SpringOwl's Yahoo Presentation 12-13-15
SpringOwl's Yahoo Presentation 12-13-15
December 2015
Trimas
InvestorPresentation:
Presentation
Investor
Presentation
Yahoo!
Investor
212.445.7829
Disclaimer
The views expressed herein represent the opinions of SpringOwl Asset Management LLC (SpringOwl"), which opinions are based exclusively on publicly
available information with respect to Yahoo! Inc. ("Yahoo"). These materials are for general informational purposes only. They do not have regard to the
specific investment objective, financial situation, suitability, or the particular need of any specific person who may receive these materials, and should not be
taken as advice on the merits of any investment decision. Opinions expressed herein are current opinions as of the date appearing in this material only.
SpringOIwl disclaims any obligation to update the data, information or opinions contained herein. Unless otherwise indicated, financial information and data
used herein have been derived or obtained from filings made with the applicable regulator by yahoo or other companies that SpringOwl considers comparable,
and from other third party reports
Except for the historical information contained herein, the matters addressed in these materials are forward-looking statements that involve certain risks and
uncertainties. You should be aware that actual results could differ materially from those contained in the forward-looking statements. SpringOwl does not
assume any obligation to update the forward-looking statements. SpringOwl has not sought or obtained consent from any third party to the use herein of
previously published information. Any such information should not be viewed as indicating the support of such third party for the views expressed herein.
Although data and information contained herein have been obtained from sources believed to be reliable, SpringOwl does not guarantee their accuracy,
completeness or fairness. SpringOwl has relied upon and assumed, without independent verification, the accuracy and completeness of all data and
information available from public sources. No warranty is made that any data or information contained herein, whether delivered or obtained from filings made
with a regulator or from any third party. Is accurate SpringOwl shall not be responsible or have any liability for any misinformation contained in any regulatory
filing or third party report.
There is no assurance or guarantee with respect to the prices at which any securities of Yahoo will trade, and such securities may not trade at prices that may
be implied herein. The estimates, projections, pro forma information and potential impact of the proposals set forth herein are based on assumptions that
SpringOwl believes to be reasonable, but there can be no assurance or guarantee that actual results or performance of yahoo will not differ, and such
differences may be material.
SpringOwl currently owns common stock of Yahoo. SpringOwl may from time to time sell all or a portion of its shares in open market transactions or otherwise
(including via short sales), buy additional shares (in open market or privately negotiated transactions or otherwise), or trade in options, puts, calls or other
derivative instruments relating to such shares. SpringOwl also reserves the right to take any actions with respect to its investment in Yahoo as it may deem
appropriate. Including, but not limited to, communicating with management of Yahoo, the board of directors of Yahoo, and other investors. Neither these
materials nor anything contained herein is intended to be nor should it be construed or used as, investment, tax, legal or financial advice, an opinion of the
appropriateness of any security or investment, or an offer, or the solicitation of any offer, to buy or sell any security or investment.
Table of Contents
I. Executive Summary
I.
Company Overview(5)
III.Private Equity Has Tried To Buy Yahoo For Cheap Before (70)
I.
VI. Appendices
I.
Corporate Governance(95)
Executive Summary
Section I
What is
Current Price
52-Week High
52-Week Low
$33.99
$51.68
$27.20
search, communication and digital content. The Company manages its business
$4,268
$477.1
$392.7
Market Cap
Net Cash
Total Debt
Enterprise Value
$33,370
$5,500
$1,217
$25,600
EV/Revenue
EV/EBITDA
EV/EBITDA Ex-Asia Stakes
F P/E
P/FCF
6.0x
53.7x
2.2x1
57.8
NegaZve
photo management and sharing service. Tumblr offers a Web platform and mobile
Total Debt/EBITDA
2.6x
create, share and curate content. Yahoo is also a digital publisher and advertising
geographically: the Americas; Europe, the Middle East and Africa (EMEA), and
Asia Pacific. The Company's products include Search, Communications, Digital
content, Flickr, and Tumblr. Yahoo Search is a search engine which serves as a
starting point to navigate the Internet and discover information, which is ranked
and organized -based on their relevance to the query. Yahoo Mail connects users
across mobile phones, tablets and PC. Yahoo.com offers news and information,
including Yahoo original content and partner content. Flickr is a Web and mobile
applications (particularly on the iOS and Android platforms) that allow users to
technology provider.
Note: As of 12/09/2015
Source: Public Data; ISS Proxy Advisory Services
1 Assumes Asian Stakes taxed at 38%
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Yahoo
Jul-15
Nasdaq
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Yahoo:
-31.0%
Note: As of 12/09/2015
Source: Bloomberg (1-Year Daily Price Chart)
Yahoo:
81.5%
Nasdaq:
71.2%
Dec-12
Dec-13
Dec-14
Yahoo
Dec-15
Nasdaq
Note: As of 12/09/2015
Source: Bloomberg (3-Year Daily Price Chart)
Nasdaq:
94.8%
Yahoo:
105.6%
Dec-10
Dec-11
Dec-12
Dec-13
Nasdaq
Dec-14
Dec-15
Yahoo
Note: As of 12/09/2015
Source: Bloomberg (5-Year Daily Price Chart)
IPO: 09/14/2014
Alibaba:
-10.1%
Yahoo:
-14.9%
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15 Mar-15
Apr-15
Alibaba
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Yahoo!
Note: As of 12/09/2015
Source: Bloomberg (1-Year Daily Price Chart)
- 55%
843
FY 2010
FY 2011
FY 2012
FY 2013
FY 2014
638
Current/LTM
Company
AOL
GOOG
FB
TWTR
Avg.
5-Year EBITDA
Growth
-40%
+97%
+444%
-86%
+100%
($) Millions
6,325
- 21%
4,984
4,987
4,680
FY 2010
FY 2013
4,618
FY 2014
4947.98
FY 2011
FY 2012
Company
AOL
GOOG
FB
TWTR
Avg.
5-Year Revenue
Growth
+6%
+144%
+640%
+690%
+370%
420
88%
278
($) Millions
224
223
Dec 2010A
203
Dec 2011A
Dec 2012A
Dec 2013A
Dec 2014A
3,000
9,000
2,000
8,000
1,000
4,618
10,000
4,680
4,000
4,986
11,000
4,984
5,000
6,324
12,000
6,460
6,000
7,208
13,000
6,969
7,000
6,425
14,000
5,257
8,000
3,574
15,000
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
7,000
0
Revenues
'15
($) Millions
HeadCount
18%
$885M
15%
$9.83B
3%
$6.04B
Yahoo
Apple
Note: As of 10/22/2015
Source: Company Fillings (10K)
Enterprise
Value ($M)
Total
Revenue ($M
with TAC)
TTM
EBITDA
($M)
EV/EBITDA
(Trailing)
Total Debt /
EBITDA
AOL
3,920
2,569
433
7x
1.0x
GOOG
461,890
71,763
23,305
19.82x
0.4x
FB
285,450
15,940
6,600
42.9x
0.01X
TWTR
15,010
1,990
-208
-72.0x
-7.6x
YHOO
25,600
2.2x ex-Asian
Stakes Taxed
at 38%
2.6x
4,948
477
Note: As of 12/09/2015
Source: Bloomberg
Source: 1. http://allthingsd.com/20111130/yahoo-bidders-come-in-at-16-50-to-17-50-with-plan-to-keep-jerry-yang-staying-on-board/
Source:
1. http://www.starboardvalue.com/publications/Starboard_Value_LP_Letter_to_YHOO_08.10.15.pdf
2. http://www.starboardvalue.com/publications/Starboard_Value_LP_Letter_to_YHOO_11.19.15.pdf
Yahoos board announced on December 9th, 2015 that it wont continue with the planned spinoff of its Alibaba
stake, as the potential tax bill for proceeding was too great a risk for the directors to assume that responsibility.
Instead, Yahoos board said it would being working on a plan to spin off the core business and the Yahoo Japan
stake
This would leave just the Alibaba stake as part of the Yahoo stock; the core Yahoo business and Yahoo Japan
stake would trade under another ticker
Some shareholders think Yahoos board is now simply going to sell the core
There is a risk not a certainty that if Yahoo Core is sold or spun, the stake in Alibaba would become taxable on
the gains from the time of Yahoos investment in 2005 to today under the Investment Company Act of 19402
Therefore, Yahoo shareholders would owe a tax bill on the gains of the Core as well as the BABA stake
Why not instead:
Start the real turnaround of the Core with new management and a new board to create $20 30/share in
value for current shareholders?
Study the tax issues in more detail with the help of a partner like a Liberty?
Yahoo Shareholders Want $30/Share More Not $3/Share And Full Tax On BABA
Source: 1 h]p://www.thestreet.com/story/13391744/1/yahoo-shareholders-need-a-be]er-soluZon-than-the-one-just-proposed.html 2. h]ps://www.sec.gov/about/laws/ica40.pdf
If all aspects of our value creation plan are implemented by the company, and if Alibaba
continues to recover, we believe that Yahoos shares may trade over $100/share
Key Drivers to
Unlocking Value In Yahoos Share Price
Getting The Core Business EBITDA back to $2-3B a year
Reducing 9,000 employees as well as free food and other expensive sponsorships would generate at least $2B
a year in EBITDA
The existing core business is generating $600 million a year in EBITDA and can hopefully get back to its more
historical levels of $1B a year
With new operator-focused management and someone like a Liberty as a partner, we expect the core business
would receive an 8x multiple on that EBITDA rather than the current 2x
This change would lead to an incremental $18B in value over the current implied value of the core beyond the
value for which the core could be sold today following Starboards sell at the lows plan
Finding an optimal solution to the 384 million Alibaba shares while Alibaba tracks back to $120/share $25.7B
in incremental value
Finding an optimal solution for the 35% stake in Yahoo Japan $4.3B in incremental value
Optimizing the value of the Sunnyvale real estate $1.8B in incremental value
Reducing the share count
Just reorganizing the core business through cost cuts could create an extra $30/share in value above a Starboard
sell it now outcome; with a recovery in BABA shares and tax efficiencies, Yahoo could break $100/share
Source: SpringOwl Asset Management LLC
CASH
REAL
ESTATE
20.4
5.3
5.5
0
Our Plan
20.4
46.11
25.7
5.3
9.61
4.3
CASH
5.5
CASH
1.5
-4
REAL
ESTATE
REAL
ESTATE
1.82
1.82
24
18
81.2
44
CORE
2.8
CORE
CORE
Mkt Cap
33.9
Mkt Cap
37.2
Mkt Cap
Difference Between
Starboard and Our
Plan
$61.45
$4B Cash
+
$1.8B Real
Estate
+
$4B Debt
Can Retire
228M Shares
At $43/Share
New Share
Count:
716M Shares
If our plan is implemented by the company and just the core business is fixed (with no additional improvement in the value of the Alibaba and YJ
stakes), we believe that Yahoo's stock would trade about $60/share or more than $30/share higher than the plan advocated by Starboard.
Source: SpringOwl Asset Management LLC
Confidential | For Discussion Purposes Only |
Note: 1. Although Real Estate value is being realized, it is being used to retire shares.
2. Through working with a Liberty-like partner to realize tax efficiencies with BABA returning to $120/share and YJ increasing in value by 12%
22
$113.41
Share Count
Reduction
Potential Total
Value
$31.783
$22.462
$35.00
Current Price
$4.411
Starboard's Plan
Core Business
2007
2008
Carl Icahn
Jerry Yang
Seeking And
Becomes
Receiving Board
CEO
Seats
Terry Semel
Hostile Takeover by
Quits
Microsoft
2012
A Revamping of
Yahoos Board
2009
2013
2010
2011
2012
Thompson Resigns
After Having Lied
About His
Undergrad Major In
Computer Science
2014
2015
Marissa Mayer
Becomes CEO
Yahoo tries to get people to get into the habit of showing up on one of their properties every day in the hope that they can a)
get them on other Yahoo properties and b) show ads.
Historically, a lot of users show up every day to check their email, the Yahoo homepage, check their portfolio on Finance,
check scores and playing fantasy on Sports, and do a few searches (all boosted by search/toolbar/homepage deals)
In the really old days, Yahoo even ventured into commerce by trying to sell people stuff
1H2013
Not Material
1H2014
$308M
$1,024M
Facebooks Mobile
Revenue
$2,965M
Facebooks Mobile
Revenue
9.6x Bigger Than Yahoo
$165M
Twitters Mobile Revenue
$406M
Twitters Mobile Revenue
$485M
Yahoos Mobile Revenue
$5,287M
Facebooks Mobile
Revenue
10.9x Bigger Than Yahoo
$744M
Source:
1. http://www.wsj.com/articles/yahoo-be-careful-playing-in-traffic-1449425043
Company Fillings (10K)
20%
88%
74%
Source:
1. Company Fillings (10K)
2. http://www.emarketer.com/Article/Facebook-Twitter-Will-Take-33-Share-of-US-Digital-Display-Market-by-2017/1012274
Marissa Mayer
New Products
Job Cuts
created for
shareholders
Star name
Transformative M&A
negotiated
Media M&A
VS.
July 2012: Yahoo has 18,000 employees, and on paper it should have
closer to 6,000 to 8,000, [Silicon Valley tech investor legend Marc]
Andreessen argues. Every analyst has noted pretty much the same
thing, and to date no CEO has had the guts to cut that deeply, even as
each of them have been vilified for making cuts. Will Mayer be able to
do what most outside observers say is necessary?
Source: https://pando.com/2012/07/16/andreessens-advice-to-marissa-mayer-cut-10000-plus-jobs/;
https://twitter.com/pmarca/status/673646979277131776
Marissa Mayer
New Products
Job Cuts
Star name
Transformative M&A
VS.
Media M&A
The Result?
No new products
Less value ascribed to the Core Business
Ineffective M&A
Job Increases Before Voluntary Attrition
More deals with media partners like ABC, CNBC & Katie Couric like he had negotiated
Essentially, Yahoo shareholders got a watered down version of the Media strategy and a less valuable Yahoo
-$2.5B
-$3B
-$9.5B
in Misallocated Capital
Since 2012
-$4B
spent on Product Development/R&D
leading to No New Successful
Products
This M&A has resulted in Zero Additional Value Implied in the Core Business For Yahoo Shareholders
Company
Stamped
OnTheAir
Snip.it
Alike
Jybe
Summly
Astrid
GoPollGo
MileWise
Loki Studios
Tumblr
PlayerScale
GhostBird Software
Rondee
Business
Social recommendation
OnTheAir
Social network
Social recommendation
Social recommendation
News aggregation, summarization
Productivity
Real-time surveys
Flight rewards management
Mobile gaming
Blogging
Online gaming
Mobile Photography Apps
Video Conferencing
Jul-13
Jul-13
Jul-13
Jul-13
Jul-13
Aug-13
Aug-13
Sep-13
Bignoggins Productions
Qwiki
Xobni
Ztelic
Lexity
Rockmelt
IQ Engines
Hitpost
Fantasy Sports
Automated Video Production
CRM
Social Analytics
ecommerce Analytics
News Aggregator
Image Recognition
Sports
Value
$3M
$4M
$10M
$1M
$1M
$30M
$2M
$1M
$2.5M
$1M
$1,100M
$1M
$1M
$1M
$1M
$50M
$60M
$1M
$35M
$70M
$4M
$2M
Company
Bread
LookFlow
SkyPhrase
Ptch
EvntLive
Quik.io
PeerCDN
Aviate
SPARQ
Cloud Party
Tomfoolery
Incredible Labs
Wander
Distill
Vizify
Blink
PhotoDrive
RayV
Flurry
ClarityRay
Luminate
Bookpad
LittleInc
BrightRoll
Cooliris
Media Group One
Polyvore
Business
Advertising
Image Recognition
Natural Language Processing
Video sharing
Live and on demand music playing
Cross Platform Video Streaming
Content Delivery Network
Intelligent homescreen for the Android OS
Mobile Marketing
Virtual world gaming
Conversation platform
Time Management App
Social Diary
Technical Recruiting
Social media information transformation
Mobile Messaging
Photo Management
Video Streaming Platform
Mobile Analytics
Ad Security
Advertising
Document Handling
Messaging App
Online Video Advertising
Photo Viewing
Advertising and online video
Clothing E-commerce website
Value
$3.5M
$1M
$1M
$7M
$2.3M
$1.3M
$1M
$80M
$1.7M
$1M
$16M
$1M
$1.2M
$1.3M
$1.5M
$1M
$1M
$16M
$300M
$1M
$30M
$15M
$1M
$715M
$28M
$1M
$230M
Price Paid:
$1B1
Price Paid:
$1.1B4
When:
April , 20121
When:
May, 20134
+30M (2012)1
260M (2013)4
Current Users:
+400M3
Current Users:
400M4
$110m (2015)2
$100M (2015)5
$35B (2014)3
$0 Implied
Source:
1.WSJ, Insta-Rich: $1 Billion for Instagram, 2012.
2.Market Watch, Instagram Revenue Forecast To Triple, 2015
3. Citi Group; http://www.wired.com/2015/09/instagram-now-tops-400-million-users-40-billion-photos/
4. Fortune, Was Yahoos Tumblr acquisition a flop?, 2014
5. The Guardian, Tumblr audience up to 420m as Yahoo predicts $100m revenues in 2015
#3
#104
#1
#12
Day after
Christmas
1 Month Post-Yahoo
Buying
The Day Yahoo Bought Tumblr Was Virtually The Day Tumblr Started To Plummet In the App Store
Rankings
(standing in a tree):
million
Source: www.nytimes.com/2015/05/fashion/will-the-met-gala-make-fashion-love-yahoo.html
Source:
1. http://www.businessinsider.com/polyvore-ceo-jess-lee-influenced-by-marissa-mayer-2015
2. http://www.bloomberg.com/news/articles/2015-08-03/yahoo-said-to-pay-230-million-for-shopping-site-polyvore
This is not rocket science. What market research was done by Yahoo to
determine Katie Couric should be the face of them on Snapchat?
- Eric Jackson, Feb 7, 2015, Forbes
Source:
1. https://twitter.com/jyarow/status/560097969475977216
2. http://www.forbes.com/sites/ericjackson/2015/02/07/why-is-katie-couric-doing-yahoo-news-on-snapchat-discover
3. http://adage.com/article/digital/snapchat-drops-yahoo-warner-music-discover/299682/
4. http://www.businessinsider.com/buzzfeed-gets-21-of-its-traffic-from-snapchat-2015-9
Note: Eric Jackson is a current employee of SpringOwl Asset Management LLC
12.7M
Monthly Unique Viewers Vertical
17.2
14.8
13.6
12
10.5
9.8
6.7
Movies Travel
Tech
Food
Beauty
Yahoo has said that it thinks it can do mobile search better than Google
Yahoos search efforts are led by a former Googler: 34 year old Enrique Munoz Torres
Munoz is the SVP of Search even though ex-Yahoo CEO Carol Bartz outsourced Search to Microsoft in 2009 and all
Yahoo search staff left the company
Yet now, Munozs Search group is one of the largest groups within the company1
Munoz said his large group is trying to figure out what search ought to mean
If this search group is 3,000 people and it will take until mid-2017 to launch this product, it will cost the company
shareholders $1.5 Billion
Source: 1. http://www.ozy.com/rising-stars/is-yahoo-really-trying-to-beat-google/65377
Yahoo Mail
Photography
Apps Rankings
Finance Apps
Rankings
#78
#72
#39
Yahoo
Search
Flickr
Tumblr
Sports Apps
Rankings
Sports Apps
Rankings
#8
#5
Yahoo
Sports
Yahoo
Fantasy
Yahoo
Finance
Yahoo Mail
#7
#79
Today
Highest Ever
05/18/2015
#6
#150
Tumblr
#12
Highest Ever
06/21/2013*
Today
Highest Ever
09/06/2013
Yahoo Sports
#104
Today
#6
#150
Highest Ever
05/20/2014
Today
#1
In Search Category:
#38
Highest Ever
04/30/2015
Today
#23
Today
Highest Ever
05/22/2015
In Finance Category:
In Photography Category:
#32
Highest Ever
05/20/2013
#78
#72
Today
#1
#153
Highest Ever
11/09/2013
Today
Note: As of 10/27/2015
Source: Apple App Store
1H2013
Not Material
1H2014
$308M
$1,024M
Facebooks Mobile
Revenue
$2,965M
Facebooks Mobile
Revenue
9.6x Bigger Than Yahoo
$165M
Twitters Mobile Revenue
$406M
Twitters Mobile Revenue
$485M
Yahoos Mobile Revenue
$5,287M
Facebooks Mobile
Revenue
10.9x Bigger Than Yahoo
$744M
20%
88%
74%
Source:
1. Company Fillings (10K)
2. http://www.emarketer.com/Article/Facebook-Twitter-Will-Take-33-Share-of-US-Digital-Display-Market-by-2017/1012274
The vast majority of that total compensation is based on Yahoos stock price which is effectively a proxy for the value
of Alibaba
The only component of her total compensation tied to Yahoo performance is the annual target bonus of $2 million or
$12 million over the 5 years or 3.3% of the $365 million total
Source:
1. http://www.forbes.com/sites/ericjackson/2014/08/17/marissa-mayers-compensation-and-stock-selling-not-linked-to-performance/
2. Company filings (10K & DEFA14)
in the form of stock options = $26.1M already sold + $68.7M still held + $63.2M still to be granted =
$148M
Source:
1. http://www.forbes.com/sites/ericjackson/2014/08/17/marissa-mayers-compensation-and-stock-selling-not-linked-to-performance/
2. http://www.sec.gov/Archives/edgar/data/1011006/000119312512307595/d384719dex101.htm
3. Company filings (10K, DEFA14, and Employment Contract)
Selling is selling
Date
2/7/2014
3/4/2014
4/1/2014
4/15/2014
4/30/2014
5/15/2014
5/30/2014
6/10/2014
6/26/2014
7/10/2014
8/5/2014
8/18/2014
9/5/2014
9/15/2014
10/2/2014
10/16/2014
10/31/2014
11/12/2014
11/25/2014
12/8/2014
12/22/2014
1/8/2015
1/20/2015
4/9/2015
4/16/2015
Total
Prot ($)
$646,588.80
$743,929.20
$628,750.80
$533,566.80
$611,636.40
$537,044.40
$564,811.20
$618,141.60
$530,200.80
$575,550.00
$620,409.60
$634,989.60
$738,036.00
$848,469.60
$760,536.00
$680,536.80
$972,716.40
$1,140,418.80
$1,185,246.00
$1,101,031.20
$1,162,537.20
$1,107,795.60
$1,035,093.60
$5,426,000.00
$2,713,000.00
$26,117,036.40
Source:
1.Company Fillings (Form 4)
2.http://www.bloomberg.com/news/articles/2015-08-19/softbank-s-arora-to-buy-483-million-of-stock-as-personal-bet-
Source: 1. http://www.businessinsider.com/henrique-de-castros-compensation-2014-1
http://www.bloomberg.com/news/articles/2015-08-19/softbank-s-arora-to-buy-483-million-of-stock-as-personal-bet-
IPhone 6
$9.3M
JawBone UP
$2M
Met Ball
$3M/Yr
Free Food
$450M
Davos
$1-2M/Yr
Yahoo also sent Mayer by NetJets with a handful of Yahoo execs to attend Davos. Yahoo was a major sponsor. The
only other Internet company sponsors were Google and Facebook which are 100x the size of Yahoos core
business. Total costs were estimated between $1 2 million. What was the business case for the Met and Davos?
Mayer provides free food for Yahoos workforce. In Sunnyvale, its catered by the Uber-Luxe and organic Bon
Appetit. At 1.5 meals a day per employee, Mayers perk has cost $450M over 4 years. Thats half an Instagram right
there.
The worlds largest start-up? What start-up do you know that would spend $108 million a year of free food?
Source:
1. www.nyZmes.com/2015/05/fashion/will-the-met-gala-make-fashion-love-yahoo.html
2. SpringOwl Asset Management LLC
December 2015
I'd like to now speak about our Q3 results in the context of the key drivers of our business: people, products, traffic,
and revenue. Starting with people, we ended the quarter with 10,700 full-time employees and just under 800
contractors, bringing our overall head count down 14% year over year and down 32% over the current
management's tenure. We will continue to be disciplined on our head count and our thoughtful work on this area has
helped appreciably on expenses. Mayer on Q315 Earnings Call
If Mayer wants to be measured on people, products, traffic, and revenue, she has failed miserably on all 4 over her
nearly 4 years
Source: 1. https://www.theinformation.com/whats-left-at-yahoo
1,086,821
1,042,831
1,043,035
1,040,365
1,002,444
Q1
Q2
2014
Q3
2015
($) In thousands
1,225,970
1,225,673
1,148,140
1,132,730
1,084,191
Q1
Q2
2014
Q3
2015
($) In thousands
Shares
Value
AVG Price
2010
119,000,000
1,749,000,000
14.69
2011
27,476,742
416,272,641
15.15
2012
79,585,394
1,451,637,587
18.24
2013
6,350,973
231,302,437
36.42
2014
46,471,212
2,103,287,055
45.26
Total
$278,884,321
$5,951,499,720
25.952
$2,353,783,669.24
As of 10/25/2015
Note: Dan Loeb (Third Point LLC) quit Yahoos board on July 22,2013- Since then, all of Yahoos stock buybacks are under-water.
Source: SpringOwl Asset Management LLC
In thousands
1,221,691
1,207,146
22%
1,000,000
1,008,487
919,000
885,824
2010
2011
2012
2013
2014
2015
We will continue to be disciplined on our head count and our thoughtful work on this
area has helped appreciably on expenses.
Marissa Mayer, Q315 Earnings Call
Note: As of 10/22/2015
Source: ISS Proxy Advisory Services
($) In thousands
($) In thousands
2,160,309
3,161,589
2,142,818
2,154,886
- 43%
- 13%
1,949,830
1,853,110
1,885,860
1,741,791
1,868,035
2010
2011
2012
2013
2014
1,792,861
2010
2011
2012
2013
2014
Note: As of 10/22/2015
Source: Company Fillings (10K)
6%
2012
2013
2014
2015
- 3%
- 22%
Mayer Hired: July 2012
- 27%
Total Revenue
Americas
EMEA
Asia Pacic
Note: As of 10/22/2015
Source: Company Fillings (10K)
$1,122M
- $199M
$1.5B
- 26%
$1.1B
- $253M
- $80M
- 87%
$190M
- $400M
Stock Compensation
Drop In Profitability
2011
Projected 2015
Correct 2015
$190M
Starboards
Sell At The Lows Plan
Section IV
Source: http://www.prnewswire.com/news-releases/starboard-delivers-letter-to-yahoos-chairman-ceo-and-board-of-directors-300181776.html
We would prefer a buy low and sell high approach rather than the reverse.
While Starboards current stake in Yahoo is about $200 million, half of this stake was bought in Q315 likely when the
stock crashed below $28/share
Starboards most recently acquired stake in Yahoo is likely already well in the money; therefore, they are incented to
see a quick sale of the company for another $2 4/share
Longer tenured Yahoo shareholders would be better served with a plan to unlock $30/share in value and not $3/
share
Source: 1. http://allthingsd.com/20111130/yahoo-bidders-come-in-at-16-50-to-17-50-with-plan-to-keep-jerry-yang-staying-on-board/
Source:
1. http://www.starboardvalue.com/publications/Starboard_Value_LP_Letter_to_YHOO_08.10.15.pdf
2. http://www.starboardvalue.com/publications/Starboard_Value_LP_Letter_to_YHOO_11.19.15.pdf
Yahoos board announced on December 9th, 2015 that it wont continue with the planned spinoff of its Alibaba
stake, as the potential tax bill for proceeding was too great a risk for the directors to assume that responsibility.
Instead, Yahoos board said it would being working on a plan to spin off the core business and the Yahoo Japan
stake
This would leave just the Alibaba stake as part of the Yahoo stock; the core Yahoo business and Yahoo Japan
stake would trade under another ticker
Some shareholders think Yahoos board is now simply going to sell the core
There is a risk not a certainty that if Yahoo Core is sold or spun, the stake in Alibaba would become taxable on
the gains from the time of Yahoos investment in 2005 to today under the Investment Company Act of 19402
Therefore, Yahoo shareholders would owe a tax bill on the gains of the Core as well as the BABA stake
Why not instead:
Start the real turnaround of the Core with new management and a new board to create $20 30/share in
value for current shareholders?
Study the tax issues in more detail with the help of a partner like a Liberty?
Yahoo Shareholders Want $30/Share More Not $3/Share And Full Tax On BABA
Source: 1 h]p://www.thestreet.com/story/13391744/1/yahoo-shareholders-need-a-be]er-soluZon-than-the-one-just-proposed.html 2. h]ps://www.sec.gov/about/laws/ica40.pdf
When Jerry Yang and David Filo agreed to take public shareholders money in 1996, they made a compact: any
future gains created by Yahoo would be shared with those public market investors
When you hear people say that Yahoo should be chopped up by private equity because Yahoo is hopeless,
what theyre really saying is that Yahoos public market shareholders should do a wealth transfer to some private
equity LPs or strategies.
Its nonsense to think Yahoo cant be turned around in public just because they havent for the past 4 years
- @jonsteinberg, CEO of DailyMail.com North America on Mayer's eorts to turn Yahoo around on CNBC,
October 21, 20151
Its not impossible at all, Jon. Thats like watching Shaq shoot a few free throws and concluding its impossible for
all NBA players to make free throws
Source: 1. h]ps://twi]er.com/carlquintanilla/status/656852009094615040
CASH
REAL
ESTATE
20.4
5.3
5.5
0
Our Plan
20.4
46.11
25.7
5.3
9.61
4.3
CASH
5.5
CASH
1.5
-4
REAL
ESTATE
REAL
ESTATE
1.82
1.82
24
18
81.2
44
CORE
2.8
CORE
CORE
Mkt Cap
33.9
Mkt Cap
37.2
Mkt Cap
Difference Between
Starboard and Our
Plan
$61.45
$4B Cash
+
$1.8B Real
Estate
+
$4B Debt
Can Retire
228M Shares
At $43/Share
New Share
Count:
716M Shares
If our plan is implemented by the company and just the core business is fixed (with no additional improvement in the value of the Alibaba and YJ
stakes), we believe that Yahoo's stock would trade about $60/share or more than $30/share higher than the plan advocated by Starboard.
Source: SpringOwl Asset Management LLC
Confidential | For Discussion Purposes Only |
Note: 1. Although Real Estate value is being realized, it is being used to retire shares.
2. Through working with a Liberty-like partner to realize tax efficiencies with BABA returning to $120/share and YJ increasing in value by 12%
75
$113.41
Share Count
Reduction
Potential Total
Value
$31.783
$22.462
$35.00
Current Price
$4.411
Starboard's Plan
Core Business
If were going to build it, then lets have a plan that can succeed and make us the 3rd largest player:
o We have a large audience
o We have some analytics from Flurry but we need much better monetization
o Lets fill out the ad tech assets with a credible plan (so we dont miss out buying future Drawbridges before
theyre too big)
o Lets cross-integrate Gemini so we have one Ad Tech platform
If were going to outsource it, fire people and pick someone to outsource it to (Google or Facebook)
Are we going to shut down, spin off or reinvest in Tumblr?
The dreams of increased traffic being monetized didnt pan out because of too much NSFW content
Yet Yahoo could do much more with the asset than it has
It cant keep on in its current state of limbo
Source: SpringOwl Asset Management LLC
AT&T
Comcast
Verizon
Disney
Fox
Any of these discussions will have to be held in concert with SoftBank and Alibaba, which is partly why we believe
someone like a Liberty would be a particularly helpful advisor here
Net Income
133,933
Net Income
133,933
Preferred Stock
Dividends
8.86
Preferred Stock
Dividends
8.86
Basic Weighted
Average Shares
Outstanding
5,693
Basic Weighted
Average Shares
Outstanding
3,700
EPS (Basic)
23.5
EPS (Basic)
36.2
By retiring Yahoos stake, YJ Shares would go from Yen 500 to Yen 770 overnight
Softbanks 43% stake would immediately jump in value from $9.5B to $15B
Source: Bloomberg
Kill:
1. Sports
2. Finance
2. Flickr
Culture
anymore
4. A New CEO
Milk:
Further Study:
relationship)
Decide On:
1. Ad Tech / Gemini
2. Tumblr
1.
Bring Back:
1. The Old Logo
CASH
REAL
ESTATE
20.4
5.3
5.5
0
Our Plan
20.4
46.11
25.7
5.3
9.61
4.3
CASH
5.5
CASH
1.5
-4
REAL
ESTATE
REAL
ESTATE
1.82
1.82
24
18
81.2
44
CORE
2.8
CORE
CORE
Mkt Cap
33.9
Mkt Cap
37.2
Mkt Cap
Difference Between
Starboard and Our
Plan
$61.45
$4B Cash
+
$1.8B Real
Estate
+
$4B Debt
Can Retire
228M Shares
At $43/Share
New Share
Count:
716M Shares
If our plan is implemented by the company and just the core business is fixed (with no additional improvement in the value of the Alibaba and YJ
stakes), we believe that Yahoo's stock would trade about $60/share or more than $30/share higher than the plan advocated by Starboard.
Source: SpringOwl Asset Management LLC
Confidential | For Discussion Purposes Only |
Note: 1. Although Real Estate value is being realized, it is being used to retire shares.
2. Through working with a Liberty-like partner to realize tax efficiencies with BABA returning to $120/share and YJ increasing in value by 12%
92
$113.41
Share Count
Reduction
Potential Total
Value
$31.783
$22.462
$35.00
Current Price
$4.411
Starboard's Plan
Core Business
Appendix
Section VI
Corporate Governance
Board & Committee Summary
Board Profile
Director Independence & Affiliations
Executive Directors
Non-Executive Directors
Compensation Profile
Executive Pay Overview