"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," Starboard Value LP wrote in a letter released Wednesday. "It appears that investors have lost all confidence in management and the Board."
If changes are not forthcoming in leadership, Starboard said, an election may be needed to replace some members of the board.
Starboard did not include any specific names in its letter. Mayer became CEO of Yahoo in 2012 and Webb became chairman in 2013.
"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 in mobile, video, native and social that we expect will drive sustainable growth," said Yahoo in a statement responding to Starboard's letter. "We will share additional plans for a more focused Yahoo on or before our Q4 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."
With shares down 35 percent over the past year, Yahoo is facing mounting pressure from unhappy shareholders.
Last month New York hedge fund SpringOwl Asset Management and Los Angeles investment firm Canyon Capital Advisors were vocal about the steps they believe Yahoo should take. SpringOwl wants Yahoo to lay off 9,000 of its 10,700 workers and eliminate free food for employees to help save $2 billion annually. Canyon Capital recommended Yahoo sell its Internet business.