Friday, January 12, 2007

The WSJ's Coverage of "Plan B"

From this afternoon's WSJ/Dow Jones article:

Investor Launches Online Campaign To Sway Yahoo

January 12, 2007 4:26 p.m.
By Riva Richmond

NEW YORK (Dow Jones)--Eric Jackson is trying to foment a Yahoo Inc. (YHOO) shareholder insurrection using the democratizing tools of the social Web.

Armed with a blog, an online-voting service and plans for a wiki, Jackson, an individual investor in Yahoo with less than 1,000 shares, is trying to create a voting block of fellow shareholders with enough collective weight to force leadership and strategy changes at the Internet giant.

On his Breakout Performance blog Sunday, Jackson, who is the chief executive of a Naples, Fla., consulting firm, called on investors and Yahoo users to buy shares - even as few as 10 - and pledge them to the effort. As of Friday morning, investors had pledged about 60,000 shares worth about $1.8 million.

Jackson also asked them to help refine his proposed "Plan B" for the company with which the group will lobby the board, which among other things demands the firing of Chief Executive Terry Semel and the immediate appointment of Chief Financial Officer Susan Decker to the top post.

The effort is inspired by rising investor activism that recently helped lead to the ouster of Home Depot Inc.'s (HD) Bob Nardelli and by growing online political activism that has empowered candidates like Howard Dean.

"Activist Investing has principally been the domain of hedge funds - well, no longer," Jackson wrote Sunday. "Let's take back control of one of the greatest Internet companies in the world and see the stock price finally start moving up."

Yahoo's stock price, now at $29.45 a share, is down 19% in the last 12 months. Meanwhile, shares of rival Google Inc. (GOOG) are up 159% for the period.

The Sunnyvale, Calif., company said in an emailed statement that it is "always interested in the views of our shareholders, as well as employees and others with a stake in Yahoo." It argued that its current strategy and recently announced reorganization, which gave Decker responsibility for a key operational unit, will help it "focus more intensively on our customers' needs and better leverage our core strengths" to the company and shareholders' benefit.

And in defense of its top executive, Yahoo said that: "Under Terry Semel's leadership over the past five years, Yahoo! has achieved tremendous growth, consistent profitability and impressive returns for shareholders, our stock price rising four fold."

Shareholders like Jackson, frustrated by the stock's more recent poor performance, have argued that Yahoo's reorganization is not enough and that more radical changes are needed.

Jackson is gathering proposed improvements to his Plan B through comments on his blog, though he said he hopes to launch a wiki to allow more direct collaboration on the document. He is also using online-voting site Vizu to gauge group support for various proposed "Plan B" actions.

Among 45 voters so far, 36% are in favor of firing Semel, 49% want stepped up share buybacks, 60% favor a pay-for-performance plan for managers, and 62% want a reduction in overlapping Yahoo products.

Jackson has set an ambitious target to gather a group with a collective 10% ownership stake, a goal he argues is more possible today than ever before because of blogging, which has put global publishing and instant interaction with like-minded people into the hands of anyone with an Internet connection.

With $1.8 million in stock pledged so far, he is still a long way from a $3.9 billion target, based on Yahoo's $39 billion market capitalization.

"It's clear we're going to need the help of the institutions" to reach that goal, Jackson said in an interview. And reaching out to them is "definitely something in the cards." But for now, he's focused on attracting individual investors and crafting a strong Plan B people can get behind.

The largest investor involved in the effort so far holds 18,000 shares, while most hold 800 to 2,000, Jackson said. About 60% have pledged anonymously, but Jackson says a fair number of current and former Yahoo employees are in the mix. On the comments section of the blog, an anonymous investor claiming to own tens of thousands of shares said he or she would monitor the campaign closely and join depending on its progress and the substance of Plan B.

"This has a 'grassroots' feel to it. I suppose this is what happened when the blogging community rallied around Ned Lamont in Connecticut," Jackson wrote on the blog, referring to the Senate candidate who beat Sen. Joe Lieberman in the Democratic primary last year. "We're really trying to harness the power of social groups in the business world for the benefit of Yahoo! shareholders."

-By Riva Richmond, Dow Jones Newswires; 201-938-5670;

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