SAN FRANCISCO — Yahoo CEO Marissa Mayer is getting some unsolicited advice on how to turn around the long-struggling Internet company, just like some of her predecessors who tangled with investors dissatisfied with management's performance.
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In a letter on Friday, activist investor Jeffrey Smith urged Yahoo Inc. to buy another fallen Internet star, AOL Inc., and take steps to reduce the taxes on the company's lucrative stake in China's Alibaba Group. He chastised Mayer for spending $1.3 billion to acquire an Internet blogging service and more than two dozen other startups during the past two years with little to show in return.
To bolster his arguments, Smith said he has built a “significant” stake in Yahoo through Starboard Value LP. The size of the stake wasn't quantified in the letter and has not been divulged in regulatory filings.
The idea of Yahoo and AOL getting together is not a new one. Various analysts and other Internet observers have argued that a marriage between the two companies would allow them to cut costs, attract more Web surfers and, most importantly, strengthen their online advertising arsenal to improve their chances of competing against Internet stalwarts Google Inc. and Facebook Inc.
“It makes a lot of sense,” said Colin Gillis of BGC Financial Partners.
In a statement, Mayer said she looks forward to discussing Smith's ideas.
“Going forward, we have great confidence in the strength of our business,” Mayer said.
AOL did not respond to requests for comment.
The prospect of a change in Yahoo's recent direction seemed to excite investors. Yahoo's stock rose $1.71, or 4.4 percent, to close at $40.66. AOL's stock added $1.58, or 3.7 percent, to finish at $44.55.
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