There has been a perception in the tech community this week that Yahoo CEO Marissa Mayer was forced by Yahoo’s board of directors to return most of the proceeds from the Alibaba stock sale to shareholders.This perception stems from the fact that, a couple of months ago, Mayer announced that Yahoo might not return this cash to shareholders, as it had previously planned to do.
This announcement was cheered by the tech community, which concluded that Mayer wanted to use the cash to buy and make cool products and, thus, make Yahoo a Silicon Valley powerhouse again.
The seeming reversal of this announcement therefore caused some tech observers to conclude that Mayer is not actually the real decision-maker at Yahoo–that, instead, the greedy board had overruled her idealistic desire to use the money to make good products and demanded that she just hand over the cash.
In other words, some tech observers concluded, Marissa Mayer is just a popular puppet and that financial types on the board are running the company.
Nicholas Carlson articulated this perception in a post this morning.
But it’s not true, says a source familiar with the situation.
All boards do, ultimately, control companies. And any board would ultimately have to support a decision like this.
But our source says that Marissa Mayer was not overruled by Yahoo’s board on this decision. In fact, the source says that the decision to return ~$3 billion of cash to shareholders was Mayer’s decision, albeit one that was championed by the board.
The perception that Mayer was somehow overruled here, the source says, stems from Mayer’s decision a couple of months ago to announce that Yahoo might not return most of the cash from the Alibaba sale to shareholders, as it had previously planned to do. The reason Mayer announced this, the source says, is that, just after joining the company, she was asked to sign an SEC filing reiterating Yahoo’s plan to return substantially all of the cash from the Alibaba sale to shareholders. At that point, Mayer had not performed the analysis necessary to support that plan, and she did not want to sign a document that she disagreed with. So she changed the language to add some wiggle room.
Later, after conducting the necessary analysis, the source says, Mayer decided that returning ~$3 billion of the proceeds to shareholders did, actually, make sense, so she proposed that plan to the board. And the board accepted it.
Even after the cash is returned, Yahoo will have more than $3 billion of cash. It will also likely generate some more cash from the sale of the rest of the Alibaba stake and the sale of its stake in Yahoo Japan. And it’s still generating more than $1 billion of cash a year.
So Yahoo has plenty of financial flexibility, the source says. And Marissa Mayer is very much in charge.
Now, as Nicholas Carlson points out, returning cash to shareholders reduces Yahoo’s flexibility, and therefore might end up hurting the company–especially if Mayer is committed to turning it around. Given how fast the Internet landscape is changing, and how many opportunities for investments and acquisitions may come along in the next few years, it seems short-sighted to return the cash to shareholders (and I say that as a shareholder). So, whether or not Mayer agreed with the board that it was smart to return cash to shareholders, it does seem like a short-sighted decision.
(Meanwhile, there’s still no word on how Yahoo plans to return this cash to shareholders–ie, via a dividend, or a share buyback).
Watch below to see what Mayer needs to do at Yahoo:
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