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Yahoo, Starboard Value Call A Truce, Agree To Four New Directors

In what Yahoo ( YHOO ) CEO Marissa Mayer called a “constructive resolution,” the troubled Web portal announced Wednesday that it had reached an agreement with activist investor Starboard Value to add four new independent directors to the company’s board. In March, Starboard had proposed replacing Yahoo’s entire nine-member board with its own slate, saying Yahoo’s current management team and board had “repeatedly failed shareholders” and shouldn’t be in charge of a strategic review of Yahoo’s core search and display ad business or determine the fate of Yahoo’s 15% stake in China e-commerce giant Alibaba Group ( BABA ) and its holdings in Yahoo Japan. Under the agreement announced Wednesday, Starboard has withdrawn its director nominees. Instead, Yahoo will add four new independent directors, including Starboard CEO and Chief Investment Officer Jeffrey Smith. Also joining the Yahoo board are Tor Braham, a former managing director and global head of technology mergers and acquisitions for Deutsche Bank Securities; media executive Eddy Hartenstein; and Richard Hill, the former interim CEO of Tessera Technologies ( TSRA ). At the company’s upcoming annual meeting, two incumbent directors will not stand for re-election, giving Yahoo an 11-member board going forward, the company said. “This constructive resolution will allow management and the board to keep our focus on our extremely important objectives,” Mayer said in a statement. Starboard’s Smith said, “We look forward to getting started right away and working closely with management and our fellow board members with the common goal of maximizing value for all shareholders.” Yahoo is in the process of evaluating buyout offers. Yahoo stock has more than doubled since Mayer, who had been a top executive at Alphabet ‘s ( ) Google, was hired as CEO in July 2012. But she’s been unable to spark significant earnings and revenue growth, and Yahoo has struggled to build online- and mobile-ad revenue vs. rivals Google, Facebook ( FB ) and others. Yahoo stock was down 1% in midday trading in the stock market today , near 37, down 18% in the past 12 months but up 40% since early February in anticipation of a sale. Last week, Yahoo gave no specifics on its efforts to find a buyer for its core business and perhaps its big stakes in Alibaba and Yahoo Japan. Most of Yahoo’s value comes from its Alibaba stake. Yahoo’s total market cap is near $34.8 billion. Yahoo last week reported Q1 earnings and revenue that topped Wall Street expectations, but its Q2 revenue outlook lagged analyst expectations. For Q2, the company forecast revenue of $1.05 billion to $1.09 billion, down 14% at the midpoint and below consensus views of $1.102 billion. Yahoo had reportedly had set a deadline of April 18 for bids by potential acquirers, with Verizon Communications ( VZ ), which owns AOL, rumored to be among the most active bidders. For Q2, Yahoo forecast revenue of $1.05 billion to $1.09 billion, down 14% at the midpoint and lagging consensus views of $1.102 billion. Alibaba stock was down nearly 2% midday Wednesday, near 77, while Verizon stock was up nearly 2%, near 51.

Yahoo To Add 4 Independent Directors In Deal With Starboard

Yahoo ( YHOO ) has reached a deal with Starboard Value to name four independent directors  while the hedge fund ends its bid to replace the entire board of the ailing web giant. Under the terms of the agreement, Starboard has withdrawn its Yahoo board nominees. Former Deutsche Bank Securities M&A head Tor Braham, media exec Eddy Hartenstein, Tessera Technologies ( TSRA ) chairman Richard Hill, and Starboard CEO and Chief Investment Officer Jeffrey Smith will become board members, effectively immediately, said Yahoo in a statement. Current directors Lee Scott and Sue James will not stand for re-election at the company’s annual meeting to allow for an 11-member board. “This constructive resolution will allow management and the board to keep our focus on our extremely important objectives,” said Yahoo CEO Marissa Mayer in the statement. Starboard had late last year pressured the Internet heavyweight to nix its Alibaba ( BABA ) spinoff, then in March issued a letter to Yahoo shareholders, telling them it was “extremely disappointed” with the company’s “dismal financial performance, poor management execution, egregious compensation and hiring practices, and general lack of accountability and oversight by the Board.” Under pressure from Starboard, Yahoo has accepted bids for all or part of the company. Verizon ( VZ ) is seen as a lead suitor in the first round of bids. Yahoo stock fell fractionally soon after the opening bell on the stock market today . Separately,  Marvell Technology ( MRVL ) agreed to add five directors, giving in to demands from Starboard Value. Starboard took a 6.7% stake in Marvell in February. Marvell Technology stock rose 1.4% to 10.10.

Baidu Set To Report Q1 Amid ‘Low Expectations’ For Margin Growth

Baidu ( BIDU ) reports Q1 earnings after the close on Thursday, with analysts expecting China’s search leader to maintain its dominant position in mobile ads, retaining its share of ad budget allocations from large advertisers. “Regarding profitability, we see several potential upside catalysts that could positively impact Baidu’s shares in the near to medium term,” wrote ITG Research analyst Henry Guo in a research note Tuesday. Baidu stock was up a fraction in afternoon trading in the stock market today , near 188.50. Baidu stock has gained 88% since touching 100 last August, its lowest point since July 2013. But Baidu stock is down 11% in the past 12 months. Citing proprietary data, Guo said Baidu’s mobile ecosystem — its mobile search, mobile app marketplace, mobile video, and mobile browser — has stayed dominant, which Guo said “helps the company control several of the most-important mobile Internet user traffic gateways, boding well for future monetization.” Data from ITG Research indicates “that Baidu’s Mobile Search app dominates the mobile search market with more than 23% installation penetration among Chinese mobile users, well ahead of its key competitors Sogou Search (1.7%) and Qihoo 360 Technology ( QIHO ) Search (0.2%),” wrote Guo. Baidu’s rivals in mobile search include e-commerce giant Alibaba Group ( BABA ) and its No. 2 Shenma search unit. In overall search in China, Baidu vies with No. 2 Qihoo 360 Technology, which has struggled to shift to mobile. Sohu ( SOHU ) search engine Sogou is No. 3. Tencent Holdings ( TCEHY ), the third of the Baidu-Alibaba-Tencent (BAT) Chinese Internet giants, owns a big stake in Sohu’s Sogou. Baidu’s fast-growing video wing, Qiyi, surpassed Alibaba-owned Youku Tudou’s user base in early 2015, Guo said. In March 2016, Qiyi had about 20% penetration among Chinese mobile Internet users, compared to Youku Tudou’s 11.5% and Tencent Video’s 10.4%, said Guo. Baidu announced last month that the company has received a nonbinding proposal from two Baidu executives to acquire Qiyi for $2.8 billion. Already one of China’s largest online video streaming services, Qiyi is looking to become a bigger force in the country’s video-streaming and moviemaking fields, a nearly $6 billion market that also includes Baidu rivals Alibaba, Tencent and Sohu.com. Last year, Netflix ( NFLX ) said it wants to begin operating in China, but the streaming media company has given no timetable. Wall Street has “low expectations” for Baidu’s 2016 margin improvement, said Guo. Baidu’s profit margins will continue to face pressure from (1) higher traffic acquisition costs (TAC) due to increasing mobile search contribution, (2) iQiyi content cost, and (3) O2O (online-to-offline) investments, he said. TAC refers to what Baidu must pay to other sites to carry its ads. Analysts polled by Thomson Reuters expect Baidu to see Q1 revenue of RMB 15.83 billion ($2.4 billion), up 24% year over year. Analysts polled by Thomson Reuters are modeling EPS ex items to fall 11% year over year to 5.96 RMB (92 cents). FactSet is expecting revenue of $2.44 billion, up 24%. FactSet is expecting Baidu to report EPS ex items of 1.03, down 11.9%.