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Yahoo CEO to Get Severance Package Worth $55M Upon Sale

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It seems that Yahoo! Inc YHOO still has long way to go and a number of hurdles to cross before its future is ascertained. After losing more than a third of its important executives, Yahoo somehow managed to avert a proxy war and is still struggling to get a suitable buyer. But the nightmare doesn't seem to end here for Yahoo. Let's see what's with latest move.

In a regulatory filing with the Securities and Exchange Commission last Friday, Yahoo revealed that CEO Marissa Mayer will get a severance package of $55 million if the sale of its Internet operations costs Mayer her job. The payout includes cash severance of $3 million, restricted stock units and options.

The company refused to comment beyond the filing.

Mayer was hired by Yahoo in 2012 to turn the company around but she repeatedly failed in her efforts to develop successful products and boost revenues. She has been making herself unpopular among employees and investors with her pressing management style and unsuccessful strategic moves.

Her latest strategy included cutting back total employees by 15% and selling off properties but that eventually backfired.

Since 2015, more than a third of the company's employees including some of Mayer's key lieutenants have left. She announced hefty packages to put a check on the brain drain but she had already lost the trust of senior employees.

The company cut Mayer's compensation by from $42 million in 2014 to $36 million in 2015. She however, received only about $14 million owing to the company's poor financial performance.

Other executives could also get huge amounts if they are terminated after the sell. Chief Revenue Officer Lisa Utzschneider could get about $20 million while Chief Financial Officer Ken Goldman may receive $16 million.

Although takeover offers are in consideration, the majority of investors believe that the company will eventually decide to sell its core Internet business that includes search, mail and news sites. In February, Yahoo launched an auction and has reportedly narrowed down its list of bidders to 10 companies by now.

Capital Markets analyst Mark Mahaney believes that Verizon Communications Inc. VZ heads the list of prospective buyers and that being the case, there is a chance that Verizon will make Tim Armstrong, the new CEO of Yahoo. Armstrong currently is the CEO of AOL Inc. that Verizon recently acquired for $4.4 billion.

Last week, Yahoo managed to avert a proxy war when it reached a settlement with activist shareholder Starboard Value LP, which was pushing to replace Yahoo's entire board. Under the agreement, Yahoo agreed to add four independent directors of Starboard including CEO Jeffery Smith.

Despite growth in new businesses, "we are still in a transition phase as we work on our turnaround strategy," Yahoo said in the filing.

Currently, Yahoo is a Zacks Rank #3 (Hold) stock. Better choices for investors would be Facebook, Inc. FB , sporting a Zacks Rank #1 (Strong Buy) and Blue Calypso, Inc. BCYP , carrying a Zacks Rank #2 (Buy).

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YAHOO! INC (YHOO): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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