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Monday, April 2, 2012

Biz Break: Yahoo revolt grows, Groupon sinks as Wall Street soars - San Jose Mercury News

yahoo - Google News
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Biz Break: Yahoo revolt grows, Groupon sinks as Wall Street soars - San Jose Mercury News
Apr 2nd 2012, 20:42

Today: New website from hedge-fund manager Daniel Loeb attacks Yahoo (YHOO) leadership. Also, Groupon's business model questioned; and stocks continue to rise, led by Apple (AAPL) and its eye-popping new target price.

New website fuels Yahoo shareholder revolt

Hedge fund manager Daniel Loeb opened a new front in his budding proxy war against Yahoo on Monday, unveiling a website highly critical of the Sunnyvale-based Internet giant.

The website, valueyahoo.com, describes itself as "a website for shareholders who support change and a better future for Yahoo," and calls for an overhaul "at one of technology's most valuable — and sadly, we believe, most mismanaged — companies." The site also touts Loeb's choices for new directors while listing recent Yahoo leadership failures.

Loeb is calling for the addition of "independent voices" to the board, and on the website lays out his plan to revitalize Yahoo through "significant organizational changes."

Loeb, whose Third Point hedge fund owns a 5.8 percent stake in Yahoo, has been on a months-long campaign



to gain influence at the struggling company, purchasing more than $1 billion Yahoo shares since September and calling for cleaning house on the board of directors. Last week, Loeb blasted Yahoo and its new CEO, Scott Thompson, after Loeb and his allies were passed over for a seat on the board. Loeb is attempting to spur a shareholder revolt that would land him and three other reform-minded candidates -- Harry Wilson, Michael Wolf and Jeff Zucker -- on the board.

Yahoo shares gained 23 cents Monday, or 1.54 percent, to close at $15.45.

Groupon shares sink as business model called into question

Groupon shares tumbled more than 16 percent Monday, the first day of trading following Friday's restatement of its earnings.

The revision increased the Chicago-based daily deals company's fourth-quarter losses by more than $20 million, and raised concerns about its accounting practices.

Bloomberg News reported Monday that Groupon's business model is now being called into question, with auditors perhaps not being given enough oversight into its accounting practices. "The business is growing so fast that it sounds like they don't have the proper financial controls to deal with the growth," Herman Leung, an analyst at San Francisco's Susquehanna Financial Group, told Bloomberg.

Groupon said the problems stemmed from an unexpected increase in refunds of higher-priced deals, such as plane tickets and gourmet meals. With the online deal industry so new, its unique accounting needs have been difficult. "There is very little history on return rates," IPO consultant Tom Taulli told Bloomberg. "Groupon hasn't been around for a long time and has been expanding so quickly, it's got to be a nightmare for an auditing firm."

Groupon ended the day down $3.10, or 16.89 percent, to $15.27.

Stocks continue gains, and how high can Apple go?

Following up a record first quarter, Wall Street started the second quarter with a bang Monday. Groupon was one of the few flops, as all three major indexes rose, led by the tech-heavy Nasdaq which closed up almost 1 percent, at 3,119.70. The Dow Jones industrial average close rose 52.45, up 0.4 percent, and the Standard & Poor's 500 ended up 10.43, or 0.74 percent.

The market was boosted by encouraging manufacturing reports, according to TheStreet.com, despite a fall in construction spending.

Apple led the way, gaining $19.08, or 3.18 percent, to set a new record-high closing price of $618.63. And one analyst expects that price to soar even higher -- Topeka Capital Markets analyst Brian White on Monday valued shares in the Cupertino tech behemoth at a whopping $1,001 apiece, 63 percent higher than its current price. White says Apple, which has seen its stock price soar 79 percent in the past year, is still undervalued, and its current share price doesn't take into consideration future growth.

Silicon Valley tech stocks

Up: Apple, Google (GOOG), Oracle (ORCL), Intel (INTC), Cisco (CSCO), HP, Yahoo

Down: eBay (EBAY), Gilead, Juniper

The tech-heavy Nasdaq composite index: Up 28.13, or 0.91 percent, to 3,119.70.

The blue chip Dow Jones industrial average: Up 52.45, or 0.4 percent, to 13,264.49.

And the widely watched Standard & Poor's 500 index: Up 10.43, or 0.74 percent, to 1,418.90.

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services.

Copyright 2012 San Jose Mercury News. All rights reserved.

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