By Douglas MacMillan and Dana Mattioli 

Yahoo Inc. on Tuesday gave its strongest indication yet that the company's board is considering a sale of its Web properties, signaling the possible end of a 20-year run by an Internet icon.

The company said it would explore "strategic alternatives" as part of a restructuring that will eliminate roughly 15% of its workforce. The announcement came alongside a dismal fourth-quarter report card in which Yahoo took a $4.5 billion charge to write down the value of businesses including its Tumblr blogging site.

Yahoo's move to weight its options sets the stage for a possible bidding war between a wide range of potential buyers. About 1 billion people a month travel collectively to Yahoo's home page, email and other sites, making them an attractive asset to media conglomerates such as Wall Street Journal owner News Corp and IAC/InterActiveCorp, telecom giants including Verizon Communications Inc. and private-equity firm TPG--all of which have expressed interest in purchasing parts or all of the business, people familiar with the matter said.

A sale process would also likely mark the end of Chief Executive Marissa Mayer's attempt to turn around Yahoo. Costs have risen, while revenue has shrunk in the 3 1/2 years since she took the reins. Fourth-quarter revenue excluding commissions paid to retail partners was about $1 billion, down 15% from a year ago and the lowest point during Ms. Mayer's tenure.

Her efforts were complicated in recent months by an exodus of top managers and growing impatience from investors, including hedge-fund activist Starboard Value LP, who has called for new leadership and a sale of the company.

Yahoo's efforts did little to appease some shareholders including SpringOwl Asset Management LLC, which last month recommended the company cut up to 75% of staff and bring in a more operations-focused CEO.

"This is a company that has clearly suffered from a lack of focus," said Eric Jackson, managing director at SpringOwl. "We believe there is much more that needs to be done to improve the profitability of the business."

Investors have until March 26 to submit proxy proposals. Prior to Tuesday's announcement, Starboard has indicated it would nominate a slate of new directors. The investor didn't respond to a request for comment.

At the moment, Yahoo is focusing on trimming costs to make it more attractive to investors or buyers. Yahoo said that by the end of 2016, it anticipates having about 9,000 employees and fewer than 1,000 contractors, which represents a workforce that is roughly 42% smaller than it was in 2012. The company sees the cuts resulting in savings of $400 million a year.

In a call with analysts on Tuesday, Ms. Mayer said the restructuring would help Yahoo improve its focus on three key areas: search, communications and digital content.

"We will simplify the business to improve execution," Ms. Mayer said on the call. "Yahoo cannot win the hearts and minds of users and advertisers with a complex portfolio of assets."

Yahoo also said it has begun to explore divesting itself of nonstrategic assets, such as patents, the sale of real estate, and other noncore assets. Through the end of the year, the company estimated that these efforts could generate between $1 billion and $3 billion in cash.

"The board also believes that exploring additional strategic alternatives, in parallel to the execution of the management plan, is in the best interest of our shareholders," Yahoo Chairman Maynard Webb said in a news release. That represents a broadening in stance from December, when Mr. Webb said the company wasn't interested in a sale but would entertain offers as part of the board's fiduciary duty.

Yahoo also said Tuesday that finance-industry entrepreneur Charles Schwab is resigning from its board. Mr. Schwab was among the seasoned executives Ms. Mayer added to the board as she put her own stamp on its governance.

Mr. Schwab, whose departure will leave the Yahoo board with seven directors, pointed to his other professional commitments and demands on his time and said his departure wasn't related to any disagreement with the company.

Shares of Yahoo, down 35% over the past year, fell 1.8% to $28.53 in after-hours trading.

Yahoo reiterated Tuesday that it will continue exploring a separation of its operating business from its stake in Alibaba Group Holding Ltd. "I do feel comfortable we can do it this year," Chief Financial Officer Ken Goldman said on the earnings call.

Write to Douglas MacMillan at douglas.macmillan@wsj.com and Dana Mattioli at dana.mattioli@wsj.com

 

(END) Dow Jones Newswires

February 02, 2016 20:11 ET (01:11 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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