In response to the letter this morning, Yahoo! analyst Robert Peck with SunTrust Robinson Humphrey reiterates a Buy rating on the stock, writing that the company was "already gearing up for a proxy contest" in his view, given it had expanded the board to 9 members from 7 earlier this month.
The year was 2012 and Starboard CEO Jeff Smith was criticizing AOL CEO Tim Armstrong's plan to grow the Internet company into an online media giant by plowing money into web sites like the Huffington Post, which AOL bought for $315 million the year before.
Making good on its threats, hedge fund Starboard Value called for the removal of Yahoo's entire nine-member board on Thursday.
Starboard said in its letter that one reason for its desire to shake up the board is to ensure that the core business is properly sold, adding that it was concerned with how the process was going so far.
Earlier this month, a report from Reuters says that the executives of the Internet firm are scheduled to meet with Starboard within the month so as to discuss if they can come to a deal to veer away from a proxy fight.
Starboard plans to nominate nine directors for the board of directors at the annual shareholder meeting. The move was seen as show of power to prove who is really in charge of the company.
Tension between Starboard and Yahoo has been escalating. Ms. Mayer had tried to explore means to spin-off the Alibaba stake without enduring a tax burden of $12 billion.
Starboard reiterated its disappointment with Yahoo's "dismal financial performance, poor management execution" and other perceived failings, saying it believed the company was "deeply undervalued", with management having opportunities within its control "to unlock significant value for the benefit of all shareholders".
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Jeffrey Smith quotes CTFN as describing bidders as being "uneasy" about the bidding process as Yahoo reportedly presented a document that was three to four times longer than the typical document produced when entering a bidding process. A 15% workforce lay off was announced as part of cost-cutting measures along with the closure of non-profitable business divisions.
"If elected, we believe the new slate of directors brings a larger breadth of industry experience to the table and will be much more critical of Yahoo's current management team".
Starboard is convinced that it is "extremely difficult" to turn around the business.
Yahoo said its Nominating and Governance Committee will review the proposal and "respond in due course".
Starboard has successfully ousted company boards before.
For Q1, Yahoo is guiding total revenue at $1.005 billion to $1.09 billion, down 18% to down 11%.
Starboard said it wants to replace the entire board and outlined a string of financial failures by the company, including missed earnings targets and failed acquisitions.