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Yahoo chairman exits, review drags on

By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Yahoo Inc Chairman Roy Bostock and three other directors will step down as the struggling company ploughs ahead with an internal overhaul, including discussions on dealing with its stakes in China's Alibaba Group and Yahoo Japan.

The corporation - once a Web powerhouse but now agonizing over a range of options to revive flagging growth - on Tuesday said it appointed former Rovi Corp CEO and International Business Machines Corp veteran Alfred Amoroso and ex-eBay COO Maynard Webb as independent directors.

Yahoo's board has come under fire from investors impatient with the company's persistent inability to effect a turnaround, and frustrated with the apparent indecisiveness of stakeholders over how to handle its investments in Alibaba and other prized Asian assets.

"We have engaged with potential investors and reviewed proposals concerning an equity investment in the company, although at this time there have not been any proposals which have been deemed by the committee to be attractive to our shareholders," Bostock said in a letter to shareholders released on Tuesday.

"We are also in active discussions with our partners in Asia regarding the possibility of restructuring our holdings in Alibaba Group and Yahoo Japan. The complexity and unique nature of these transactions is significant," the letter said.

Bostock, who joined Yahoo's board in 2003, was a lightning rod for Yahoo shareholders upset about the company's fall from grace and the string of struggles that defined the company during his tenure. Shareholders blamed Bostock, along with Yahoo co-founder Jerry Yang, for turning down a rich acquisition offer by Microsoft Corp in 2008 near the height of Yahoo's valuation.

Yang resigned from Yahoo last month. The 71 year-old Bostock, who also serves as vice chairman of the board of Delta Air Lines and who fired Yahoo CEO Carol Bartz over the phone in September, announced his plans to leave Yahoo shortly after the appointment of former PayPal President Scott Thompson to the CEO Post.

Bostock will remain chairman until the company's annual meeting, expected in the next few months. Yahoo's new board will decide on a new chairman at the appropriate time, according to a person familiar with the matter.

A Web pioneer, Yahoo has seen its revenue growth stall in recent years as rivals Facebook and Google Inc have increased their share of online advertising spending.

Thompson, credited with driving growth at eBay's online payments division PayPal, joins Yahoo during a period of turmoil, as the company plows ahead with a strategic review in which discussions have included the possibility of being sold, taken private or broken up.

Many investors hope Yahoo will sell or spin off its Asian assets, with some speculating that Thompson may focus on developing Yahoo's core online media business.

But one of Yahoo's major institutional investors described the company's efforts at striking a deal to spin off its Asian assets as "painfully slow."

While the shareholder said the departure of Bostock was "monstrously overdue," he noted that the changes to the board would not necessarily accelerate the dealmaking process or bolster his confidence in the company.

"I'm not highly confident about anything given that group, and now I don't know who the group is," said the shareholder, who wished to remain anonymous. "I have a choice of uncertainty or almost a certainty that they'll make a bad decision. It's like the lesser of two evils."

Bostock and fellow board members Vyomesh Joshi, Gary Wilson and Arthur Kern will not stand for re-election at the next shareholders' meeting, Bostock said in Tuesday's letter.

The changes come a few weeks before dissident shareholders can nominate rival directors to Yahoo's board. In November, activist hedge fund manager and Yahoo shareholder Dan Loeb, of Third Point LLC, called for Bostock and Yang to resign from the board and demanded the right to appoint two of his own directors to the board.

Third Point did not immediately respond to a request for comment.

Shares of Yahoo were up one penny at $15.83 in after-hours trading on Tuesday.

"A lot of this change was expected. That's why you're not seeing as big a reaction to the stock," said Herman Leung, an analyst with Susquehanna Financial Group.

"Most investors are getting a little numb on the corporate governance that's going on. At this point it's either get your head down and focus on the business or get something sold," he said.

Under a "cash rich split" plan being discussed, Yahoo would effectively transfer most of its 40 percent slice of Alibaba back to the Chinese company and all of its stake in Yahoo Japan to Softbank Corp in return for cash and assets, sources have told Reuters.

Yahoo had also entertained separate proposals from private equity firms TPG and Silver Lake about minority investments in the company, but those offers fell short of Yahoo's expectations.

"Those talks are pretty much done," said a person familiar with the matter.

The person added that Yahoo had not received any offers to purchase the entire company in the five months since it undertook a broad "strategic review" of its business.

(Reporting by Alexei Oreskovic and Edwin Chan; Editing by Richard Chang, Bernard Orr)

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