Wednesday, June 13, 2007 Yahoo! Shareholders Show Discontent

From yesterday's

By Vishesh
Senior Writer
6/12/2007 5:55 PM EDT

The last year has been tough for Yahoo! (YHOO - Cramer's Take - Stockpickr - Rating).
So it's no surprise that the company's annual shareholder meeting on Tuesday was hardly a cakewalk.

Shares of Yahoo! finished the day at $27.05, down 10% from where they were trading a year ago. The broader Nasdaq index, meanwhile, has gained almost 25% in the same time fame. Over the past two years, the Nasdaq has outperformed Yahoo! by more than 45%.

And the discontent showed among Yahoo! shareholders, who re-elected the company's board of directors with only a 66% vote of support. Last year, by contrast, a 95% majority voted to re-elect the board.

Some Yahoo! investors also found the company's vision for regaining momentum to be deficient in substance. "There has been a lack of detail about how they are going to win with regard to what they have communicated to the public and to shareholders," says Eric Jackson, a Yahoo! investor who has waged a high-profile battle to hold management's feet to the fire.

"A lot of the plans they have sound like motherhood and apple pie. Who can be against being a leader in mobile?" he says.

But the company may not be delivering on the rhetoric. Jackson complained to the board about the quality of Yahoo!'s Go service, which was launched at the beginning of this year to much fanfare from the company.

Despite the hype, the service was slow and cumbersome, Jackson told the board.

"Afterwards, a product manager from the mobile division approached me, told me to uninstall and reinstall it, and said it was going to get better in the future," Jackson says. "But they really need to get much beyond that."

Jackson may be one of the most vocal critics of Yahoo!'s performance under CEO Terry Semel, but he is hardly alone. With only 100 shares of Yahoo! stock to his name, Jackson has nonetheless attracted a group of shareholders that collectively control 2 million shares to his plan to make big changes at Yahoo!

Dubbed "Plan B," Jackson's group used emerging Web tools like blogs, videos and wikis to solicit suggestions for changes the company can make.

And while Jackson says he submitted the plan to the company in February, Semel said he had not reviewed it in a conversation with Jackson following the question and answer segment of the meeting.

Still, Semel said that he would be willing to talk to Jackson and that the company was receptive to ideas from its shareholders.

Yahoo! also faced motions by shareholders to enact new payment criteria for Yahoo! management and to make stronger efforts to address censorship and humanitarian issues raised in countries like China. All of the motions failed to pass.

But Yahoo! co-founder Jerry Yang did give a long speech about how important the matters are to Yahoo! and what the company was doing along those fronts.

And listening to disgruntled shareholders may be the first step to a more pleasant meeting next year -- and better performance in between.

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