Yahoo First-Quarter Profit Drops 22 Percent to $159.6 Million but Meets Analysts’ Expectations
It wasn’t an apples-to-apples comparison because of new rules requiring companies to recognize the costs of their employee stock options.
The change, imposed over strident protests from Silicon Valley, is taking an especially large bite from the profits of Yahoo and other high-tech companies that have distributed bushels of stock options to reward their workers.
Yahoo said the accounting change lowered its earnings by $71 million in this year’s first quarter versus $6 million a year ago.
When Yahoo reported earning in January, we questioned their management and their generous stock grants to…themselves.
I understand that stock options are a big part of attracting and retaining executives, but what Yahoo is doing seems pigish, excessive and not in the best interest of shareholders. If they are selling like crazy, why wouldnâ??t you?
The update on Yahoo insider action for the trailing 6 months is the following,
Zero PURCHASES on the open market
Forty One SALES Totalling 7.33 million shares
Six months ago the stock traded for around $34 per share. It rose steadily to $43, then crashed after the last earnings report in January finally bottoming at $29.75. Today’s close, $31.30. All that volitility and not a single insider saw a good time to throw a bone?
The worst of the bunch is Terry Semel, the CEO. In January 2006, Semel had sold $244 million in stock in the previous 12 months. Since then, he has been a busy man.
Sure he exercised his right to purchase more shares, spending nearly $9 million. The options he exercised were priced at $15 per share. Not a bad deal for him, considering the stock closed at 31.30 today. Nice tidy 100% profit. For the rest of the bagholders, er, shareholders, Yahoo stock is down 10% since mid-January.
Doesn’t really matter to management.
The stock could go down another 50% and Semel’s self-awarded option grants would still be above water. I say self-awarded because Semel is CEO and Chairman of the Board. To say that the interest of shareholders are not aligned with that of management would be an understatement. (I’m not a shareholder)
Since January, Semel has sold an additional $33 million in stock. That makes a 15 month total of more than $277 million for a guy who has been with the company since May, 2001. I don’t have the strength, energy or patience to look up Semel’s first three years. Incredible.
This problem isn’t confined to Yahoo, UnitedHealth has been hit with the news that the SEC is looking into their grants and whether not they were rigged in favor of CEO Dr. William McGuire, whom Kevin Aylward of Wizbang called, the richest guy you’ve never heard of. This one is interesting because UNH has had an excellent reputation on Wall Street for delivering consistent earnings and explosive stock appreciation.
Lee Raymond never looked so good..:)
UPDATE: It looks like Alan Murray of the Wall Street Journal agrees with me,
Exxon Mobil Corp.’s former chief executive, Lee Raymond, has become the latest target of critics of executive pay. He doesn’t deserve it.
Shareholders, by and large, got their money’s worth from Mr. Raymond’s tough-minded leadership. He not only gave them the phenomenal returns that resulted from an oil-price boom — a feat a well-trained monkey might have accomplished — but also managed to modestly outperform the rest of the industry, which isn’t easy for such a big company.
Fadel Gheit, senior energy analyst with Oppenheimer & Co., calculates that Exxon Mobil has provided total returns to shareholders of 223% over the past decade — factoring in Exxon’s 1998 takeover of Mobil — while other big oil companies have averaged 205%. The difference is worth about $16 billion to those lucky enough to have held Exxon, and then Exxon Mobil, stock during that period.