Where To Now For Yahoo? Thompson Out, Loeb & Co In

Over the weekend, Yahoo's embattled CEO Scott Thompson finally did the honorable thing and stood down. Ex-President of News Corp's Fox Interactive Media division, Ross Levinsohn, has been named interim Chief Executive Officer. Hedge fund shareholder Daniel Loeb - whose firm Third Point owned 5.8% of Yahoo - and his three cronies have effectively won their long-running battle for seats on the Yahoo board. The board also has a new chairman: Fred Amoroso, the ex-CEO of digital entertainment company Rovi. Amoroso only joined Yahoo's board in February and is said to be "one of Silicon Valley's most enthusiastic proponents of patent warfare."

So now that Daniel Loeb has gotten his way, what can we expect from Yahoo in the coming months? Clearly more patents, if Amoroso's appointment is anything to go by. But Loeb had an agenda, too...

Loeb ran a website called Value Yahoo, which at time of writing is down with a server error. The website promoted the views of Loeb and three other board-seeking Yahoo shareholders: Harry Wilson (who specializes in corporate restructurings and turnarounds), Michael Wolf (ex-President and COO of MTV Networks) and Jeff Zucker (the one who didn't get appointed; he was ex-President and CEO of NBC Universal). Collectively, these four men called themselves "The Shareholder Slate."

The Shareholder Slate is only interested in one thing: increasing Yahoo's share price in order to make a buck. Loeb and co talk about "increasing value," but they are referring to monetary value. This isn't about creating "societal value," as Henry Blodget described Mark Zuckerberg's mission at Facebook.

Loeb & Co's Vision For Yahoo

Plainly put, Loeb and his partners want to optimize Yahoo's assets. Their main complaint with Thompson was that he didn't do enough with Yahoo's Asian interests. In particular Yahoo currently owns 42 percent of Alibaba, a Chinese B2B e-commerce company. Alibaba connects Chinese manufacturers to companies around the world looking for suppliers. According to Loeb and co, Alibaba is worth $35 billion and has "significant growth potential." Specifically, they think it will help drive Yahoo's share price upwards: "a 20 percent increase in the value of Alibaba would drive almost $2.00 in value per Yahoo share."

On its Agenda page, Loeb and co outlined their desire to implement "significant organizational changes to strategically allocate capital and talent toward Yahoo!’s greatest strengths and brightest opportunities." Its list of nine initiatives is wide-ranging - and rather vague. For example, they want Yahoo to grow in the video and mobile segments; which would be in the strategic plan of just about any media company you could name these days.

How Did Scott Thompson's Strategic Plan Differ From Loeb's?

At his first earnings call last month, Yahoo! CEO Scott Thompson talked about reducing Yahoo's size and becoming more focused on its core business. He remarked that Yahoo would be "doing away with everything that does not contribute to its core business of profit-driving ads and e-commerce." He went on to say that Yahoo will get smaller by consolidating its various platforms and jettisoning 50 properties. Yahoo! has already cut 2,000 jobs in order to reduce costs and streamline the business.

So it seems like Thompson had a narrower strategic focus and was more intent on cost-cutting. He also wanted to find new revenue by aggressively licensing Yahoo's intellectual property, a plan he put into place in March by suing Facebook for alleged patent violations.

Patents aren't mentioned at all on Loeb's website, however new chairman Fred Amoroso will likely push for more legal maneuvers. 

What can we expect of new interim CEO Ross Levinsohn? Even though he has a proven track record as a leader in Internet corporations, it's likely his role will be focused on steadying the ship while Amaroso and Loeb agree on the new strategic direction for Yahoo. Loeb has been plotting for many months to steer the Yahoo ship into higher stock price waters; now it looks like he will get an opportunity to do that.

Where To Now For Yahoo?

I'm not entirely convinced that Daniel Loeb's motivations are good for Yahoo long term. They seem more focused on making money for Wall Street shareholders, than returning Yahoo to its roots of being a true innovative force on the Web.

However, the Value Yahoo website and its suggested solutions for Yahoo do at least demonstrate the passion needed to turn Yahoo around. The Yahoo! board has gone through five CEOs in recent times, so it really is desperate times. Let's see if Loeb and co can turn the beleaguered company around - for the benefit of shareholders, employees and Internet fans in general.