Starboard to Yahoo: Investors have lost confidence

It's time for Yahoo and CEO Marissa Mayer to face the music and recognize their turnaround approach isn't working, Starboard Value's Jeffrey Smith said Wednesday.

"Despite over three years of effort and billions spent on acquisitions, the management team that was hired to turn around the Core Business has failed to produce acceptable results, in turn, causing massive declines in profitability and cash flow," the hedge fund's managing partner said in a letter to Yahoo's board.

"It appears that investors have lost all confidence in management and the Board [of directors]. As of Tuesday's close, the value of the 'Yahoo Stub' (defined as Yahoo's market value less the value of its shares in Alibaba) has collapsed and is currently trading near zero," the activist investor added.

Smith also said Yahoo needs to make significant changes to its management team, board composition, strategy and execution.

Yahoo later said in a statement: "Yahoo is in the midst of a multi-year transformation. We attract more than a billion people every month and we've built a profitable, billion dollar business."

"We will share additional plans for a more focused Yahoo on or before our fourth quarter earnings call. Our board and management team engage in and maintain regular, open dialogue with all our shareholders, and consistently strive to deliver and to maximize shareholder value."

Yahoo's stock closed down by just 0.1 percent Wednesday, in a trading session where major indexes closed down more than 1 percent.

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