One Of Marissa Mayer's Biggest Defenders Has Turned On Her
Eric Jackson, founder and managing partner of hedge fund Ironfire Capital, has a blistering post at Forbes ripping Mayer and her run as CEO.
"I think many large Yahoo shareholders are frustrated with her performance as CEO," Jackson told us over Twitter direct message. "This was never seen as an easy job but she's shot herself in the foot repeatedly. There is concern after the last $2B spent on acquisitions that the incoming Alibaba cash will be wasted."
Yahoo has a stake in Chinese e-commerce giant Alibaba, which is set to host its IPO later this year. When that happens, Yahoo is selling 140 million Alibaba shares, which will lead to billions in fresh cash for Yahoo.
Yahoo CFO Ken Goldman said the company plans to return half of that money to shareholders. The other half will presumably be used for acquisitions, and that has Jackson nervous.
Since taking over, Jackson says Mayer has spent $2 billion buying companies, but most of those acquisitions have been for naught.
"Can you name any other acquisition Yahoo has made besides Tumblr? If not, what does that say about them?" writes Jackson at Forbes. "If these small acquisitions were mostly talent-driven as characterized by management, why was it necessary to spend, say, $30 million to hire 3 people from a dying company? Was this really the best use of shareholder capital? Yahoo should not responsible for bailing out VCs from their failed investments. This isn't TARP."
He has other reasons to be skeptical of Mayer.
- Her first major hire was Henrique De Castro. He was a mismatch, and he was forced out of the company, but not before he collected a massive payday.
- Headcount at Yahoo has increased, not decreased since she took over. Yahoo is a bloated company that could use a slimming. Mayer hasn't been willing to do it.
- Yahoo's increase in mobile usage is not that impressive. Mayer talks about Yahoo gaining mobile users, but that would have happened with any company. Yahoo is a big consumer property, and consumers are going mobile.
Most important of all, Yahoo's core business is flagging, and investors value it at -$4 billion when you back out Yahoo's stakes in Alibaba and Yahoo Japan. Mayer has shown no aptitude so far for getting the core ad business cranking. She's also failed to release any new products that are really catching with users.
It's still early, but Yahoo is facing a critical deadline. When Alibaba IPOs and Yahoo sells its shares, it takes a tax hit. Jackson believes the best thing for Yahoo is to sell to Alibaba, which would result in cost savings. Then Alibaba would be able to attack the U.S. market with a well-known property.
"The tax savings from an Alibaba or SoftBank acquisition would be welcome by all compared to the status quo," Jackson tells us.
However, he thinks Mayer would resist selling to Alibaba because it would lead to her being replaced as CEO.
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