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Power Sheet – February 3, 2016

Yahoo chief Marissa Mayer seems finally to be acquiescing to shareholders’ demands but keeps talking as if she isn’t. In announcing earnings yesterday, which weren’t good, board chairman Maynard Webb said the magic words “exploring additional strategic alternatives,” which he said would be “in the best interest of our shareholders.” Translation: The company is not just open to selling its core web businesses, it will be investigating ways to do it.

That is what Starboard Value chief Jeff Smith has been urging for months. Yet as Webb announced this significant change of stance, Mayer seemed to be speaking from a parallel universe in which it hadn’t happened, detailing a plan “to accelerate Yahoo’s transformation” and painting a rosy picture of the company’s fabulous performance. In the universe inhabited by the rest of us, the earnings report showed the lowest revenues since she arrived as CEO 3 ½ years ago; it announced that Yahoo would close five offices and get rid of about 1,600 employees; and it disclosed that several key parts of the company were together worth $4.5 billion less than previously thought, requiring an impairment charge to earnings.

It gets weirder. Webb also affirmed that the company would continue working on its plan to spin off its web businesses into a separate company, leaving Yahoo as primarily a vessel for its hugely valuable stake in Alibaba. Investors have been clamoring for Yahoo to separate the Alibaba holding and its stake in Yahoo Japan from the operating businesses, since the two Asian properties account for virtually all of Yahoo’s market value. But Starboard’s Smith has argued against the spin off because it could take a year to execute, and he’s afraid Yahoo’s web businesses are deteriorating so fast that they should just be sold– which Yahoo said yesterday it will explore doing. But in the meantime it’s sticking with plan A.

Yesterday’s report suggested at least one more disorienting comparison. Analysts have estimated that Yahoo’s operating businesses account for around $3 billion of the company’s $27-billion market cap. But if, as Yahoo just announced, they’re worth $4.5 billion less than previously recorded, then how much are they really worth? Accounting wonks know this isn’t necessarily a contradiction, but it puts an exclamation point on the decline of Yahoo’s performance.

Why so much cognitive dissonance from Mayer yesterday? My guess is that it’s a valiant effort to keep employees onboard, maintain performance as much as possible, and get the highest prices from eventual buyers of the businesses. In doing so, she may well be making the best of a bad situation. But in saying that her plan “will dramatically brighten our future,” and in telling the WSJ that she’s “very much looking forward to the turnaround plan that I have presented today,” I doubt she’s persuading anyone that the plan will get much of a chance to work before other owners impose plans of their own.

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What We’re Reading Today

Senators call for broader Takata recall

Connecticut Sen. Richard Blumenthal and Massachusetts Sen. Edward Markey wrote to President Barack Obama, urging him to recall every vehicle carrying Takata airbags using ammonium nitrate in their propellant. With at least 10 deaths and over 100 injuries linked to Takata’s airbags, the move would increase the number of recalls from 28 million airbag inflators to potentially 54 million inflators. NYT

Chipotle outlines food safety plans

After releasing earnings yesterday, Chipotle co-CEOs Steve Ells and Monty Moran outlined a series of changes to help prevent another E. coli outbreak. Changes include DNA testing of meats and produce, prepping some vegetables in a central location, and auditing restaurants weekly. The broad measures may be prompted in part by the failure of Chipotle and food investigators to find the contamination’s cause. Fortune

ChemChina offers $43B for Syngenta

Buying Syngenta, a Swiss pesticide giant,would be the largest foreign acquisition ever by a Chinese company. Syngenta CEO John Ramsay and the board are recommending that shareholders agree to the deal. Syngenta executives would remain in place. ChemChina Chairman Ren Jianxin may consider an IPO for the company “in the years ahead” if the deal goes through. ABC News

Trump signals debate ditch may have cost him Iowa

The admission comes after many entrance polls showed that voters who made up their minds in the last couple of days before the caucuses leaned towards Ted Cruz and Marco Rubio. But Donald Trump tried to position the No. 2 finish as a victory and said he didn’t regret skipping the Fox News debate. CNN

Building a Better Leader

The best benefits found in the marketplace

According to rankings by Glassdoor, Netflix’s one-year maternity and paternity leave rank first, followed by REI’s “Yay Days.” Fast Company

Intel’s internal compensation study discovered… 

…the company didn’t have a gender pay gap in 2015. Chief diversity officer Danielle Brown says this wasn’t a one-year effort, though. Fortune

To speed up hiring…

…get rid of the “maybe” pile. Telling candidates where they stand also improves your employer brand. Quartz

Worth Considering

Internal docs show Shkreli boasting over drug prices

Elijah Cummings, head of the House Committee on Oversight and Government Reform, released memos from its investigation into the hiking of drug prices by Turing and Valeant Pharmaceuticals. The documents include emails by former Turing CEO Martin Shkreli boasting about how much money the company would make by raising a drug’s price 50-fold. They also undermine his insistence that Turing helped those who couldn’t afford the medicine by offering deep discounts; internally he expressed pleasure that such discounts were rarely used. Shkreli and a Valeant executive have been asked to testify to the committee, but Shkreli plans to invoke his Fifth amendment right. Valeant will send interim CEO Howard Schiller since CEO J. Michael Pearson remains on medical leave.  Washington Post

Women-led businesses struggle to win U.S. contracts 

Women-led companies have 21% less chance of winning a federal contract than do similar male-owned companies, says the Commerce Dept. The findings come after  years of attempts to bridge the gap between men and women in the bidding process. Only 4.7% of federal contract money went to women-owned companies in 2014 despite a 2014 law sponsored by Sens. Jeanne Shaheen, Maria Cantwell, and Kirsten Gillibrand enabling some women-led companies to qualify for no-bid contracts, reducing their competition. NYT

Amazon may open hundreds of book stores 

A mall operator says Jeff Bezos‘s company will launch 300 to 400 physical bookstores. The move would be a bit ironic, since Amazon began by selling books and drove some bricks-and-mortar bookstores out of business.  Fortune

Up or Out

Dow Chemical CEO Andrew Liveris will step away from the company in mid-2017 once the planned merger with DuPont is finalized. Fox Business

Fortune Reads and Videos

HP-Enterprise CEO Meg Whitman hits the campaign trail… 

…to support Chris Christie, not former HP CEO Carly Fiorina Fortune

Uber got a new logo… 

…but you may need someone to explain it to you. It’s about the building blocks of the technology world. Um, what? Fortune

Luxembourg teams up with Larry Page…

…to mine asteroids. It had been trying to get Planetary Resources, a company started by Google’s co-founder, on board for two years. Fortune

Jaguar wants to make self-driving cars more human

The company doesn’t believe we trust robots enough to let them drive us around, at least not if they drive like robots. Fortune

Today’s Quote

“In fact, it appears that NHTSA has consistently deferred to Takata as it set forth its requirements to industry, first by allowing many automakers to take voluntary rather than mandatory actions to alert vehicle-owners to this defect’s existence, then by limiting the recalls to cars registered in ‘high humidity’ states absent evidence that the defect would not manifest itself outside these arbitrary boundaries…This, coupled with NHTSA’s willingness to allow Takata to take until the end of 2018 to prove that ammonium nitrate is safe in existing airbags; and until 2019 to show that the latest models of the inflators that use the compound are safe, is an outrageous dereliction of NHTSA’s basic duty to protect consumers.” – Sens. Richard Blumenthal and Edward Markey chastising the National Highway Traffic Safety Administration’s response to the Takata airbag malfunctions. Richard Blumenthal

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Produced by Ryan Derousseau
@ryanderous
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