AllThingsD » activist

Exclusive: Yahoo Finally Set to Strike Alibaba Share Deal -- Half Now, Then Half of What's Left After Eventual IPO

Kara Swisher — Fri, 18 May 2012 06:39:00 +0000

Yahoo is in the final stages of selling a large chunk of its stake in the Alibaba Group back to the company — in a complex deal that is set to include a multibillion-dollar share buyback to investors of the Silicon Valley Internet giant and an eventual IPO of the Chinese company — according to multiple sources close to the situation.

The deal has yet to be officially approved by the boards of both companies, but sources said it is likely to be, and could be announced as early as Monday.

This all could change, of course, since negotiations between Alibaba and Yahoo have taken place in a variety of ways in recent years, without success and with much acrimony. Talks over a tax-free deal — also involving Yahoo’s Japanese partner, SoftBank — collapsed in February, for example.

But the 324th time is apparently the charm — so here are the details of what looks to be a nearly complete agreement that I have ferreted out thus far from lots of relieved sources familiar with the situation:

Yahoo will sell half of its roughly 40 percent stake in Alibaba, in a taxable deal. The transaction is likely to value that portion of Yahoo’s holdings at about $7 billion — or 20 percent of Alibaba’s $35 billion enterprise valuation. Alibaba is in the midst of raising capital to fund the sale.

After taxes of upward of 35 percent are paid on the long-term gains — remember that Yahoo bought the now-lucrative Alibaba stake for a fraction of that, many years ago — the company will likely use the funds to buy back its own shares. That stock has been caught in the mid-teens doldrums for quite a while.

A shareholder dividend is also being considered. It’s not clear if some of the cash will be held back for acquisitions by Yahoo, sources added, but it is unlikely.

As part of the deal, sources said, incentives have been put in place for Alibaba to move forward with a public offering, which sources stressed is without the contractual obligation or a time frame. Alibaba execs have already been publicly indicating such a direction recently, but this will put them more firmly on that path.

In return, Yahoo has agreed to sell the remaining quarter of its current holdings when that IPO does occur. It would then have an only 10 percent stake of Alibaba, which it could sell at any time after the IPO.

If finally struck, the transaction will finally bring to an end one of the more protracted and disputed relationships in the Internet world.

Once close, the pair have been wrangling over the large Yahoo ownership, which Alibaba CEO Jack Ma has been trying to dislodge in a variety of nice and not-so-nice ways. It has resulted in a number of very public disagreements.

That included a nasty back-and-forth over its Alipay unit with now-fired CEO Carol Bartz, threats of takeover of Yahoo with private equity firms and, more recently, making friendly with its just-ousted CEO, Scott Thompson.

Those talks with him in recent weeks, which included a visit to China by Thompson, led to the new deal, which was negotiated primarily between Yahoo’s CFO Tim Morse and legal head Mike Callahan and Ma and Alibaba’s Joe Tsai.

The talks continued even as Thompson was suddenly engulfed in a controversy over a fake computer science degree on his resume that quickly led to his departure from Yahoo on Sunday.

Ironically, the error was first discovered by activist shareholder Daniel Loeb, who will now vote on the deal as a newly named director of Yahoo, after successfully helping to oust Thompson.

He owns almost 6 percent of Yahoo, and is expected to approve the transaction.

But the final decision to approve the deal will be in the hands of a very new board of Yahoo, which has been drastically reshaped in recent weeks. It is meeting tomorrow and perhaps over the weekend to vote on it.

While the deal with Alibaba looks to be nearing an end, Yahoo’s talks to sell its 33 percent stake in Yahoo Japan is not part of this agreement. That’s due to what Thompson had called a “valuation gap,” which sources said is still an outstanding issue.

New interim CEO Ross Levinsohn has not been involved in the Alibaba deal in any significant way. But he certainly will benefit from its halo effect, if approved, especially given that it will likely boost Yahoo shares.

Next up for Levinsohn, who has just rejiggered Yahoo management again, other sources said, is an effort to settle the patent-infringement lawsuit with Facebook, and also to renegotiate its search deal with Microsoft.

And, oh yes, fix Yahoo’s rocky core-advertising business, which is still in distress and needs a major overhaul to push it back to growth.

But that, as they say, is yet another episode of Yahoo’s ongoing reality show.

Here's New Yahoo CEO's First Note to Troops! (The Leaking-Internal-Memos-to-ATD Policy Remains in Effect As Usual)

Kara Swisher — Sun, 13 May 2012 21:33:22 +0000

Here is the first missive to Yahoo’s troops from new interim CEO Ross Levinsohn, which I obtained from 653 sources at the company. (Joke alert! Sort of!)

“Importantly, today’s announcements lay to rest the unfortunate and serious distractions surrounding our senior leadership and the composition of our Board going forward,” said Levinsohn, who has been head of global media at the Silicon Valley Internet giant, in part. “In spite of the very bumpy road we’ve traveled, we are achieving genuine and meaningful successes in the marketplace every day and heading in the right direction.”

Well, it’s a direction at least, given the recent controversy after it was revealed that former CEO Scott Thompson had a fake computer science degree on his resume.

Levinsohn was named today as the next leader of Yahoo, which has had a revolving door of CEOs in recent years, in a massive shake-up at and which includes many board changes and also the settlement of a potentially nasty proxy fight with activist shareholder Daniel Loeb.

Enjoy:

Exclusive: Yahoo's Thompson Out; Levinsohn In; Board Settlement With Loeb Nears Completion

Kara Swisher — Sun, 13 May 2012 15:59:24 +0000

Yahoo’s embattled CEO Scott Thompson (pictured here) is set to step down from his job at the Silicon Valley Internet giant, in what will be dramatic end to a controversy over a fake computer science degree that he had on his bio, according to multiple sources close to the situation.

The pair will apparently say he is departing for “personal reasons.” Sources said that Thompson will be claiming to be leaving due to a serious illness that he recently discovered he had.

But the evolving crisis — which is just over a week old — centered on his botched resume and how he handled the thorny issue is the key reason for the abrupt end to his tenure as a CEO.

Thompson’s likely replacement on an interim basis will be Yahoo’s global media head Ross Levinsohn, who most recently also ran its Americas unit, including its advertising sales.

In addition to the management upheaval, Yahoo’s board is closing in on a settlement with the man who discovered Thompson’s misstep, activist shareholder Daniel Loeb of Third Point, said sources.

The situation could change, since Yahoo’s full board still has to meet this morning to officially approve the sweeping changes at the long-troubled company.

But, if it is, this development goes a long way toward fixing some of what has been ailing Yahoo recently.

And it’ll also be a stunning victory for Loeb (pictured here), since the pugnacious hedge fund investor is set to get three board seats from a slate proposed by him as part of a proxy fight aimed at Yahoo. The new Yahoo directors will be media exec Michael Wolf and turnaround specialist Harry Wilson. Loeb’s fourth selection — former NBC head Jeff Zucker — will withdraw.

The five current Yahoo directors — who were to step down at the company’s annual meeting this summer — will leave the board effective immediately, sources said, to make way for the Third Point selections.

Finally, Yahoo’s recently added director Fred Amoroso will be named chairman of the board.

Amoroso is the director who has been conducting the investigation into the issues raised by Loeb about how the fake academic credentials got in Thompson’s public bios, as well as in Yahoo’s regulatory filings, and also the hurried circumstances around his hiring in January.

Those mysteries — read, screw-ups — might never be solved now, although Thompson made a convoluted attempt to explain it all in two awkward employee meetings at the end of last week. In those gatherings, according to numerous sources, he blamed a headhunting firm for introducing the mistake when he was being hired for a job at eBay in the mid-2000 timeframe.

That company, Heidrick and Struggles, slapped back last week with an internal memo, noting that Thompson’s claim was “verifiably not true.” Sources said that Heidrick told Yahoo’s board that it was in possession of a resume that Thompson had apparently submitted showing the inaccurate CS degree on it.

That memo, impugning Thompson’s credibility, was one of many that piled on to create an impossible situation for the Yahoo board, related to his leadership ability going forward.

Thompson had also previously issued a Yahoo statement, in which he apologized for the “distraction” caused by the problematic resume, but not for the mistake itself.

And, initially, Yahoo — under his direction — had called the borked resume an “inadvertent error.”

Such fumbling to fix the situation was among the many other issues that the board has been considering relating the ability of Thompson to remain in his job. Also of importance was the sinking morale of Yahoo employees, who had largely rejected Thompson’s excuses in the ResuMess scandal.

Internal message boards at Yahoo lit up all last week, with staffers largely rejecting his explanations. In addition, a number of top execs and engineers approached the board calling for Thompson’s firing.

While that’s not precisely what happened here, it’s close enough to describe Thompson’s departure as inevitable.

All this change comes in the wake of a massive restructuring he was in the midst of at Yahoo, after 2,000 employee layoffs.

Thompson was pushing forward a vision of adding a much more significant data and commerce element to Yahoo’s largely ad-based business.

That is likely to be less stressed under media-focused Levinsohn, who will be essentially trying out to be the permanent CEO.

Well known in the media and advertising communities, he has worked at a number of big online efforts over many years.

According to his bio at Yahoo, where he arrived in 2010:

So far in my checking, Levinsohn’s resume is accurate.

More to come, obviously.

I have emails and texts and calls into everyone for comment, but apparently they are all out at a Mother’s Day brunch (except me).

Is He In or Is He Out? Crunchtime for Scott Thompson at Yahoo.

Kara Swisher — Fri, 11 May 2012 15:15:28 +0000

While he has only been CEO of Yahoo for less than five months, in the next several days Yahoo CEO Scott Thompson is facing perhaps the most critical moment of his short tenure.

According to sources with knowledge of the situation, the board of Yahoo is not likely to take long in assessing whether he will stay or if he will be let go, due to a controversy around how a non-existent computer science degree got on his bio and also in Yahoo regulatory filings.

A special committee of independent directors is now investigating the matter, including trying to assess the damage has had on Thompson’s ability to lead the Silicon Valley Internet giant.

How quickly the board moves is likely to be a sign of their intent. If within the next days, it is likely to let the former president of eBay’s PayPal payments unit go and replace him with a current company exec; if it waits longer and shows some public support of him — which the board has not done since the scandal erupted — Thompson’s chances are better that he will only be given some sort of censure.

One important task is also closely considering the impact of possible legal problems related to Thompson and others signing documents with the Securities and Exchange Commission that were not accurate.

One thing is clear from interviews with multiple sources, many members of the board have not been happy with how Thompson has handled the matter since activist shareholder Daniel Loeb of Third Point uncovered the problem a week ago.

While first tossing the borked bio as an “inadvertent error,” Thompson was then largely silent about the issue with staff, despite being in close meetings with them, which caused stress among key execs.

Then, he made a public announcement in which he apologized for only the “distraction” caused by the incident and not the error itself as some had hoped he would.

Yesterday, apparently feeling it was time to try to explain things face-to-face, Thompson made another attempt to explain what happened in two separate meetings with his direct reports and then his senior staff, apparently trying to get through to employees that he did not fake his resume nor did he give an inaccurate bio to Yahoo when he was being hired for the job earlier this year.

Thompson thought it was time — now that the board investigation was underway — to answer questions directly, said a source.

Among other things, Thompson gave a somewhat convoluted explanation that it appeared in his bio due to a misunderstanding during an interview with a headhunting firm. And that he never noticed it once it proliferated And that when an NPR interviewer asked him directly about his CS degree, he did not want to correct her in mid-discussion — although others report he said he did not hear the question fully.

Sources said Thompson — who is on the midst of initiating changes across a large and troubled organization, after laying off 2,000 employees — thought the sessions went well, that he clearly communicated that he was taking blame for the problem and its repercussions. Those sources also noted that he received support for doing so after the talks.

But, more than a dozen others I interviewed who were listening remotely — some of whom I sought out and some who contacted me directly — thought Thompson’s complex explanation was deeply problematic and that he tried to foist the blame on others rather than on himself.

Every one of these people expressed the need for him to step down to allow Yahoo to move forward.

What the board thought about the performance is still not clear, said sources, but things are coming down to two distinct scenarios.

The first is a quick parting of the ways with Thompson, within days, either for cause or via a negotiated settlement. Others at Yahoo involved with perpetuating the mistake in the bio are also at risk.

This option is perhaps the more likely at this moment, unless the scandal dissipates and employees continued rancor over the situation can be assuaged soon.

In this case, sources said, Thompson will be replaced by a current board member or a member of the top staff. When directors fired Carol Bartz last fall, CFO Tim Morse became interim CEO and he is one of the likely candidates for the job again.

The second scenario centers on needing Thompson to complete a number of complex transactions related to the sale of Yahoo’s Chinese assets and its re-negotiations with Microsoft over its troubled search partnership, among other things.

In that case, Thompson will be censured in some manner by the board and will also probably have to endure some punishment for allowing false regulatory documents to be filed by Yahoo. Others at Yahoo will also be subject to the same treatment in such an outcome.

How will it turn out?

Only board member Patti Hart has so far paid for her faulty vetting of Thompson, stepping down from the board earlier this week.

But whether she will be the only shoe to drop in what has turned out to be a bizarre wildfire that as raged across Yahoo’s troubled landscape remains to be seen.

Thus, most definitely watch this space this weekend.

Not So Scott Free? Yahoo's Other Big Shareholder -- Cap Re -- Leaning Toward Supporting Loeb Over Thompson ResuMess.

Kara Swisher — Thu, 10 May 2012 22:56:57 +0000

One of Yahoo’s biggest long-term investors, Capital Research and Management, which owns more than 10 percent of the company in two different funds, is leaning toward voting for the slate proposed by activist shareholder Daniel Loeb of Third Point, in the wake of the controversy around the botched bio of its new CEO Scott Thompson.

“Having a CEO with that hanging over his head is really a problem going forward,” said one person with knowledge of the situation. “It’s hard to pretend this is not a problem.”

While sources said Yahoo’s longtime institutional investor — which currently holds large stakes via its Capital Research Global Investors and Capital World Investors funds — is not likely to go public with their voting choice until close to the annual meeting, which will take place sometime this summer.

But its fund managers have told key Yahoo board members of their grave concerns over the situation.

Ironically, in the last proxy fight showdown with Carl Icahn, Capital removed its support of Yahoo’s slate too and was an important influence to many major changes at the company.

Such a move is problematic for Thompson, since the rejection of another big shareholder at its upcoming annual meeting will keep the unusual issue and right in the middle of a noisy proxy fight.

A special committee of the Yahoo board is investigating the situation — in which a fake computer science degree somehow got on the resume of the former president of eBay’s PayPal payments unit and later into official Yahoo regulatory filings.

The problem was uncovered last week — unfortunately for the Silicon Valley Internet giant — by Loeb, who has been banging away on Yahoo since.

A trio of independent Yahoo directors is looking into the mess, with a focus on how that happened, whether anyone at Yahoo knew of the inaccurate bio and how it got there in the first place.

Also of great concern, is how Thompson could have not seen the error in the many years it was on the Web site of eBay and also how he approved a bio that had the inaccuracy in it when he was hired by Yahoo in January.

Worse still, in a 2009 interview, he clearly did not say he did not have such a degree in with a radio show host when directly asked about it.

“It’s a little hard believe an executive of this level would have missed such a thing, when he had so many opportunities to fix it,” said one source. “And, if he did overlook it that many times, that’s a problem too.”

In fact, according to a report earlier today by Business Insider that I also confirmed, Thompson told employees today in two separate meetings that he did miss the error since it was placed there — inexplicably — in 2004. In the meeting, he blamed a low-level headhunting staffer who added it incorrectly, an error that then proliferated.

Thompson also said he did not provide a resume to the company in his hiring process — say whaaaat, but true — although this still does not absolve him from the original error.

As to the interview: Thompson said he did not want to be rude and correct the host of TechNation, Moira Gunn, after she clearly asserted to him he had a computer science degree as part of a question on his qualifications. Others present at the meetings said he said he did not hear the question.

But, in an video interview with me yesterday, though, Gunn said she and Thompson discussed a computer science education in a way that left the clear impression that he had obtained one.

While Thompson’s excuse may beggar the imagination of some, it’s his story and he’s sticking to it. In all seriousness, his complete lack of willingness to take responsibility for the error — even if it was not his fault — itself is a little startling.

Because what’s not clear is how the bio was miraculously correct in eBay’s official filings and also if it is plausible that he never saw the mistake.

Numerous communications execs at Internet companies told me that it was unusual for a high-level exec not to pay close attention to information that went out about them, especially in legal filings. In addition, just as many execs are made to check and swear on their bios that go into such documents.

In fact, it was Thompson’s job to make sure the things written about him were correct at all times. As CEO, as a major Silicon Valley player pointed out, he is required by federal law to personally certify Yahoo’s Securities and Exchange Commission filings. Violations of these rules carry financial and also potential criminal penalties.

Sources said the board is worried about that credibility issue too and it puts Thompson in an ever-dicier position. Noticeably, the board has yet to make a public statement of support for him on the issue.

Also a major worry for the directors is the mostly negative response to the situation from Yahoo employees, who are deeply upset that Thompson’s error was not caught and that he might not be treated in the same way as anyone else who turned in a false resume, whether it was by accident or not.

A Yahoo spokeswoman told me last week that there was also support internally for Thompson, but in many dozens of interviews I have done with Yahoo employees and a continued monitoring of internal bulletin board, the tone is not in his favor by any means.

Like I said, it’s a dicey time to be Scott Thompson right now.

Loeb Calls Again for Thompson Firing From Yahoo, as Former eBay Boss Supports Him

Kara Swisher — Wed, 09 May 2012 14:33:40 +0000

As expected, activist shareholder Daniel Loeb of Third Point released a new letter on the bio controversy he set off at Yahoo, again calling for the firing of its CEO, Scott Thompson.

“It seems farcical to us that the Board will most likely spend more time deliberating over whether Mr. Thompson should be fired than it did properly vetting whether he should have been hired,” read the letter in part. “The necessary investigation into whether certain senior executives and Board Members knew of Mr. Thompson’s deceptions before hiring him should not delay decisive action over his ethical breaches.”

Loeb, who is waging a proxy fight with Yahoo over board seats he wants, also offered to work with the Yahoo board to find a new CEO if it accepted his slate of directors. In the interim, he suggested Yahoo put either CFO Tim Morse or media head Ross Levinsohn in the job. Morse had taken that position temporarily after Yahoo fired its last CEO Carol Bartz last fall.

Confused yet?

Loeb set off a management crisis there last week with the revelation that Thompson had added a fake computer science degree to his bio.

The first casualty came yesterday with the stepping down of Yahoo director Patti Hart, who was charged with vetting Thompson for the job.

The Yahoo board also announced yesterday that it would be conducting a probe of the circumstances around the hiring, as well as how the faux academic credentials got in Thompson’s bio and also the company’s regulatory filings.

The new letter was a reaction to Thompson’s apology on Monday for the borked bio becoming a “distraction” (but not, oddly, for the mistake itself). Loeb had previously called for Thompson’s firing over the bio fibbing.

Loeb will be appearing at an investor conference in Las Vegas later today, where he will surely be asked about the situation.

In related news, eBay CEO John Donahoe, Thompson’s former boss, lent words of support, but also underscored that the online commerce company’s legal filings of his bio were always correct, even if its Web site and other PR documents handed out were not. Thompson came to Yahoo from a stint as president of eBay’s PayPal payments unit.

As reported by Bloomberg, Donahoe said:

“When Scott was hired at EBay Inc., all of EBay’s filings had the accurate information. Some of EBay’s PR materials had that bio. Our legal filings were taken care of by our legal department. Some of the PR materials had that info,” he said while in Tokyo of the correct bio versus the incorrect one.

Donahoe added: “I think Scott Thompson did a great job at PayPal. I think he’s a very talented leader and I believe he can help Yahoo. I hope they get through this and he can continue to do the very challenging job he’s got of helping to turn Yahoo around. I’m Scott’s biggest fan.”

This has been the first public support of Thompson by a prominent Internet figure, which might help lagging morale at the company.

Here’s the full version of the latest Loeb letter:

Third Point May 9 Letter Release

Place Your Bets: Will Loeb Drop Another Bomb on Yahoo at Vegas Confab Later Today?

Kara Swisher — Wed, 09 May 2012 13:00:48 +0000

Daniel Loeb of Third Point — the activist shareholder who set off a management crisis at Yahoo last week with the revelation that new CEO Scott Thompson had added a fake computer science degree to his bio — will be onstage at a high-profile investor confab in Las Vegas this afternoon.

It’s Loeb’s first public appearance since he scored a direct hit on Yahoo in his ongoing proxy fight against the company — a first casualty yesterday, with the stepping-down of Yahoo director Patti Hart, who was charged with vetting Thompson for the job.

With one win like that, can Loeb resist using the panel — titled “Titans of Wall Street: Insight & Strategies for Capitalizing on Today’s Markets” — to strafe Yahoo a bit?

Sources said Loeb is prepping some reaction to Thompson’s apology on Monday for the borked bio becoming a “distraction” (but not, oddly, for the mistake itself), as well as an offer to work with the Yahoo board on a new CEO choice. Loeb has called for Thompson’s firing over the bio fibbing.

But the pugnacious investor will likely also be asked to opine on the situation so far at the off-the-record SkyBridge Alternatives Conference, which describes itself as “committed to facilitating balanced discussions and debates on macro-economic trends, geo-political events and alternative investment opportunities within the context of a dynamic global economy.”

What will be more interesting to see in the days ahead — even as the Yahoo board investigates how the false information about Thompson’s academic credentials got on that bio, as well as in regulatory filings — is if Loeb can be more than just a bomb-thrower and put forth a more specific and substantive plan for the long-troubled company than he has so far.

It’s not a requirement, of course, since Loeb is only seeking board seats and is not lobbying to be CEO, whose job it is to formulate a cogent strategy. But other Yahoo shareholders he is seeking to convince to join him in his proxy battle probably want more than “Yahoo stinks” from him at some point.

Still, for today at about 1:35 pm PT, when Loeb is scheduled to speak, it’s probably a good bet to expect some less-than-pretty noise from Sin City.

Update: In related news, eBay CEO John Donahoe, Thompson’s former boss, lent words of support but also underscored that the commerce company’s legal filings of his bio were always correct, even if its Web site was not. Thompson came to Yahoo from a stint as president of eBay’s PayPal payments unit.

As reported by Bloomberg, Donahoe said:

This has been the first public support of Thompson by a prominent Internet figure, which might help lagging morale at the company.

Exclusive: Yahoo Director in Charge of Botched CEO Vetting to Step Down From Board

Kara Swisher — Tue, 08 May 2012 15:50:13 +0000

CSLie has claimed its first victim, although the mystery is still unsolved.

Patti Hart — the Yahoo director in charge of the search that resulted in the hiring of Scott Thompson as its CEO, making her directly responsible for a clearly botched vetting of his academic record — will not stand for re-election to the board at the next annual meeting, according to sources close to the situation.

Hart — who is CEO of International Game Technology, which makes electronic gaming equipment and systems products — is resigning. Apparently, said sources, her own board asked her to remove herself from the Yahoo mess to better focus on the company she actually runs.

But she is perhaps just a few steps ahead of being pushed, given her key role in the hiring of Thompson, who was president of eBay’s PayPal payments unit when he cold-emailed Yahoo director and Intuit CEO Brad Smith seeking the job.

A Yahoo spokesman declined to comment.

[UPDATE: Yahoo confirmed the inevitable departure later in the day and said the Yahoo board would have nine members going forward. Hart also released a statement, confirming the move.]
Hart, who came to the Yahoo board in 2010, has been head of its corporate governance and nominating committee.

The departure makes her the first casualty — but definitely not the last — of the controversy over how a fake college degree managed to get in Yahoo’s regulatory filings via Thompson’s inaccurate bio.

The issues around how Thompson was hired — including how background checks on him failed to discover that he never got a CS degree from the Boston area’s Stonehill College, as his longtime bio on eBay had claimed — are part of a new investigation by the board.

That will be officially announced later today, along with the hiring of an outside law firm to conduct the probe, which will be headed by independent director Fred Amoroso.

[UPDATE: Yahoo officially said it was forming a special committee to look at Thompson's bio snafu and the circumstances around his hiring. Along with Amoroso, the other members are John Hayes and Thomas McInerney, independent directors who joined the board in April.

"The special committee and the entire Board appreciate the urgency of the situation and the special committee will therefore conduct the review in an independent, thorough and expeditious manner," a statement from Yahoo said.

Interestingly, the statement did not include a show of support for Thompson, which often happens in such circumstances.]

They will have a lot to investigate. Such as this mystery: Thompson’s correct bio appeared in filings eBay made with the Securities and Exchange Commission, while Yahoo’s similar documents were inaccurate about his educational credentials.

Also under scrutiny: How the falsehood was added to Thompson’s public resume, and who put it there; why Thompson never noticed the error, there since at least 2004; why he declined to correct it when asked directly about it; and who at Yahoo might have known about the problem before the hiring.

It’s a basic case of who, what, where, when and how. And, most of all, why anyone would make such a dumb mistake.

Hart would seem to have all the answers to that, along with a forensic firm that worked on the vetting. Key Yahoo staffers were also involved, said sources, although its headhunting firm on the CEO search, Heidrick & Struggles, was not used in relation to Thompson.

Presumably, there is a paper trail of some sort, which was the subject of a legal demand by activist shareholder Daniel Loeb of Third Point yesterday. He uncovered the bio error last week, in the middle of pressing a proxy fight to garner board seats.

Loeb’s allegations also nailed Hart in much-less-egregious padding of her own college record, making it appear as if she had economics and marketing degrees. She has one in business administration, with “specialties” (Yahoo’s ridonkulous word, not mine) in economics and marketing.

While Hart’s leaving might assuage some, providing a convenient scapegoat to the bizarre situation, this is by no means over for Yahoo or Thompson.

Another increasingly potent issue is the ever-declining morale at the Silicon Valley Internet giant over the company’s odd response — it initially called the bio problem an “inadvertent error,” without further explanation — and also Thompson’s lack of transparency on the issue.

He released an email to employees last night, apologizing for the “distraction” of the resume issue, but not for the error itself.

That, and other of Thompson’s actions — he has been described to me, by many close to the situation, as defiant over the issue, and as blaming Loeb for conducting a personal vendetta — did not sit well with many, both inside and outside Yahoo.

A Yahoo spokeswoman told me earlier this week that there is much support for Thompson internally and externally, but declined to provide specifics.

But message boards I read were mostly negative about him, as are a plethora of direct emails to me on the situation. One clever commenter on this site bemoaned that Thompson might get off “Scott-free.”

Ouch! Nonetheless, the atmosphere at Yahoo is indeed unsettled.

“Sentiment from employees is unanimous that he must go,” said a Yahoo employee, who has no personal agenda that I can grok, in a common refrain. “He clearly knew and lied for years; and his handling since exposed has been unacceptable.”

Unacceptable or not, though, Hart is the only one going for now. But stay tuned.

Until then, here’s an appearance I made today on WSJ.com to talk about Hart’s departure:

[ See post to watch video ]

CEO Says Sorry to Yahoos for Borked Bio "Distraction" -- But Will Mea Culpa Work Without an Apology for Error? (Memo)

Kara Swisher — Mon, 07 May 2012 23:59:45 +0000

He’s sorry. Deeply regrets. Apologizes. Takes full responsibility for the unfortunate distraction to the people.

No, it’s not a scandal-ridden politician caught in some compromising position, but Yahoo CEO Scott Thompson talking about the hubbub created by the addition of a fake computer science degree on his bio.

This kind of move is, of course, PR 101, but it still took Yahoo several days after activist shareholder Daniel Loeb uncovered the resume problem, which the Silicon Valley Internet giant said was an “inadvertent error.”

In his new memo, which comes after a terse one on Friday, Thompson said he was upset by how the controversy has impacted the company.

“As I told you on Friday, the board is reviewing the issue and I will provide whatever they need from me. In the meantime, I want you to know how deeply I regret how this issue has affected the company and all of you,” he wrote. “We have all been working very hard to move the company forward, and this has had the opposite effect. For that, I take full responsibility, and I want to apologize to you.”

It is interesting to note that he said nothing in the new email about being actually sorry for the still-mysterious inaccuracy in his bio.

It was present since 2004 when he worked at eBay and also somehow got into the Yahoo regulatory filings after he was hired earlier this year.

Presumably, that information is to come after an investigation by Yahoo’s board, headed by independent director Fred Amoroso, which is proceeding now.

It will be announced officially tomorrow, but it is already in the works, as Thompson noted.

Earlier today, Loeb demanded all books and records about the circumstances of Thompson’s hiring and has made hay out of the issue.

To calm the story, said Thompson to his new troops: “I am hopeful that this matter will be concluded promptly.”

Unfortunately for him, that hope is probably also going to turn out to be inaccurate.

But read it for yourself. Here’s the internal memo that just went out to all Yahoo employees from beleaguered Thompson, which I obtained from the company.

Loeb Lobs Lawsuit, as Expected, at Yahoo's Borked Bio Mess

Kara Swisher — Mon, 07 May 2012 16:23:59 +0000

Botched CEO bio. Activist shareholder. Screwy board of directors. Mix it all together and what do you get?

More legal filings, natch!

This — as I reported this weekend would happen today — from Dan Loeb of Third Point, which is waging a proxy fight against Yahoo.

The aggressive hedge-fund investor — who owns close to 6 percent of Yahoo — recently scored a direct hit by revealing that new CEO Scott Thompson had added a faux degree in computer science to his bio, which somehow made its way into regulatory filings of the Silicon Valley Internet giant.

This, despite a supposed thorough vetting by Yahoo’s board of the former president of eBay’s PayPal payments unit.

Not so much, as it turns out — which is why Loeb is asking for all the information about Thompson’s hiring process and more.

Third Point said it was making a demand “under Section 220(b) of the Delaware General Corporation Law to inspect books and records relating to the hiring of CEO Scott Thompson, the appointment of Patti Hart to the Yahoo! Board, and the selection of Board Members Peter Liguori, John Hayes, Thomas McInerney, Maynard Webb, Jr., and Fred Amoroso.”

And its press release added:

“Third Point believes that Yahoo! shareholders and employees will be best served if the Board accepts responsibility quickly for this latest debacle … We believe that this internal investigation by this Board must not be conducted behind a veil of secrecy and shareholders deserve total transparency.”

Well, it looks like it will eventually be all out in the open, what with all the legal motions flying.

Expect a Yahoo response soon, which sources said will focus on a board investigation — using an outside law firm, and headed by independent director Amoroso.

Here you go on Loeb’s shot today:

Third Point May 7 Demand Letter Release

As Yahoo CEO Reaches Out to Top Staff, Board Meets to Weigh "Options" (I.E., Deciding Who Gets to Take the Borked Bio Blame)

Kara Swisher — Mon, 07 May 2012 03:27:43 +0000

Even as Yahoo’s board was kibitzing all weekend about how to handle the continuing resume-padding controversy around its recently hired CEO Scott Thompson — including hiring its own outside crisis communications firm to represent it — he was working the phones to keep top staff apprised of the evolving situation.

While Thompson told those he spoke to that he was limited in what he could say and blamed a “personal vendetta” by an activist shareholder for his troubles, being proactive in this regard is probably a good idea.

That’s because multiple sources said he said exactly nothing in various strategy meetings with top employees last week about allegations leveled by Dan Loeb of Third Point, which proved correct, that Thompson had not gotten a computer science degree in college, as his longtime bio had claimed.

“It was the gorilla in the room and it was awkward in the extreme,” said one exec present at the meetings. “He never brought it up, which was even worse.”

At this point, it seems unlikely that Thompson can regain the confidence of many at Yahoo — even though a company spokeswoman said he received a lot of incoming support too, both externally and internally — until he can render some cogent explanation about how the borked bio got into both Yahoo’s public site and also its more critical regulatory filings.

Even more mysteriously, how the error was never present in filings with the Securities and Exchange Commission made by eBay, where Thompson led its PayPal payments unit, although his public eBay bio has also been wrong for close to a decade.

And, most of all, how was it that Thompson never caught the mistake himself — even when directly asked about it — despite the likelihood of reviewing it multiple times over those many years and ultimately certifying it for Yahoo’s own SEC filings.

Calling Encyclopedia Brown to solve the Case of the Computer Science Degree That Wasn’t!

Thompson has given no explanation about the debacle to the bulk of the Yahoo staff at all levels, save for an information-free and terse note to employees on Friday afternoon that essentially asked them to focus on their work instead of his bizarre crisis.

Unfortunately for him, many Yahoos are focusing a lot on Thompson, with message boards at the Silicon Valley Internet chastising their CEO and giving him support that is tepid at best. From interviews I have had with two dozen employees this weekend, to say morale is at an all-time low is perhaps understating the situation.

Here is a short selection of comments that were read to me, for example:

What appears to trouble employees the most in the threads I was read was the nonchalance of the initial Yahoo statement about the issue, which called the addition of a fake degree on Thompson’s bio an “inadvertent error.”

“From a pure employee perspective, it feels like it is a violation of their principles,” said one person, reflecting a dozen or more conversations I had this weekend up and down the organization. “And anyone else would probably be immediately fired for this, even with an explanation.”

Said another: “He clearly knew and lied for years; and his handling since exposed has been unacceptable.”

As I noted above, a company spokeswoman said there was also much support for Thompson (pictured here) within the company, but declined to provide any quotes or details.

Presumably, some answers will be coming from a board investigation aimed at getting to the bottom of the situation, including trying to grok who put the error in the bio in the first place.

My bet: They’ll try to pin it on a lower-level minion, although that will not fly with a lot of people.

Including me, because whoever typed in the faux degree, its presence there has been too long for Thompson not to be responsible for it.

Flunky error or not, there are important questions about whether Thompson himself provided a bio that contained the inaccuracy to the board when he put himself forth for the job via direct emails to Yahoo director and Intuit CEO Brad Smith.

That line of thought basically boils down to: Can Thompson not read?

More problematic is the fact that the placement did not come via Yahoo’s headhunter on the CEO search, Heidrick & Struggles, which apparently was not charged with doing a background check on Thompson.

Instead, the director in charge of the search, Patti Hart, sources said, hired another forensic firm, which appears to have missed Thompson’s erroneous academic record.

The only thing completely clear amidst all the confusion: Hart screwed up by botching an extremely simple part of a vetting she was charged with. That makes her vulnerable, of course, along with other Yahoo board members or staffers closely involved in the talent search.

While Hart (pictured here) is in a much dicier position, Thompson still appears to have initial board backing — at least for today — as it’d be a very tough call to fire yet another CEO so quickly in the middle of several key deals for Yahoo, as well as a proxy fight.

Said one person close to the situation, the board is still considering its “options,” in an effort that is being led by independent board member Fred Amoroso.

So, it will be instructive to see how the board will proceed tomorrow — especially since it is likely that Loeb will lob a lawsuit to try to get more information on the Thompson hiring process.

But it’s started by hiring its own outside communications firm, Sard Verbinnen, which has handled other crises for Yahoo in the past.

Sard’s Charles Sipkins — welcome back, Charlie! — had no comment about the board’s next move, except to reiterate its statement from last week that it is looking into the Thompson bio mess and will make appropriate disclosures at some point.

We can’t hardly wait.

Yahoo Should Expect Incoming Lawsuit Lobbed by Loeb Tomorrow on CEO Hiring

Kara Swisher — Sun, 06 May 2012 16:01:48 +0000

On Friday, Third Point’s Dan Loeb — the activist shareholder who is waging an ever-nastier proxy battle against Yahoo — said in a letter regarding the inexplicable errors in the resume of its CEO Scott Thompson that he would take “further action” if he did not get answers.

Let me translate that for Yahoo and any other interested observers: Come Monday, the Silicon Valley Internet giant is likely to be on the receiving end of an official lawsuit demanding all the notes and records related to the hiring of Thompson.

Presumably, Loeb hopes that if he gets ahold of the material on the quick hiring of the former president of eBay’s PayPal payments unit that it will show a sloppy vetting by the board, which led to it not catching inaccurate educational information about Thompson.

Last week, Loeb discredited Yahoo CEO Scott Thompson’s academic credentials and credibility by showing that his bio listed a computer science degree, even though he never obtained one while at Stonehill College.

Perhaps most problematically, that data got into official regulatory filings Yahoo made.

After proven correct, Loeb than quickly lobbed in another letter, making an explicit legal threat to get the resume information:

How such a legal demand will be greeted by Yahoo will be interesting, especially given the tension internally. While Yahoo initially reacted to Loeb’s allegations about the inaccurate bio by saying the insertion of a computer science degree was an “inadvertent error,” the board quickly backpedaled and said it would conduct an investigation into the matter.

But that will not be speedy enough for the aggressive Loeb — so, I expect his lawyers have been working all this weekend to prep for his next attack.

In 2009 Interview, Yahoo CEO Does Not Deny He Has a CS Degree, and Calls Himself an "Engineer" (Audio)

Kara Swisher — Fri, 04 May 2012 06:22:41 +0000

On March 25, 2009, Yahoo CEO Scott Thompson — when he was then president of PayPal — appeared on the TechNation radio show to talk about the revival of the eBay payments unit.

At the end of the largely charming interview, Moira Gunn asked him a direct question about his college degrees, specifically noting they were in accounting and computer science.

“Your bachelor’s degree is in accounting and computer science. Now, from both of those, I mean that’s, that’s pretty obvious that’s PayPal,” said Gunn. “What are the most important things you learned?”

“Yeah,” begins Thompson, failing to correct her at all on the fact that he does not actually have a computer science degree — only one in accounting.

He then went even further, touting his early tech training at Stonehill College, near Boston, which did not offer a computer science degree at the time he went there, from 1975 to 1979.

“And that’s really the background that I have, and it started back in my college days, and I think that’s really the wonderful part of being an engineer is you think that way,” said Thompson.

In the most generous interpretation, it’s not quite clear whether Thompson was saying “Yeah” to her statement of his academic credentials, or if he was not actually listening.

But it’s a careless oversight on his part not to have corrected her about the degrees, which could also be said about a computer science degree being present on his bio for more than a half-dozen years at eBay and later at Yahoo without some notice by him.

Because while Thompson has had a long career as a tech exec, as well as a stint as a CIO, academically speaking, a computer science degree did not happen in his college days nor did he graduate as an engineer.

That became apparent earlier today, when Yahoo confirmed that it included inaccurate information about Thompson’s academic background on its Web site and in its regulatory filings.

The admission came after activist shareholder Dan Loeb of Third Point correctly asserted that Thompson’s resume was overstated related to his education.

Yahoo called the inclusion of the computer science degree on his bio an “inadvertent error,” but gave no other explanation as yet. Tonight, the Yahoo board said it was reviewing the matter and would then make appropriate disclosures afterward.

While it is entirely possible that Thompson did not correctly grok what Gunn was saying, it seems pretty clear that he implied his college background was in tech and he was an engineer.

It is true that Thompson did take some computer science classes at Stonehill. And it is entirely possible that he thinks of himself as an engineer by work training and not by college degree.

I am awaiting comment from Yahoo PR, which has its hands full today (welcome to the circus, Amanda!).

Until then, here is the actual audio of that part of the interview and the pertinent part of the transcript, which began at the 26:33 time on the audio, to judge for yourself:

Yahoo's Response on CEO's Computer Science ResumeGate: "Inadvertent Error"

Kara Swisher — Thu, 03 May 2012 19:27:37 +0000

A Yahoo spokesperson just confirmed as accurate allegations from an activist shareholder Dan Loeb of Third Point that its CEO Scott Thompson did not have a computer science degree from Stonehill College as claimed on his bio and also in regulatory filings.

He does not, a mistake that the Silicon Valley Internet giant is calling an “inadvertent error.”

Except this is a mistake that goes back more than a half-dozen years, as it is also on the Web site bio at eBay, where he served as president of its PayPal payments unit and its CTO before that.

(Update: Yahoo just removed the line about Thompson’s college degrees from his Web site bio entirely.)

While Yahoo sought to underplay the controversy, it could become a serious issue for Yahoo, both from a credibility and regulatory compliance issue.

It would also call into question — as Loeb does in the letter — the amount of vetting done by Yahoo on the CEO choice, which was conducted by board member Patti Hart.

It gets worse: Loeb also alleged that Hart changed her degree from Illinois State College from business administration to a loftier economics and marketing. And Yahoo admitted it was so, noting the director had a business administration degree, with a specialty in economics and marketing — whatever that means.

But, incompetent vetting by Hart aside, it is how and why Thompson changed his resume that will be at issue.

Here’s one fact that is true: Thompson only has an accounting degree from Stonehill College, near Boston, which he attended from 1975 to 1979.

(Second Update: Stonehill also confirmed that Thompson’s degree was only a Bachelor’s of Science in Business Administration (Accounting).)

Here is, in fact, a screenshot of an alumni newsletter when Thompson got the job at Yahoo earlier this year:

Despite the mistake, however it was made and which presumably serves to burnish Thompson’s tech cred, Yahoo said in a statement that it does not diminish his qualifications to lead the tech company.

Said the statement in full:

“Scott Thompson’s degree at Stonehill College was in bachelor science in accounting. There was an inadvertent error that stated Mr. Thompson also holds a degree in computer science. This, in no way, alters that fact that Mr. Thompson is a highly qualified executive with a successful track record leading large consumer technology companies. Under Mr. Thompson’s leadership, Yahoo! is moving forward to grow the company and drive shareholder value.”

Here’s the definition of inadvertent, for those who don’t know:

1. failing to act carefully or considerately; inattentive
2. resulting from heedless action; unintentional inadvertently

I’d say it’s going to turn out to be a lot more than that, but we’ll see what the board of Yahoo and, ultimately, shareholders, have to say.

(And, ironically, just yesterday Yahoo wrote a letter to shareholders claiming that Loeb did not have “relevant” expertise to be on its board. Turns out, he’s definitely pretty good at vetting.)

Dan Loeb Alleges "Discrepancies" on Yahoo CEO Scott Thompson's Resume Related to Computer Science Degree

Kara Swisher — Thu, 03 May 2012 18:53:08 +0000

The gloves are now really off in the proxy battle for Yahoo.

In a letter to Yahoo’s board, activist shareholder Dan Loeb of Third Point is alleging that the company’s new CEO Scott Thompson has inaccurately added a computer science degree to his resume.

(Update: Yahoo confirmed that Loeb is correct about Thompson not having such a degree and called it an “inadvertent error.”)

Thompson went to Stonehill College, near Boston, from 1975 to 1979, according to his LinkedIn profile, but it does not specify his degree.

(Second Update: Stonehill College also confirms that Thompson only graduated with a Bachelor’s of Science in Business Administration (Accounting).)

And older bios, such as one from his director bio for F5 and one from Forbes, as well as a Stone Hill College alumni newsletter, note that he graduated only with a Bachelor’s of Science in accounting.

But in official bios from his job at eBay as head of its PayPal payments division, as well as on the current Yahoo one, a degree in computer science also appears, along with the accounting degree.

“Scott received a bachelor’s in accounting and computer science from Stonehill College,” read the Yahoo and eBay bios. It is also in Yahoo’s regulatory filings.

According to Loeb’s letter:

I am awaiting a call back from Stonehill about Thompson’s degree, which the college is checking now. And I called Yahoo for comment and also am waiting for that, too.

If Loeb’s allegations are true and Thompson burnished his resume to add educational expertise to lend him more tech credibility, it could become a serious issue for Yahoo.

It would also call into question — as Loeb does in the letter — the amount of vetting done by Yahoo on the CEO choice, which was conducted by board member Patti Hart.

It gets worse: Loeb is also alleging that Hart changed her degree from Illinois State College from business administration to a loftier economics and marketing.

(Update: Loeb is correct. Yahoo said Hart has a degree in business administration, with a specialty in economics and marketing — although I am not sure what that means exactly.)

But Thompson’s educational pedigree is the main issue here, of course, and Loeb is calling for his head if explanations are not provided.

“If Mr. Thompson embellished his academic credentials we think that it 1) undermines his credibility as a technology expert and 2) reflects poorly on the character of the CEO who has been tasked with leading Yahoo! at this critical juncture. Now more than ever Yahoo! investors need a trustworthy CEO,” said Loeb in the letter.

But read it for yourself — here is the full letter from Loeb:

Third Point Letter to Board May 3 Release

Yahoo Gives Dan Loeb a Fresh One, but Real Action in Proxy Fight Begins in Coming Weeks

Kara Swisher — Thu, 03 May 2012 00:28:54 +0000

Earlier today, Yahoo released a letter talking itself up to investors, introing a new Web site called Yahoo Forward to do more bragging and — you guessed it — giving yet another smackdown to activist shareholder Dan Loeb of Third Point.

The move comes as the proxy fight over the Silicon Valley Internet giant moves ever closer to its annual meeting, which is set to take place sometime this summer.

In the letter, which had precisely zero new news, Yahoo recounted again that it tried hard to settle things with its disgruntled shareholder, but underscored its desire not to have Loeb on the board.

Why? Because the man who owns about six percent of Yahoo — which is about 99.99 percent more than any other current board member, which seems to make him pretty interested in Yahoo’s fate — is not qualified to be a director.

“The board continues to believe that Mr. Loeb himself does not bring the relevant skill set and experience to the board, particularly in comparison to the candidates selected by the board,” the Yahoo letter read. “In addition, we believe that, based on the specific qualifications of Third Point’s nominees relative to Yahoo!’s business and opportunities, the candidates nominated by the board’s Nominating and Governance Committee are significantly superior to those proposed by Third Point. “

Buuuurn! (Not really.)

Loeb has his own Web site, Value Yahoo, which he launched last month to pillory Yahoo. He used it today to post an infographic titled “The Incredible Shrinking Yahoo.”

Buuuurn! (Not really.)

In fact, the real fire could start as early as next week and in the months ahead when other Yahoo investors start to pick sides in the fight.

That should really begin when independent proxy advisory firm Institutional Shareholder Service gives its recommendation on the issue to Yahoo investors.

A backing by ISS for another prominent proxy advisor Glass Lewis will help Loeb, although he still has an uphill battle to convince other shareholders to vote down Yahoo, which has a new CEO in Scott Thompson and a mostly new board.

That will be even more difficult, given how active Thompson has been in making a ton of productive-sounding moves, such as a recent restructuring which included 2,000 layoffs. While results will not be in for a while, a lot of we’re-hard-at-work strategery noise is probably a good tack for Yahoo.

The company will surely try to drop some more Yahoo bombs on Loeb to burnish its chances in the coming month — most likely first around a taxable sale of a large portion of its Asian assets related to new rounds of talks now taking place again, which might include a fat dividend to investors.

(Investors like fat dividends and the people who give them fat dividends, by the way!)

The company could also sell off some of its underperforming units, such as its advertising technology business and renegotiate its search partnership with Microsoft, all of which will give Yahoo more of a case that Loeb’s complaints are now unfounded.

But don’t count Loeb out, either. He’s a deft campaigner and also deserves some credit for forcing Yahoo to make several of its recent moves to oust weak members of its longtime dysfunctional board.

In that regard, at least, Loeb has been very relevant.

Here’s Yahoo’s letter today, in full (the odd bolding is all done by the company):

Yahoo Beats Q1 Expectations (as Expected) -- Now, Will New CEO Outline More Strategery on Investor Call?

Kara Swisher — Tue, 17 Apr 2012 20:15:24 +0000

Yahoo beat Wall Street estimates in its first-quarter earnings report today, with revenue of $1.08 billion and earnings of 23 cents. That’s a gain of 28 percent from a year ago in net earnings and 38 percent per diluted share.

Analysts had been expecting Yahoo to report revenue of $1.06 billion and earnings of 17 cents a share. But, as I reported earlier today, sources had indicated that the results would be on the upside.

Still, revenue was only up year over year by 1 percent — not exactly a great achievement, given exploding growth across the Internet industry. The real drag was the Europe, Middle East and Africa regions, whose revenue was down 9 percent — which Yahoo attributed to the weak economy there — with its “contribution” down 27 percent. That region has been run by Rich Riley, who is now Yahoo’s sales lead in the U.S.

One interesting note: While display revenue was down, search revenue was up. And unique visitors to Yahoo were up 7 percent, which was lower growth than in previous quarters. The reason was declines in search and communications, with media up strongly.

Now, investors are hoping to get more clarity from new CEO Scott Thompson in a call at 2 pm PT about the overall strategy for the troubled Silicon Valley Internet giant, which just restructured its management again and also had layoffs of 2,000 employees.

Thompson has yet to articulate a specific plan beyond the broad strokes of media, commerce and data/platforms as Yahoo’s aim.

But there is a lot more to deal with and in detail, including figuring out its troubled advertising search partnership with Microsoft, the talks around selling off parts of the company’s lucrative Asian assets, Yahoo’s patent lawsuit against Facebook, how Yahoo is going to deal with activist shareholder Third Point’s possible proxy challenge and whether more layoffs beyond recent firings will be needed.

“In the first quarter, Yahoo!’s results came in at the high end of our guidance range and beat consensus on revenue and profits,” Thompson said in a statement. “We also made changes to resize the organization and establish a new leadership structure to quickly deliver the best user and advertiser experiences at scale.”

Until Thompson gives more deets on the earnings call, which I will be liveblogging, here’s Yahoo’s official press release and cool charts on the subject:

YHOO News 2012-4-17 General

YHOO_Q112EarningsPresentation

Amid Worries About Strategery, Yahoo CEO Scott Thompson Tries to Soothe the Savaged Troops (Memo Time!)

Kara Swisher — Thu, 05 Apr 2012 22:13:40 +0000

Yahoo CEO Scott Thompson, who has developed a tough-talk reputation within Yahoo of late, went all sweet — well, less crabby, I guess — the day after the layoffs in which 2,000 employees were fired.

After dressing down top execs the night before the cuts by telling them the bad situation was due to their poor performance as leaders, his internal letter to the troops was also a bit cut-and-dried, with the not-very-sympathetic admonishment, “change is never easy.”

Not exactly what someone who just got their pink slip — or saw a close colleague get axed — likes to hear!

Today, Thompson opted to go with the softer side of Scott, in an internal memo I obtained titled “time to move forward.” It includes a promise to deliver a real strategic plan next week at an “All Hands” meeting. (I have previously reported that he was rolling out a new structure next week.)

Yahoo’s activist shareholder Third Point admonished Thompson yesterday for not having such a plan in place before making such widespread layoffs, which shed 14 percent of the workforce from the Silicon Valley Internet giant.

“While this action was unfortunately necessary and widely expected, Third Point, Yahoo!’s largest outside shareholder, is disappointed that this round of cuts occurred before CEO Scott Thompson has articulated his strategic plan for the Company,” it wrote in a letter (embedded below). “Shareholders deserve a management team and board who have a vision and strategic plan.”

Internally, there was also a lot of grumbling over the lack of a vision before the layoffs and worries that Thompson does not have a clear path for Yahoo.

“It’s like going into war and killing a big chunk of troops right before, without a plan in place about how to win,” said one person, in a common sentiment I heard from employees. “Everyone left feels shell-shocked and with no direction.”

In recent meetings about various options, including selling off a variety of Yahoo’s businesses, the former president of eBay’s PayPal payments unit has focused on a range of ideas, especially adding more commerce and data to the mix.

Apparently, all will be revealed next week, in what Thompson called “comprehensive plans for Yahoo!’s future.”

Thompson also did a little cheerleading:

“We can do this. We will do this! One thing I’ve heard repeatedly since I got here is that everyone wants to win again…I have seen big turnarounds before, and this company has the foundation, the spirit, the backbone, and the creativity to get it done,” he wrote. “Personally, I can’t wait to get moving.”

That’s good, because shareholders and employees have been waiting a long time for any forward momentum at Yahoo.

Here’s the memo below in its entirety:

And here’s the Third Point letter from yesterday:

TP April 4 Statement

Finally, here is a video of a “Reporters’ Roundtable” I did last week on CNET:

It's Official: Yahoo Lays Off 2,000 Employees -- 14 Percent of Workforce

Kara Swisher — Wed, 04 Apr 2012 13:22:13 +0000

In a move that AllThingsD had previously reported was coming, Yahoo said it had laid off 2,000 employees, or 14 percent of the workforce.

“Today’s actions are an important next step toward a bold, new Yahoo! — smaller, nimbler, more profitable and better equipped to innovate as fast as our customers and our industry require,” said Yahoo CEO Scott Thompson in a statement. “Unfortunately, reaching that goal requires the tough decision to eliminate positions.”

While Yahoo has had periodic layoffs over the years, this one is its most significant in its history, and will also result in another large-scale restructuring of the management organization. More cuts are also likely to follow in the months ahead, due to the reshaping of Yahoo.

The latest employee action is being pushed by Thompson, who joined the Silicon Valley Internet giant in January from eBay’s PayPal unit.

“Change is never easy,” he wrote in an internal email to Yahoo employees (it is below in its entirety), in a well-worn cliché I am dead certain few appreciated hearing today from the top leader.

At an internal meeting with top staff last night, Thompson — who has gotten what seems to be a well-deserved reputation for chewing folks out at Yahoo — was more direct with the execs gathered, berating them extensively for not delivering and getting the company to this sorry point.

Ouch, Scott! It’s Easter, so it might be time for some forgiveness. (And no more ranting about my reporting to those inside Yahoo, since I have been 100 percent accurate so far. FYI, will aim for 110 percent next week!)

Yahoo said it will save about $375 million with the cuts, incurring a $125 to $145 million pretax cash charge for employee severance in its second quarter. Before the cuts, Yahoo had 14,000 staffers and has many thousands more hired as contractors.

The layoffs touch all units of the company, but the hardest hit is the product division, which is headed by Blake Irving, as well as its marketing, research and international units. Yahoo gave no details on the layoffs other than the number.

But the fate of two key parts of the soon-to-be-blown-apart unit — Yahoo’s advertising technology businesses, Right Media and APT, and its search business — is still being contemplated, as I have previously reported. Possible scenarios include a sale or a joint venture transaction for both, which employ thousands of Yahoo staffers.

The layoffs tomorrow are not the end of the road in cutting costs. Along with the likely shedding of its ad tech and search businesses, Yahoo leadership is also looking at future cuts as it evaluates current businesses, which could lop even more employees off its roster.

That said, Yahoo will be doubling down in some older and new arenas, so there would also be simultaneous hiring in the months ahead.

As wrenching as they will be today at Yahoo, the layoffs come as no surprise. Thompson had told employees in memos and also in recent meetings that “real change” was coming to the company.

Along with the trauma of the layoffs, Yahoo is also facing two other tense face-offs externally. In one, activist shareholder Third Point is waging a proxy fight for board seats and stepped up the public pressure this week; and Facebook struck back hard at Yahoo’s patent lawsuit with a counterclaim of its own.

After the layoffs tomorrow, sources say Yahoo will be announcing a new organization by next week. Thompson, along with outside consultants he has hired from the Boston Consulting Group, are making what appear to be profound changes.

Sources said that Yahoo will most likely be comprised of a global media division, one that encompasses Yahoo’s consumer products businesses and one focused on global and regional sales. There could also be a small organization of about 50 employees aimed at future innovation.

Americas head Ross Levinsohn is pegged to run the media arm, which will also include its leads/commerce businesses, such as autos; Shashi Seth — who now heads search and marketplaces — is likely to run consumer products, which will include Yahoo’s communications and search businesses.

Yahoo has already been conducting a search for a new worldwide sales head, who will also be boss of the U.S., Asia and Europe, Middle East and Africa sales regions. Rich Riley, who was recently running EMEA, is reportedly the pick for U.S. sales; Rose Tsou, who is running Asia, would presumably stay put; Yahoo is looking for an EMEA sales lead.

Some current operational execs — such as service engineering and ops head David Dibble, CFO Tim Morse, and top lawyer Mike Callahan — are likely to continue to operate as before.

One big question mark is how Chief Product Officer Irving fits in the possible new org, in which the new units get control of their product development. Irving has reportedly had several incoming job offers, although it is not clear if he has responded to that interest.

But today, the focus is on the layoffs and letting go all those employees, many of whom have worked at Yahoo for years. Even if it will result in a stronger Yahoo, as Thompson promises, it is still a very sad day in Sunnyvale.

Here is a video on the topic that I did with the WSJ.com “Digits” show today, after the cuts were announced early this morning:

Here’s the entire terse statement from Yahoo:

And here is Thompson’s memo to employees, stating the obvious and with nothing new from previous statements and internal memos:

Sticks and Stones: Third Point Launches "Value Yahoo" Blog (Which Does Not Value Current Leadership)

Kara Swisher — Mon, 02 Apr 2012 14:30:09 +0000

In another high-profile parry in its increasingly aggressive proxy fight against Yahoo, activist shareholder Third Point has launched an extensive Web blog to support its case with investors called “Value Yahoo.”

Along with a long statement — a blogifesto of sorts — about what it will take to fix the Silicon Valley Internet giant, Value Yahoo also tries to keep up the pressure on Yahoo’s board and management.

The purple-themed site — this is Yahoo’s well-known color — features a humorous take on Yahoo’s now dearly departed neon sign in San Francisco, with the banner: “Yahoo Shareholders Deserve Overdue Representation!”

It includes a section on “Failed Leadership,” info on its “Road to Recovery” slate of alternate directors and even an FAQ and mission statement.

“We believe in Yahoo!, its loyal users, committed employees, dedicated partners, and the potential of the brand,” it reads, in part. “Yahoo! shareholders, employees, and partners have suffered for too long with a revolving door of management teams and Directors who have been unable to seize opportunities despite the Company’s enduring role as the premier online source for news, sports, business, entertainment and email.”

By the way, in a clever dig, there is also a Facebook site for Value Yahoo — patent lawsuit or no, you can “like” Third Point’s effort.

Here, for example, is one of Value Yahoo’s charticles:

The goal of all this, presumably, is to get Yahoo to give in to demands for several board seats using its directors, including Third Point’s Dan Loeb. So far, ongoing discussions between Loeb and Yahoo have failed to stop the shareholder battle, which comes in the midst of the company’s wrenching restructuring.

Last week, Yahoo said it had appointed three new directors to its board. In a pointed slap at Loeb, the company said it had rejected him specifically, although Yahoo added that it was willing to accept one of his current choices and another that was mutually agreed to.

Loeb reacted to that, um, badly, with another letter last week that said Yahoo leadership was living in an “illogical Alice-in-Wonderland world.”

The war of words continues with the new site, which Third Point said it will maintain actively like a blog, with updates, charts, filings, outside news stories and more.

(Since Yahoo has apparently banned me from its internal news offering to employees, according to more sources than you can shake a stick at, I hope they can see my work here!)

In its newest post — titled “Why Are We Running for Election to the Yahoo! Board?” — Third Point presents an argument for other shareholders to act, even though Yahoo has actually made a lot of the changes that Loeb has been pushing for already.

(In fact, that’s an FAQ question on Value Yahoo, natch: “Yahoo! has made changes to its Board. Hasn’t Third Point already gotten what it wanted?” Short answer: Vigilance, since they are well-known backsliders over there!)

As the firm notes in its reasons-why essay, with the original bolding on the Value Yahoo blog:

“After years of failed leadership and poor governance, Yahoo! shareholders have a chance to inject experienced, independent voices aligned with their interests. The “Shareholder Slate” — Daniel Loeb, Harry Wilson, Michael Wolf, and Jeff Zucker — seeks a voice and a choice for Yahoo! owners hurt by the current “Legacy Board’s” track record of value disintegration, and wants to prevent the Board from simply nominating their handpicked replacements — the “Insider Slate” — for Yahoo!’s board.”

Third Point's Loeb to Yahoo About Board Rejection: "Illogical Alice-in-Wonderland World"

Kara Swisher — Wed, 28 Mar 2012 17:45:31 +0000

Third Point’s Dan Loeb, the activist Yahoo shareholder, fired back at the company today about recent board appointments that ignored his alternate slate of directors, in yet another colorful letter that compared the Silicon Valley Internet giant to the famous children’s book “Alice in Wonderland.”

And not in a nice way.

“Our view of the nomination process is further reinforced by your explanation on Sunday as to why I would not be an acceptable Director. You told me that the Board felt my experience and knowledge ‘would not be additive to the Board’ and that as Yahoo!’s largest outside shareholder, I would be ‘conflicted’ as a Director, wrote Loeb to CEO Scott Thompson. “Am I conflicted to advocate for the interests of other shareholders because we are owners of 5.8% (over $1 billion) of Yahoo! shares (unlike the non-retiring and proposed board members who have never purchased a single share of Yahoo! except for subsidized shares issued through option exercises and shares “paid” by the Company in lieu of fees)? Only in an illogical Alice-in-Wonderland world would a shareholder be deemed to be conflicted from representing the interests of other shareholders because he is, well, a shareholder too. This sentiment further confirms that Yahoo!’s approach to Board representation is “shareholders not welcome.”

We’re about to go down the rabbit hole, indeed, as the well-known New York hedge fund exec moves to significantly step up his proxy battle against Yahoo. While it will be a tough road for Third Point to attract enough investor support for his side, it’s still a noisy mess that Yahoo can ill afford, especially as Thompson readies significant layoffs as part of a major restructuring.

Here’s the full text of Loeb’s saucy letter:

TP March 28 Letter to CEO Thompson Re Board Negotiations

Yahoo-Geddon: Leaders to Debate Layoffs, Asset Sales, Search Deals and More Today, as a Major Restructuring Looms

Kara Swisher — Wed, 28 Mar 2012 15:02:15 +0000

What is Yahoo?

While that has been the perennially unanswered question at the Silicon Valley Internet giant for many years, according to dozens of sources inside and outside the company, Yahoo’s leadership is now deeply embroiled in an intense — and sometimes very tense and fast-changing — debate over a number of critical issues about what is expected to be the most sweeping restructuring in its history.

Top executives at the company are conducting what is likely to be a lively all-day “offsite” meeting today (which is actually taking place on Yahoo’s Sunnyvale campus) to continue to discuss, among other things: How and where the company will make large-scale cuts in staff, which I have previously reported were coming and will perhaps be numbering in the thousands; which businesses to sell off and which to keep, including its ad tech unit; the correct structure for the reconfigured entity; and who will be left to run it all when it is all settled.

Also up for debate is the best course of a two-pronged effort — being led primarily by CFO Tim Morse and members of his corporate strategy team — to renegotiate its search and advertising partnership deal with Microsoft, while also engaging in active discussions with Google about it taking over Yahoo’s search business.

“Everything is on the table,” said one person. “And anything could be blown up by Scott.”

The Scott being referenced is new CEO Scott Thompson, who has become something of a whirling dervish since he arrived at Yahoo only three months ago from the top job at eBay’s PayPal unit.

If shaking up the place — as he has promised in public and internal statements, including a recent memo in which he wrote that “real change is coming” — was his aim, Thompson is certainly doing just that and more.

Along with immediately initiating a massive effort to figure out the best way to restructure the long-troubled and ever-meandering company and all that entails, Thompson has also been meeting players all over Silicon Valley for advice; stopping and then restarting negotiating discussions with Yahoo’s Asian partners, visiting major advertising clients; and engaging in talks with activist shareholder Dan Loeb about settling a looming proxy fight, while also packing the board with allies to help fend off said battle.

And, oh yes, he also took a little time out from his busy schedule to sue Yahoo partner Facebook for patent violations.

But the real action is the remaking of Yahoo in his image. To do so, Thompson has been furiously evaluating the entire company, with the help of Boston Consulting Group and a small group of execs, especially Morse.

While it is all still undecided, he seems to be leaning toward Yahoo as a drastically slimmed-down entity without a central product group and with a simplified structure that includes global units — such as media, commerce and sales organizations — which will again be in charge of the entire development of their offerings.

(I will note, since I have been covering Yahoo since near its founding, this is a structure that has been in place before. In other words, at least for dinosaurs like me, there is nothing new under the sun here.)

The changes being contemplated include, as I have written previously, the possible sale or drastic reconfiguration of its ad technology business, which will effect at least 1,000 employees. Another 1,500 involved in Yahoo’s search business will also be impacted, depending on talks the company has been having with Microsoft, as well as Google, about better monetization.

Such a structure brings up a lot of questions about how, and by whom, it will be run. To figure it out, Thompson has been evaluating — sometimes rather brusquely — his own top managers, as well as looking for new ones outside the company, such as a search for a chief marketing officer and other key positions.

Confused? Perhaps, but not for much longer, said multiple sources, as Thompson moves closer to delivering his answer to the what-Yahoo-is question.

Yahoo PR — by the way, it will not escape Thompson’s change machine, either! — declined comment.

Yahoo Hopes to Fight Back at Activist Shareholder Third Point With More New Board Members of Its Own

Kara Swisher — Thu, 22 Mar 2012 20:34:10 +0000

Yahoo leadership, betting it can stave off a challenge from activist shareholder Daniel Loeb of Third Point, has been stepping up efforts to name three additional new board members to replace directors that are leaving.

Yahoo has already named two of the five open slots — former Rovi CEO Fred Amoroso and LiveOps Chairman (and former CEO) Maynard Webb, who was once COO of eBay.

But now, the company is pushing harder to get the last three on board in light of Third Point’s ever-increasing proxy pressure.

Several sources said that Yahoo’s new CEO Scott Thompson has told people inside and outside the Silicon Valley Internet giant that the threat from Third Point, which owns almost six percent of the company, is not as worrisome as some think it could be.

Thus, Yahoo’s headhunting firm Heidrick & Struggles has been contacting a number of high-profile media players about joining the board, including former News Corp. execs Peter Chernin and Tony Vinciquerra, as well as former MTV head Judy McGrath.

Both Chernin and Vinciquerra, sources said, have turned down the prospect of joining the Yahoo board in the midst of a possible proxy battle, along with other massive changes taking place.

Yahoo has not yet been successful at landing the remaining directors.

Meanwhile, Loeb, via saucy letters and filings, has been aggressively making a case that Yahoo should add his alternate slate of directors, including former NBC head Jeff Zucker, to the board. He recently submitted preliminary proxy filing with the Securities and Exchange Commission.

That’s because his cursory discussions with Thompson have apparently led nowhere, causing him to also publicly call for Yahoo to pay more attention to Third Point’s board selections.

If Yahoo names more directors to replace outgoing ones, it will be a slap in the face to Loeb, followed by inevitable ground battle war for investor votes.

Yes, that too.

Here’s a video from the WSJ.com’s “Digits” online tech show I did on the topic:

More Shoes Drop: Third Point Formally Files Preliminary Proxy Statement With SEC

Kara Swisher — Wed, 21 Mar 2012 16:39:15 +0000

No surprise — preliminary proxy documents from Yahoo’s activist shareholder Third Point were filed to the Securities and Exchange Commission today, which you can see here. In them, the New York hedge fund took new aim at the Silicon Valley Internet giant’s latest board member candidates, noting “installing the hand-picked choices of the current Board does nothing to allay concerns that the Company is poised to repeat the errors of its past.” More to come, to be sure, as Third Point seeks to get its own directors on Yahoo’s board.

Nobody Puts Dan Loeb in the Corner: Third Point Begins Proxy Bombing Yahoo in 3 … 2 … 1

Kara Swisher — Wed, 14 Mar 2012 20:24:51 +0000

Yahoo just got yet another poison-pen letter from activist investor Dan Loeb of Third Point, which says the company has been “dismissive” of his alternate slate of board members, including former NBC head Jeff Zucker.

It is another doozy, full of all kinds of interesting details and signals, which I will go into more detail about below, although the main message is: Perhaps it is actually time for a proxy fight.

Wrote Loeb to Yahoo CEO Scott Thompson: “The Board’s stonewalling, apparent insouciance and decision not to engage with us in a serious manner, has left us no choice but to directly approach our fellow owners with the Shareholder Slate. Accordingly, we hereby notify you that we intend to file our Preliminary Proxy Statement with the Securities and Exchange Commission within the week.”

Before the battle begins, let me just note: Who uses the great word “insouciance” anymore? Kudos, Dan! (It means indifference, Cliff Clavin.)

In an e-mailed statement, Yahoo said: “As previously stated, in order to achieve the best possible outcome for all Yahoo! shareholders, the Board’s nominating and corporate governance committee continues to review a wide range of highly qualified candidates. The committee has included Third Point’s candidates in its thorough review process and will make its recommendations to the full Board in due course.”

The Silicon Valley Internet giant also sent this turgid (look it up!) explanation of how proxy fights go down:

Got that?

One interesting part of the Loeb’s much more sassy letter is a suggestion at the bottom about Yahoo’s lack of a chairman when current head Roy Bostock steps down later in the year. Loeb’s idea is to keep on Gary Wilson, former CFO of Disney and Marriott, who was also leaving, in that role for one year.

“We believe this role should be for one year only, with the explicit understanding that Mr. Wilson would recruit his replacement prior to the end of the term,” wrote Loeb, who appears to be sending a none-to-subtle smoke signal that this might have been discussed already. “We suggest this in the spirit of continuity and compromise, and believe it would be in the best interests of all shareholders. We encourage the Company and Mr. Wilson to strongly consider this idea.”

The letter is a bit of a olive branch, followed by a swift kick, presumably an attempt by Loeb to get Yahoo to start taking him more seriously.

“Scott, it is not too late for you to take decisive leadership action and avoid the costs and distraction of an expensive proxy contest fighting the Shareholder Slate (which, according to our research, will be well-received by shareholders),” Loeb noted archly, before referring to Yahoo’s current lawsuit against Facebook over patent infringement. “You appear to have enough battles to fight already.”

In other words, if you prefer the “Fatal Attraction” movie metaphor rather than from “Dirty Dancing,” Loeb is not going to be ignored!

Oh, read it all for yourself — here’s the full letter:

Third Point Letter 3.14.12