Activist investor Starboard Value LP sent its latest missive to Yahoo Inc. on Wednesday, calling for a change in management and stepping up its pressure for a spinoff or sale of the company’s core Internet business.
“The past year has been an extremely frustrating one for shareholders of Yahoo,” Starboard wrote, pointing to a “continued downward spiral of the operating and financial performance of Yahoo’s core search and display advertising businesses.”
The company’s management team, hired to turn around Yahoo’s beleaguered Internet business, “has failed to produce acceptable results, in turn, causing massive declines in profitability and cash flow,” Starboard said. “It appears that investors have lost all confidence in management.”
Starboard called for a sale or spinoff of Yahoo’s core business, for which it said there are interested and credible buyers. Such a move would require a change in leadership, according to Starboard.
A representative for Yahoo didn’t respond to a request for comment.
Wednesday’s letter follows one in November, when Starboard took its gripes public after about a year of private talks. In its earlier letter, the investor criticized management but stopped short of calling for a change at the top. On Wednesday, Starboard was more forceful in its call for new leadership.
Maynard Webb, Yahoo’s chairman, told investors last month that the board hasn’t approved a sale process for its Internet business. But in a sign that many observers took as a signal that Yahoo is open to a sale, Mr. Webb said then that “the board has a fiduciary duty to entertain any offers.”
In November, Starboard—which owned 0.8% of Yahoo’s stock as of Sept. 30—also called for Yahoo to halt the spinoff of its holdings in Alibaba Group Holding Ltd. Yahooeventually shelved its plans to spin off the Alibaba stake.
The pressure from Starboard and other investors comes as Chief Executive Marissa Mayer has tried to suggest that reviving growth at Yahoo would take multiple years. Dozens of executives who had been instrumental to Ms. Mayer’s turnaround plan have left for jobs elsewhere, and The Wall Street Journal reported in August that the embattled CEO asked senior executives to sign a written agreement pledging to remain at Yahoo for at least three more years.
Ms. Mayer has said she would announce a more detailed reorganization plan on the fourth-quarter earnings call.
Over the course of Ms. Mayer’s tenure, Yahoo’s core business has shrunk. In 2012, when she arrived, Yahoo sales totaled $4.5 billion. In 2014, they were $4.4 billion. Over the past 12 months, shares have lost 35% through Tuesday’s close.
Shares of Yahoo fell 1.8% to $31.61 in premarket trading amid signs of a broader market selloff.