) announced that its chief executive officer Scott Thompson has
resigned after it was revealed that his academic credentials were
Thompson came from
) in January to replace Carol Bartz, who was dismissed by the Yahoo
board in September 2011. Yahoo hired Thompson hoping that he would
turn around the struggling Web portal.
On May 3, Daniel Loeb, a principal shareholder (5.8% stake in
Yahoo through the Third Point LLC fund), discovered that Thompson's
official Yahoo biography exaggerated his academic credentials,
showing a dual degree in accounting and computer science, while his
actual degree was only in accounting.
Thompson's departure will be expensive for Yahoo. Besides an
annual base salary of $1 million, Thompson will receive a hiring
bonus of $1.5 million in cash and $5.5 million in stock, according
to Yahoo's agreement letter filed with the U.S. Securities and
According to regulatory filings, Thompson is also set to receive
an inducement equity award worth $5 million. Thompson is also
eligible for incentive compensation of as much as twice his annual
salary, depending on performance, with the bonus guaranteed to be
at least $1 million this fiscal year.
Thompson's leadership proved beneficial in his four months of
work at Yahoo, as evident from the earnings results reported on
April 17. Yahoo reported first quarter net sales of $1.08 that was
ahead of both the consensus and management guidance. He also made
efforts to reduce operational costs by eliminating 14% of its
workforce or about 2,000 jobs.
According to sources, Thompson will be replaced on an interim
basis by Ross Levinsohn, head of global media at Sunnyvale,
The dismissal of the third CEO in just three years will not only
intensify the turmoil at Yahoo, but will also have a negative
impact on its shareholder confidence. Despite being one of the
biggest brand names, Yahoo has performed very poorly in the last
few years. The social networking sites Facebook and
) have been persistently eating into Yahoo's market share.
That said, the turnaround in Yahoo's board may be a positive for
the company. Daniel Loeb and the Third Point LLC fund have been
publicly criticizing Yahoo's board for quite some time because of
its inability to take appropriate action at the proper time,
pointing to the company's failure to sell itself to
) at an attractive valuation (among other things).
They have been asking for a reshuffling of the board to bring in
fresh members and set the company back on track. Investors are
clearly in support of this decision, which is the main reason for
buoyant share prices.
Yahoo shares carry a Zacks #2 Rank, implying a Buy rating for
the near term (1-3 months).
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