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How Shareholder Activism Shook Up Yahoo (YHOO)

By U.S. News & World Report

Stocks mentioned in this story: YHOO, VZ, DRI, ODP, SPLS, MSFT, LNKD, FB, TWTR, TWX, GOOG, GOOGL

Yahoo? The company that once proudly, if pompously, capped its name with an exclamation point has stumbled into the e-sunset.

It’s now the property of Verizon Communications (ticker: VZ), which acquired the humbled internet giant for $4.8 billion. The story lit up Silicon Valley water cooler talk Monday, but as dust settles around the new reality, one fact remains irrefutable: The demise of Yahoo (YHOO) came at the hand of aggressive activist shareholders who aren’t used to taking no for an answer.

The writing was scrawled on the wall as recently as March, when Starboard Value made a full-court press for control of Yahoo’s board. The effort didn’t pan out — at first. But this week’s news reinforces the truism every sports fan can identify with: Sometimes, losing is winning.

[See: 10 Ways to Play in the Asia-Pacific Stocks Pool.]

Since acquiring a sizable Yahoo stake in the fall of 2014, Starboard pressured Yahoo to make wholesale changes to revive shareholder returns. And after the March setback, Starboard fought back with a vengeance. CEO Jeffrey Smith was named to the Yahoo board in April along with three allies; once on the board, Smith called for the company to sell itself to the highest bidder.

That Yahoo and embattled CEO Marissa Mayer might have hoped to emerge unscathed seems foolish in hindsight. The New York-based hedge fund doesn’t like to sit on the sidelines and pussyfoot.

This is, after all, the same fund that mounted a 300-slide presentation in its bitter battle to wipe out the board of Darden Restaurants (DRI). At one minute per slide, that would last five hours, not counting the time needed to draw daggers.

So thorough was the attack that Starboard even questioned the number of free breadsticks Olive Garden locations gave out. Starboard won in 2014, replacing the entire board; since then, DRI stock is up 25 percent. (How much the breadstick cutbacks had to do with it isn’t known.)

Starboard also pushed, and pushed hard, for the 2013 merger between Office Depot (ODP) and OfficeMax. That effort clinched, they pushed even more, this time for Staples (SPLS) to acquire Office Depot. A federal judge quashed the $6.3 billion deal in May for antitrust reasons.

And unfortunately for Smith and other Yahoo shareholders, the deal hasn’t budged Yahoo’s stock, a state of affairs dating to when Starboard first got involved in Yahoo. YHOO trades at less than $39 a share.

Yet Starboard’s reputation as the two-ton gorilla of activist pressure will only grow after one-two victories in its Yahoo proxy fight and reaching the goal of selling the company’s assets.

To be sure, Starboard didn’t win this slugfest alone. Dating to 2008, activists Carl Icahn, and later Dan Loeb, planted the seeds for the latest shakeups at Yahoo. Canyon Capital Advisors and the hedge fund SpringOwl Asset Management also called, with Starboard or individually, for Mayer’s ouster, slashing the work force by 75 percent and finding a buyer for the troubled company.

[See: 7 Global Goats That Could Bring Market Mayhem.]

“The Yahoo acquisition was inevitable given the company’s inability to monetize its Alibaba [stake] without facing adverse tax consequences,” says Ryan Donovan, vice president of product development with Sitecore, a partner of Microsoft Corp. (MSFT).

Now investors should keep an eye out, especially since the Yahoo sale marks the latest in a series of high-profile deals in the digital content space, including Microsoft’s purchase of LinkedIn Corp. (LNKD) and Facebook’s (FB) acquisition of Instagram.

“This move takes yet another major internet player off the table and puts even further pressure on companies like Twitter (TWTR) to either fix their lack of growth or join the ranks of consolidation.” (In fact, Twitter is down more than 45 percent over the last 12 months, trading at about $18.50)

For Verizon, the deal is a screaming bargain, given Yahoo’s current market capitalization of $35.84 billion. Still one could well cast a hairy eyeball in Verizon’s direction, as it adds to its growing collection of unsexy digital has-beens. For about the same price ($4.4 billion), it acquired AOL in June of last year.

For those who can remember back far enough in this age of Twitter-speed attention spans, AOL was infamous for one thing (besides those infernal CD-ROM discs and charging for email access long after others gave it away).

The crucial factor, especially if you’re Verizon, is AOL’s bad juju of sharing in the most colossal failure new media merger in history — the 2001 union with Time Warner (TWX). AOL hasn’t been nearly the same company since, and has limped from failure to failure, including its much-hyped Seed and Patch content experiments.

That said, AOL’s marriage to the Huffington Post has been a happy one. And industry observers see a very bright side to two legacy companies coming under one roof.

“In many ways, this feels organic,” says Tasso Roumeliotis, founder and CEO of Location Labs, a mobile security company whose clients include Verizon. “AOL and Yahoo were natural companies to consolidate in the online ad space, so this makes a ton of sense from that perspective.”

That noted, “Going from a phone service to an advertising company is not an easy feat — this will be a challenge and a stretch,” Roumeliotis says — and he’s right.

Glued together, AOL and Yahoo represent just above 5 percent of the digital ad market. Facebook controls three times as much, and Alphabet (GOOG, GOOGL) nearly eight times AOL/Yahoo’s single digits.

For now, Starboard has no role in how Verizon runs its affairs. But in the bizarre soap opera of mergers, acquisitions and spinoffs, there’s no telling how much opportunity — or blood — Smith and company will smell in this newly created content ocean.

“I’m not sure how successful Verizon will be,” says M.S. Krishnan, professor of technology and operations at the University of Michigan’s Ross School of Business. “It won’t be easy to integrate these platforms — and it will also be very important to move fast on this integration.”

[Read: The Valuable World of Value Investing.]

Otherwise, Verizon could see its very identity and profitability diluted: perhaps to the point of Ya-Who?

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How Shareholder Activism Shook Up Yahoo (YHOO) originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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