Yahoo chief executive Marissa Mayer has come under renewed pressure over her leadership as activist investor Starboard Value once again called for a shake up of management and strategy at the troubled internet media business.
The hedge fund warned that it may seek to oust board directors if it does not accept "that significant changes are needed".
"This would include changes in management, changes in board composition, and changes in strategy and execution. If the board is willing to embrace the need for significant change and pursue a strategy along the lines of what we have proposed above, we are hopeful we can work constructively together and make changes to the board through a mutually agreeable resolution. This is clearly the preferable route.
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But it said: "If the board is unwilling to accept the need for significant change, then an election contest may very well be needed so that shareholders can replace a majority of the board with directors who will represent their best interests and approach the situation with an open mind and a fresh perspective."
"The new board can then assess the state of the existing business, including a review of management’s strengths and weaknesses, so that the Board can best represent shareholders in analysing a viable turnaround plan compared with potential offers for the core business," added Starboard's Jeffrey Smith in a letter to Yahoo.
It's the strongest worded letter yet from the fund which specialises in under-performing and undervalued companies.
In December, Yahoo did a u-turn, saying it would not spin off its lucrative stake in Chinese business Alibaba, as had been expected. Instead it revealed plans to separate its core business.
Starboard also renewed calls for Yahoo to sell off that core business, and that it had received interest from potential buyers.