The so-called activist investment firm Starboard Value LP is agitating for a complete overhaul of the management at Yahoo! Inc., claiming that the venerable Web giant is leaking cash with no recovery in sight.

The investors penned the following letter to Yahoo’s board of directors, expressing their extreme frustration at the last year’s financial performance. According to them, 2015 was a “downward spiral of the operating and financial performance of Yahoo’s core Search and Display advertising businesses.”

Starboard refrained from calling out CEO Marissa Mayer directly, unlike SpringOwl Asset Management, which recently wrote an open letter calling for her to be ousted. Still, Starboard did offer some heavy criticism over the company’s strategy in the past three years, which more or less coincides with Mayer’s term at the helm.

“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 said.

Yahoo’s attempts at turning itself around continue “to be plagued with deteriorating financial performance and an accelerating number of executive leadership departures,” it added.

Starboard also stated its concern about Yahoo’s increasing operating costs, which have risen by around $500 million a year in the face of declining revenues. It also called out Mayer’s poor investments over the last three years, saying most of these were “misguided, poorly overseen, and, ultimately, shut down.”

“The Board must accept that significant changes are desperately needed. This would include changes in management, changes in Board composition, and changes in strategy and execution,” Starboard concluded.

Our take

Starboard makes a lot of relevant points, but one can’t help thinking its latest agitating is designed to mask it’s own poor performance of late. The hedge fund has performed quite poorly of late, with the value of its portfolio rising by just one percent in the most recent quarter.

Yahoo was clearly not a sound investment for anyone looking for quick profits when Mayer took charge in 2012. At the time she was faced with two choices – either strip the company down for sale, including its 24 percent stake in Alibaba Group Holdings Ltd., or try to turn things around. What with the economy being stalled back in 2012, Mayer chose the latter option.

Anyone investing in Yahoo at that point (i.e. Starboard) should have been keenly aware they’d have to wait a while before seeing a return. Yahoo’s management is still fighting to turn the company around, and the outcome of those efforts are yet to be determined. If Yahoo does indeed change its management again, it only makes a fire sale of its assets all the more likely.

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