to greatness as a company and the potential to deliver significant shareholder value,” Ms. Mayer said in a statement. “While there’s still a lot of work ahead, they’ve given us a great foundation.”

Yahoo to Buy Back Shares From Third Point

Three Yahoo board directors appointed by Third Point, including Daniel Loeb, the hedge fund's chief, will resign from Yahoo's board. Third Point will still own about 20 million shares, less than 2 percent of the Internet media company's common stock.

Third Point's decision to sell shares of Yahoo comes as the struggling Internet's company's stock has surged more than 80 percent during the past 12 months, due largely to aggressive share buybacks and the value of Yahoo's Asian assets.

It was not immediately clear why Third Point was selling its shares now. Third Point declined to comment, but Loeb expressed his confidence in Yahoo's prospects in a statement on Monday.

Given the gains in Yahoo's shares, Third Point may have decided it was prudent to sell some of its holdings, said JMP Securities analyst Ronald Josey.

But Loeb's move may be prompting other shareholders to similarly re-evaluate their investment, he said.

"Probably a lot of investors are saying 'We had a pretty good run here, it makes sense to take some off the table,'" Josey said, adding, "Much like a lot of investors followed Third Point in, a lot will follow Third Point out."

Yahoo, which plans to fund the Third Point transaction primarily with cash, said it would increase earnings per share.

After the deal, about $700 million will remain under a $5 billion overall buyback authorization that Yahoo announced last year.

Third Point settled a bitter proxy battle with Yahoo last year after months of criticising the company. Loeb was instrumental in selecting former Google Inc executive Marissa Mayer to join Yahoo as CEO.

The resignations of directors Loeb, Harry J. Wilson, and Michael J. Wolf were part of Yahoo's settlement with Third Point in May 2012, Yahoo said.

Yahoo shares fell 4.3 percent, or $1.25, to $27.86 on Nasdaq in midday trading.

(This story adds "per share" to first paragraph)

(Additional reporting by Sinead Carew; Editing by Jeffrey Benkoe and Leslie Gevirtz)

‘Saturday Night Live’ Archives Moving to Yahoo

But it’s reality now, as the owner of the “S.N.L.” archive, Broadway Video, tries to wring a profit out of the old episodes. On Wednesday, Yahoo announced that it had acquired the exclusive rights to classic clips from 1975 through 2012, effective in September. The clips will be removed from Hulu and NBC.com, where they currently reside, and be shown instead on Yahoo, which wants to share in the buzz the show creates.

The deal between Broadway Video and Yahoo highlights the jockeying among companies that want to have a library of online videos to call their own. A dizzying number of online video producers are pitching their programs to advertisers this month, ahead of the traditional television upfront sessions in May. While these Web programs’ quantity and quality are increasing quickly, there are doubts about whether the advertising dollars are.

“On one hand, digital video advertising is growing fast and its prominence is increasing,” said Clark Fredricksen of the research firm eMarketer. “On the other, compared to television, online video is an incredibly competitive market, where you have more companies fighting over far less.” Mr. Fredricksen’s company estimates that $4.1 billion will be spent on online video ads this year, in contrast to $66.4 billion on television ads.

“There are a handful of major conglomerates who split revenues from the huge TV-ad pie,” Mr. Fredricksen said, “while the digital video world features hundreds of companies fighting, comparatively, for scraps from the TV table.”

Attaching, barnaclelike, to television might be a way to stand out from the crowd. Yahoo, which is trying for a turnaround under its chief executive, Marissa Mayer, has content-sharing relationships with many major media companies, but its video hub, Yahoo Screen, has lagged rivals like Google, which owns YouTube.

Erin McPherson, a Yahoo vice president who oversees the company’s video business, said the company jumped at the “S.N.L.” opportunity. She said the “S.N.L.” clips would be “widely distributed” across Yahoo, suggesting a strategy that will go beyond the current Yahoo Screen site.

“Rather than competing with Hulu, Netflix or any other platform, we see this as a step toward adding scale and breadth to the great content we are already offering users,” Ms. McPherson said.

Yahoo and Broadway Video declined to comment on terms, but people with knowledge of the arrangement said access to the “S.N.L.” library had cost upward of $10 million a year in the past.

Hulu, the online video Web site owned by Comcast, The News Corporation and the Walt Disney Company, enjoyed an immediate bump in traffic when it added “SNL” to its collection. These days, however, Hulu — which its owners are considering selling — is concentrating on other content. It will promote several of its forthcoming original series at an event for advertisers next week.

Under the deal announced on Wednesday, Hulu will still stream clips and full episodes from the current television season. Yahoo will be able to do that, too. But Yahoo will have the old “S.N.L.” clips all to itself, giving it something special to show off — although only for one year. The deal will be up for renegotiation at that point.

Jack Sullivan, chief executive of Broadway Video, said the deal would let “S.N.L.” increase its distribution internationally, since the clips of classic episodes have generally only been accessible in North America in the past.

For a company like Yahoo, “having TV-like offerings is really important,” said Mike Vorhaus, president of the digital media consulting firm Magid Advisors. That’s because online video ads have partly taken the place of Web display ads, sometimes called banner ads, in advertisers’ budgets; as Mr. Vorhaus put it, “You can only take so much banner money away before there’s no banner money left at all.”

“Now they kind of have to pursue TV money,” he added.

Along the way they’re becoming more like TV. Earlier this year, a sendup of dating reality shows created by Yahoo, “Burning Love,” was deemed worthy of running on the cable channel E! as well. Sony, another company that will be presenting to advertisers next week, was recognized for treating Jerry Seinfeld’s experimental Web series “Comedians in Cars Getting Coffee” like a TV series when it ordered a 24-episode second season.

And Netflix, the ad-free streaming service that so many other companies want to resemble, was praised for commissioning “House of Cards,” the Washington thriller that could have fit right in on HBO or AMC. On Wednesday night, Netflix released a long-term vision statement for investors that summed up why it and so many of its competitors are optimistic about their chances: “While Internet TV is only a very small percent of video viewing today, we think it will grow every year,” it said, citing faster Internet speeds, sales of Internet-connected TV sets, improvements to TV apps and the possibilities for personalized online video ads.

The competition for Internet TV viewing, it concluded, “is just beginning.”

Bits Blog: Carol Bartz on the Yahoo Board That Fired Her and Advice for Marissa Mayer

If Carol Bartz, the former chief executive of Yahoo, could go back in time, she would have changed one thing about her relationship with the board that fired her by phone last year.

Ms. Bartz would have spent more time understanding the relationships between the board members, she said Tuesday at Fortune’s Most Powerful Women summit in Laguna Niguel, Calif.

Alex Gallardo/Reuters Carol Bartz at Fortune’s Most Powerful Women event.

“I didn’t understand or have the time or take the time — that’s a much better thing to say, take the time — to understand the relationships they had between themselves,” she said.

How could she have done that as chief executive? “Well, you go in the men’s room,” she said. In reality, she added, she should have arranged dinners with two board members at a time.

Ms. Bartz gave Yahoo’s former board some credit — but also a little dig.

“Unfortunately for the board, they had gone through one year of the acquisition battle with Microsoft,” she said. “And in fairness to them, they just wanted it to be simple, like no more press, no more anything. But the business is tougher than that.”

Now Marissa Mayer has taken over as chief executive of Yahoo, with an entirely new board. Ms. Bartz said she and Ms. Mayer have spoken about the job.

Her advice for Ms. Mayer was to understand that change at such a big company is hard. Ms. Mayer is trying to change Yahoo’s culture in ways big and small, like serving free food and acquiring more startups.

“One piece of advice I would give her is changing culture is not a sprint, it’s a marathon,” Ms. Bartz said. “It’s very, very hard to affect culture. And you can get surprised thinking you’re farther down the path of change than you really are because, frankly, most of us like the way things are.”

Employees might nod when an executive suggests changes, she said, “then they go back to their cube and go, ‘I ain’t doing that.’ And so I think that’s important for all of us, is to realize how stuck individuals can be, much less 14,000 people.”

Ms. Bartz did not rule out taking another chief executive role, saying she is an opportunist rather than a planner.

“I grew up in a small town in Wisconsin,” she said. “I never thought I’d be where I am. I never thought I’d have bling,” she said, flashing the rings on her fingers before adding, with perfect comic timing, “that I bought.”

Ms. Bartz is the lead director of Cisco Systems, where she has been on the board for two decades, and she has also served on seven other public company boards during that time.

The difference between a good board and a bad one, she said, is not panicking, which she said the Cisco board achieves, and being genuinely interested in the company rather than prestige or money.

She said she has turned down board positions from banks because “I like banks because they keep my money safe, but I don’t want to talk about banks 12 times a year.”

Directors who are genuinely interested will take the time to get to know one another and the executives, but not be afraid to fire one another, she said.

“When trouble strikes, which it always does — bad economy, bad quarter, activists, takeover — when trouble strikes, those board members who don’t understand or are not committed are not helpful,” she said.