Yahoo Parts Ways With Its No. 2 Executive

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N.S.A. Said to Tap Google and Yahoo Abroad

In partnership with the British agency known as Government Communications Headquarters, or GCHQ, the N.S.A. has apparently taken advantage of the vast amounts of data stored in and traveling among global data centers, which run all modern online computing, according to a report Wednesday by The Washington Post. N.S.A. collection activities abroad face fewer legal restrictions and less oversight than its actions in the United States.

Google and Yahoo said on Wednesday that they were unaware of government accessing of their data links. Sarah Meron, a Yahoo spokeswoman, said that the company had not cooperated with any government agency for such interception, and David Drummond, Google’s chief legal officer, expressed outrage.

“We have long been concerned about the possibility of this kind of snooping, which is why we have continued to extend encryption across more and more Google services and links,” Mr. Drummond said in a statement. “We do not provide any government, including the U.S. government, with access to our systems. We are outraged at the lengths to which the government seems to have gone to intercept data from our private fiber networks, and it underscores the need for urgent reform.”

In a statement, the N.S.A. did not directly address the claim that it had penetrated the companies’ overseas data links. But it emphasized that it was focused on “foreign” intelligence collection — not domestic — and pushed back against the notion that it was collecting abroad to “get around” legal limits imposed by domestic surveillance laws. It also said it was “not true” that it collects “vast quantities” of Americans’ data using that method.

Companies like Google that operate Internet services — including email, online document and photo storage and search queries — send huge amounts of data through fiber-optic lines between their data centers around the world. Those data centers are kept highly secure using heat-sensitive cameras and biometric authentication, and companies believed the data flowing among centers was secure. But Google said last month that it began the process of encrypting this internal traffic before reports of N.S.A. spying leaked during the summer, and accelerated the effort since then. Google security executives were suspicious that outside parties, like governments, could tap into the cables, but did not have hard evidence that the spying was occurring, according to three people briefed on Google’s security efforts who spoke on condition of anonymity.

The N.S.A. could physically install a device that clips on the cable and listens to electric signals, or insert a splitter in the cable through which data would travel, said Nicholas McKeown, an expert in computer networking and a professor at Stanford. Or, he said, someone with remote login access to the cable’s switch or router could also redirect data flowing through the cables.

Level 3 is a company that provides these cables for Google, according to a person briefed on Google’s infrastructure who was not authorized to speak publicly.

In a statement, Level 3 said: “We comply with the laws in each country where we operate. In general, governments that seek assistance in law enforcement or security investigations prohibit disclosure of the assistance provided.”

In July, the company denied a German television report that it had cooperated with American intelligence agencies to spy on German citizens using its network. The New York Times reported in September that for at least three years, GCHQ had been working to gain access to traffic in and out of data centers operated by Google, Yahoo, Facebook and Microsoft’s Hotmail. The program, described as having been developed in close collaboration with the N.S.A., was said to have achieved “new access opportunities” into Google’s systems by 2012, according to GCHQ documents provided by Mr. Snowden. But it was not clear what that meant.

The Post said that under a system code-named Muscular, GCHQ was storing data taken in from the interception in a rolling three- to five-day “buffer,” during which the two agencies decoded it and filtered out information they wanted to keep.

It also reported that the N.S.A. was using about 100,000 “selectors” as its search term filters — more than twice as many, it said, as the agency has been using from its Prism program inside the United States. In that program, the agency collects emails, search queries and other online activity of foreigners abroad from Google, Yahoo and other companies through a court-approved process authorized by the FISA Amendments Act of 2008.

Charlie Savage reported from Washington, and Claire Cain Miller and Nicole Perlroth from San Francisco. James Glanz contributed reporting from New York, and John Markoff from San Francisco.

Pogue, Times Technology Columnist, Is Leaving for Yahoo

David Pogue, the technology writer for The New York Times, whose columns were among the most popular at the paper, said on Monday that he was leaving for Yahoo to start a consumer-focused technology site.

David Pogue, in 2009 at the Macworld Expo in San Francisco.

In addition to his “State of the Art” column, where he has reviewed new technology products for 13 years, Mr. Pogue created weekly videos for The Times and wrote a blog, Pogue’s Posts, that won a Gerald Loeb award for Distinguished Business Journalism in 2010.

In a statement on his Tumblr site this morning Mr. Pogue wrote: “Thirteen years is a long time to stay in one place; we all thrive on new experiences.”

He then elaborated on his new mission at Yahoo. “I’ll be writing columns and blog posts each week, of course, and making my goofy videos,'’ he wrote. “But my team and I have much bigger plans, too, for all kinds of online and real-world creations.'’

Mr. Pogue always worked for other organizations besides The Times, and while at Yahoo he will continue to keep his outside assignments, which include technology correspondent for “CBS News Sunday Morning,” columnist for Scientific American and the host of a series on technology on the PBS program “Nova.”

Mr. Pogue’s departure comes as technology coverage has become increasingly prized by media companies. Only weeks ago, Walter Mossberg, a leading reviewer of new devices, and his partner Kara Swisher at AllThingsD, said they would be leaving The Wall Street Journal to start a technology writing and conference business with the backing of new partners.

In a memo to the newsroom, Dean Murphy, The Times’s business editor, and Suzanne Spector, the technology editor, wrote that Mr. Pogue’s columns were “a delight to read'’ and wished him well in his new job.

Bits Blog: Trying to Reinvent Itself, Yahoo Searches for a New Look

Breaking Views: Why an Alibaba I.P.O. Is Both Promise and Problem for Yahoo

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Yahoo to Buy Back Shares From Third Point

Three Yahoo board directors appointed by Third Point, including Daniel Loeb, the hedge fund's chief, will resign from Yahoo's board. Third Point will still own about 20 million shares, less than 2 percent of the Internet media company's common stock.

Third Point's decision to sell shares of Yahoo comes as the struggling Internet's company's stock has surged more than 80 percent during the past 12 months, due largely to aggressive share buybacks and the value of Yahoo's Asian assets.

It was not immediately clear why Third Point was selling its shares now. Third Point declined to comment, but Loeb expressed his confidence in Yahoo's prospects in a statement on Monday.

Given the gains in Yahoo's shares, Third Point may have decided it was prudent to sell some of its holdings, said JMP Securities analyst Ronald Josey.

But Loeb's move may be prompting other shareholders to similarly re-evaluate their investment, he said.

"Probably a lot of investors are saying 'We had a pretty good run here, it makes sense to take some off the table,'" Josey said, adding, "Much like a lot of investors followed Third Point in, a lot will follow Third Point out."

Yahoo, which plans to fund the Third Point transaction primarily with cash, said it would increase earnings per share.

After the deal, about $700 million will remain under a $5 billion overall buyback authorization that Yahoo announced last year.

Third Point settled a bitter proxy battle with Yahoo last year after months of criticising the company. Loeb was instrumental in selecting former Google Inc executive Marissa Mayer to join Yahoo as CEO.

The resignations of directors Loeb, Harry J. Wilson, and Michael J. Wolf were part of Yahoo's settlement with Third Point in May 2012, Yahoo said.

Yahoo shares fell 4.3 percent, or $1.25, to $27.86 on Nasdaq in midday trading.

(This story adds "per share" to first paragraph)

(Additional reporting by Sinead Carew; Editing by Jeffrey Benkoe and Leslie Gevirtz)

DealBook: Activist Investor to Step Down From Yahoo Board

Steve Marcus/ReutersDaniel S. Loeb, founder of Third Point, at a conference in Las Vegas last year.

2:09 p.m. | Updated To add Third Point’s earnings from its investment in Yahoo and include Yahoo’s afternoon share price.

The activist investor Daniel S. Loeb is parting ways with Yahoo.

Mr. Loeb, whose campaign to change Yahoo culminated in the appointment last year of Marissa Mayer as the company’s chief executive, has submitted his resignation from the board, Yahoo said Monday.

Two other directors originally nominated by Mr. Loeb’s firm, Harry J. Wilson and Michael J. Wolf, are also stepping down. The resignations, effective July 31, will leave Yahoo with a seven-member board, the company said.

In addition, Yahoo has agreed to buy 40 million shares of its stock from Mr. Loeb’s firm, Third Point, at a price of $29.11 a share, the closing price on Friday. That will leave Third Point with about 20 million Yahoo shares, or less than 2 percent of the common stock outstanding.

Third Point, which initially disclosed a 5.15 percent stake in Yahoo in September 2011, more than doubled its investment in less than two years. It initially paid about $509 million for 40 million shares, which it sold on Monday for $1.16 billion.

Yahoo’s stock fell more than 4 percent in trading on Monday, dipping below $28 a share in afternoon trading.

The hiring of Ms. Mayer from Google last July was considered a coup for Yahoo, an aging technology company in need of a fresh direction. She has overseen a string of acquisitions since then, including the $1.1 billion deal for Tumblr in May.

“Since our board’s rigorous search led us to hire Marissa Mayer as C.E.O., Yahoo’s stock price has nearly doubled, delivering significant value for shareholders,” Mr. Loeb said in a statement.

Ms. Mayer’s appointment came after a hard-fought campaign by Mr. Loeb that led to the ouster of the previous chief executive, Scott Thompson, in May of last year.

Yahoo said Monday that Max Levchin, a co-founder of PayPal, would remain on the board. His appointment in December was supported by both Third Point and the board.

The share repurchase plan announced Monday is part of Yahoo’s previously announced plan to buy $1.9 billion of stock, the company said.

“Daniel Loeb had the vision to see Yahoo for its immense potential — the potential to return to greatness as a company and the potential to deliver significant shareholder value,” Ms. Mayer said in a statement. “While there’s still a lot of work ahead, they’ve given us a great foundation.”

Bits Blog: The Latest to Disclose Government Requests, Yahoo Reveals the Least

Emmanuel Dunand/Agence France-Presse — Getty Images Marissa Mayer, Yahoo’s chief executive, in May. She and the company’s general counsel, Ron Bell, said in a statement Monday that Yahoo would issue its first global law enforcement transparency report later this summer.

Following in the footsteps of Facebook, Microsoft and Apple, Yahoo disclosed late Monday some broad data about the number of requests that American law enforcement authorities had made for data about its users.

From Dec. 1, 2012, to May 31, 2013, the Internet company received between 12,000 and 13,000 requests from the government, related to everything from local crimes to terrorism investigations under the Foreign Intelligence Surveillance Act. “The most common of these requests concerned fraud, homicides, kidnappings, and other criminal investigations,” the company said in a post on Tumblr, the blogging platform it recently acquired.

Unlike the other companies, which have been criticized for disclosing too little information, Yahoo did not specify how many users were included in the 12,000 to 13,000 requests.

But like the other companies, Yahoo said that the government would not permit it to break out more specific data on the number of FISA data requests, which the government considers so secret that companies aren’t supposed to even acknowledge their existence.

Yahoo went to a secret intelligence court in 2008 and challenged the government’s requests under FISA as unconstitutional, but lost the case. It subsequently joined the government’s secret Prism surveillance program.

In its post, signed by its chief executive, Marissa Mayer, and its general counsel, Ron Bell, Yahoo said it would continue to press for more disclosure of FISA data.

Yahoo said it would also issue later this summer its first global law enforcement transparency report, which will cover the first half of the year, and will continue making similar reports every six months.

This post has been revised to reflect the following correction:

Correction: June 18, 2013

An earlier version of this article misstated when Yahoo disclosed information about the requests for user data it received from American government agencies. Yahoo disclosed the information on Monday, not Friday.

DealBook Column: But Wait. Didn’t Yahoo Try a Deal Like This Before?

Mark J. Terrill/Associated PressGeoCities workers after Yahoo bought it in 1999. Some worry the Tumblr deal is similarly poor.

When Yahoo announced its headline-grabbing acquisition, it boasted that the deal gave it access to an “unduplicated” audience of users and that its target was a “popular personal publishing” platform.

“Yahoo will be able to integrate and distribute a powerful set of state-of-the-art editing tools and content published through personal home pages in an array of services,” the company declared.

But Yahoo wasn’t talking about Tumblr. Those quotes came from a news release Yahoo issued in 1999 when it acquired GeoCities, which allowed users to create their own Web pages — not unlike Tumblr — for $3.6 billion in stock. The site was closed in 2009.

As investors and analysts size up Yahoo’s latest $1.1 billion acquisition, it is worth reflecting on the GeoCities deal, which has many similarities. Both companies were money losers when they agreed to be acquired. Tumblr had just $13 million in revenue last year, according to reports.

Both companies had loyal followers that quickly left in droves. According to Matt Mullenweg, the founder of WordPress and a competitor, Tumblr users were moving their posts over to WordPress at a rate of 72,000 an hour amid speculation of an impending deal this weekend. (Usually, he said, Tumblr users migrated 400 to 600 posts an hour). Still, for perspective, Tumblr users generate tens of millions of posts a day.

And GeoCities and Tumblr had at one point been averse to accepting advertising. Tumblr’s 26-year-old chief executive (and now multimillionaire), David Karp, said three years ago, “We’re pretty opposed to advertising,” adding that “It turns our stomach.”

The lesson of GeoCities raises this question about Tumblr: How can a company with zero profits (actually, multimillion-dollar losses) and just $13 million in revenue be worth $1.1 billion?

Inside Yahoo, officials dismiss the comparison to GeoCities. Instead, they compare the Tumblr deal to Google’s purchase of YouTube — that is, Yahoo’s management believes that Tumblr is one of a rare few transformative sites on the Internet. Google paid $1.6 billion for YouTube when it too made no money. At the time of that deal, it seemed heretical. Now, it seems genius.

To Yahoo, Tumblr is the equivalent of beachfront property. With more than 100 million user-generated blogs on Tumblr, there is no question that it brings Yahoo a younger audience. It adds a sense of hipness to a company that had lost its sense of cool.

According to Marissa Mayer, Yahoo’s chief executive, who drove this deal, Tumblr brings Yahoo a possible growth engine for the future.

But that’s a big if. It requires Ms. Mayer’s team to execute brilliantly and online users to continue to want to establish ways to communicate outside of places like Facebook and Twitter.

And then there is the pesky issue of selling ads on Tumblr’s pages without upsetting the site’s finicky users. (One user began a petition to block the deal.)

“It is difficult to justify the premium acquisition price for Tumblr given its low levels of revenue,” wrote Anthony DiClemente of Barclays Capital in a note to investors. “In addition, we believe Yahoo needs to be careful about the manner in which it monetizes Tumblr, as a significant ad load and the perception of a large corporate owner could potentially alienate Tumblr’s core user base. Though we believe Tumblr’s model does have switching costs for users, we do not view its actual barriers to entry as particularly high.”

If you want to do the math on what it would take for Yahoo to justify the price tag, Brian Pitz, an analyst at Jefferies, has sketched it out. By his count, Yahoo will need to figure out a way to make $127 million a year in profit from Tumblr, meaning the site would have to bring in an additional $950 million annually in advertising revenue.

That’s a big challenge, especially considering that Ms. Mayer pledged that while she planned to add more ads to Tumblr, she would do so mostly on the site’s “dashboard” or newsfeed.

“We would like to look at them and understand how we could introduce ads — in a very light ad load — where the impact is really created, because the ads really fit the users’ expectations and follow the form and function of the dashboard,” Ms. Mayer said.

She said she might add advertising to user pages, but only with the permission of the blogger. That means a lot of Web pages will not be monetized.

And there is the issue of porn. Yes, porn. At least some of Tumblr’s users post images that are not exactly “work safe.” Indeed, Tumblr’s own terms of service allows for such content. Such content could make Tumblr a challenging environment for advertisers.

Tumblr’s users also regularly post copyrighted images and other content Yahoo will have to find a way to police. When Tumblr was just an upstart, content owners were unlikely to pursue claims against the company, but now that it might be owned by a big public corporation, you can bet that copyright owners, some of whom compete with Yahoo, will be contacting their lawyers.

Given all of that, you might expect me to say that Yahoo should have never proposed acquiring Tumblr. But I won’t.

It may actually turn out to be the right bet. The key is recognizing that it is a shoot-the-moon gamble. It might work out. It might not.

And even if it does not work out, analysts note that Yahoo can afford to experiment given the billions of dollars it has in cash.

As Jordan Rohan, an analyst at Stifel Nicolaus, wrote: “Even a squandering of $1.1 billion in cash, however unlikely that might seem to Yahoo management, would only move the sum-of-parts slightly.”

This post has been revised to reflect the following correction:

Correction: May 22, 2013

The DealBook column on Tuesday, about the similarities between Yahoo’s deal for Tumblr and its deal more than a decade ago for GeoCities, misidentified an analyst from Barclays Capital who commented on the Tumblr transaction in a note to investors. He is Anthony DiClemente — not Doug Anmuth, who is an analyst for JPMorgan Chase.

Yahoo Chairman Is Stepping Down

Mr. Amoroso, 63, is giving up the chairmanship immediately, prompting Yahoo to appoint another director, Maynard Webb Jr., to handle the duties on an interim basis.

Yahoo indicated it would not add another director after Mr. Amoroso departs, leaving the Internet company with 10 directors. Mr. Amoroso said in statement that he only intended to serve as chairman for a year.

Mr. Amoroso and Mr. Webb joined Yahoo’s board 14 months ago when four longtime directors stepped down under shareholder pressure. Yahoo’s co-founder, Jerry Yang, started the exodus when he left the board a month earlier. Finally, late last year, Intuit’s chief executive, Brad D. Smith and the Weather Channel’s chief executive, David Kenny, stepped down.

A former accounting executive, Sue James, is now Yahoo’s longest-serving director. She came on board three years ago. The other directors, including Yahoo’s chief executive, Marissa Mayer, have been appointed since February 2012.

The rapid turnover probably suits Ms. Mayer, who has been trying to infuse Yahoo with new talent and ideas since she defected from a longtime job at Google to tackle the challenge of turning around one of the Internet’s best-known companies.

Although Yahoo’s Web site remains one of the Internet’s top destinations, Web surfers had been visiting less frequently and staying for shorter periods. That problem has made it more difficult for Yahoo to sell the online advertising that generates most of its revenue.

Until a slight increase last year, Yahoo’s revenue had been steadily declining since 2008 while rivals such as Google and Facebook reveled in robust growth. Yahoo’s lack of growth exasperated Yahoo shareholders, and led to a reshaping of the board in which the hedge fund manager Daniel S. Loeb won a board seat, along with two allies, Harry Wilson, a turnaround specialist, and Michael J. Wolf, an MTV executive.

Mr. Amoroso became Yahoo’s chairman 11 months ago after the company parted with former chief executive Scott Thompson, over a fabricated academic degree. Ms. Mayer was then hired.

Chief Tries to Infuse Yahoo With a Start-Up’s Spirit

Yahoo, an Internet pioneer, missed the boat on social networks and mobile devices as the new gateways for information and, in recent years, had been losing advertisers and employees to rivals like Facebook and Google.

Critical to Ms. Mayer’s turnaround effort is infusing fresh blood and ideas into the company by buying creative start-ups and integrating them into the company. So since she took over last July, she has been on a splashy shopping spree, spending tens of millions of dollars to acquire six start-ups.

But in many ways, it has been a tough sell.

In part, that is because of the past problems with acquisitions. Yahoo’s neglect of Flickr, a pioneering photo service that was the Instagram of its time, and Delicious, an early social bookmarking tool that predated Twitter’s rise, are prominent examples of the company’s mishandling of promising acquisitions.

These days, too, Ms. Mayer has to compete against the deep pockets of competitors like Twitter, Google and Facebook, which are also trying to buy great technologies and hire top talent.

Still, there is evidence that she is making inroads.

Increasingly, entrepreneurs say, she is getting personally involved in acquisitions, focusing particularly on mobile-minded engineers. She is also trying to reverse Yahoo’s reputation as a company that acquires talent and innovative technologies and then lets them wither.

Last month, Yahoo made headlines when it acquired Summly, a newsreading mobile app started by a 17-year-old in England, for an undisclosed sum. In October, it acquired Stamped, a mobile recommendation service.

Robby Stein, who sold Stamped to Yahoo, said he was willing to take a chance on the company given Ms. Mayer’s solid track record at Google, where she helped perfect Web search and was largely credited with the clean aesthetic of the Google home page.

“After conversations with Marissa and others, it became very clear that this was a unique moment in time where we could have a phenomenal impact and affect millions of people,” said Mr. Stein, a former Google employee himself, who worked alongside Ms. Mayer on Google’s mail products. “There are few opportunities like that.” (The New York Times Company was a small investor in Stamped.)

Mr. Stein said he was now concentrating on building a “major mobile development center in New York” for Yahoo. He is determined to imbue it with the ethos of an agile, lean start-up, not as an outpost of a large corporation.

Stamped’s offices are covered in chalkboard paint and whiteboards, for scribbling down ideas and code, and also feature a fully stocked kitchen. They are decorated with posters of software applications the employees admire and aim to compete with. The team has also installed two large television screens for testing app prototypes and has built a game room with club chairs.

“I feel remarkably empowered and able to get things done,” Mr. Stein said. “I’m supported to the fullest extent by Marissa and the executive team.”

Ms. Mayer’s other acquisitions include OnTheAir, an online video service; Snip.it, a clipping service for the Web; Propeld, a maker of location-based apps; and Jybe, a social recommendation site.

Despite the string of purchases, some say Ms. Mayer’s pitch — which could be a part of the biggest technology turnaround since Steven P. Jobs’s return to Apple in 1996 — seems as if it is still in rehearsal.

Shortly after Ms. Mayer joined the company last year, one Valley entrepreneur in acquisition talks with Facebook and Google reluctantly met with Yahoo on the counsel of advisers, who told him he owed it to investors to hear the company out.

At Facebook and Google, the offices were buzzing with activity, the reception desk checked him in using shiny new tablet computers and the executives working on the deal were so prepared they “basically knew what size underwear I wear,” said the entrepreneur, who spoke on condition of anonymity because he was still in talks to sell his company. Yahoo was completely different. He arrived to an empty parking lot and deserted offices. He checked in on dusty, clunky desktop computers that ran outdated Web browsers. Worse, company executives made it abundantly clear they had not bothered to read his résumé.

“I found it depressing,” he said. “It was disorganized, they hadn’t done basic due diligence, and offered no clear incentive to go work there.”

His conclusion: “They would have to be willing to pay me twice what anyone else was willing to pay to work there.”

Yahoo certainly has the cash, having reaped $4.3 billion from the first stage of its sale of half its stake of Alibaba back to the Chinese Internet company.

Yahoo Says New Policy Is Meant to Raise Morale

Parking lots and entire floors of cubicles were nearly empty because some employees were working as little as possible and leaving early.

Then there were the 200 or so people who had work-at-home arrangements. Although they collected Yahoo paychecks, some did little work for the company and a few had even begun their own start-ups on the side.

These were among the factors that led Ms. Mayer to announce last week that she was abolishing Yahoo’s work-from-home policy, saying that to create a new culture of innovation and collaboration at the company, employees had to report to work.

The announcement ignited a national debate over workplace flexibility — and within Yahoo has inspired much water cooler conversation and some concern.

But former and current Yahoo employees said that Ms. Mayer made the decision not as a referendum on working remotely, but to address problems particular to Yahoo. They painted a picture of a company where employees were aimless and morale was low, and a bloated bureaucracy had taken Yahoo out of competition with its more nimble rivals.

“In the tech world it was such a bummer to say you worked for Yahoo,” said a former senior employee who, like many Yahoo insiders, would speak only anonymously to preserve professional relationships. The employee added, “I’ve heard she wants to make Yahoo young and cool.”

Restoring Yahoo’s cool — from revitalizing behind-the-times products to reversing deteriorating morale and culture — is hard to do if people are not there, Ms. Mayer concluded. That view was reflected in Yahoo’s only statement on the work-at-home policy change: “This isn’t a broad industry view on working from home. This is about what is right for Yahoo, right now.”

Yahoo declined to comment further.

On Monday, another ailing company, Best Buy, announced that it, too, would no longer permit employees to work remotely, reversing one of the most permissive flexible workplace policies in the business world.

Inside Yahoo, there has been mixed reaction to the policy change. Some employees said that they were able to be highly productive by working remotely, and that it helped them concentrate on work instead of the chaos inside Yahoo.

Brandon Holley, former editor of Shine, Yahoo’s women’s site, said she built the site and signed on big-name advertisers while she and most of her team worked from homes across the country.

“It grew very rapidly,” said Ms. Holley, who is now editor of Lucky, Condé Nast’s shopping magazine. “A lot of that had to do with the lack of distraction in a very distracted company.”

The change to the work-at-home policy initially angered some employees who had such arrangements, and worried others who occasionally stayed home to care for a sick child or receive a delivery. Reports that Ms. Mayer built a nursery for her young son next to her office made parents working at Yahoo even angrier.

This week, the policy continued to be the topic of much discussion at the company, as people wondered aloud whether they would lose that flexibility, said employees who spoke anonymously because they were not authorized to speak to the media.

But for the most part, those employees said, those concerns have been eased by managers who assured them that the real targets of Yahoo’s memo were the approximately 200 employees who work from home full time.

One manager said he told his employees, “Be here when you can. Use your best judgment. But if you have to stay home for the cable guy or because your kid is sick, do it.”

Many of Yahoo’s problems are visible to people outside the company. It missed the two biggest trends on the Internet — social networking and mobile. Its home page and e-mail services had become relics used by people who had never bothered to change their habits. It ceded its crown as the biggest seller of display ads to Facebook and Google. Its stock price was plummeting.

DealBook: Yahoo Shakes Up Its Board

Araya Diaz/Getty Images for TechcrunchMax Levchin formed Slide, a company that helped produce Web applications for Facebook. He was nominated for director by Daniel S. Loeb.

Yahoo announced a number of changes to its board on Thursday, including the addition of Max Levchin, a co-founder of PayPal.

The company also said two directors were stepping down: Brad Smith, the chief executive of Intuit, and David W. Kenny, chief executive of the Weather Channel.

Yahoo’s latest board changes signal its continued push to become a top technology company once more, a strategy it began in July, when it hired Marissa Mayer away from Google to become its new chief executive.

Since taking over, Ms. Mayer has emphasized ways to modernize Yahoo staples like its e-mail and the Flickr photo service, to help the company square off against ever-newer competitors.

Bringing in Mr. Levchin is intended to help with that push and show a commitment to developing enticing new offerings. He served as PayPal’s chief technology officer before forming Slide, a company that eventually helped produce Web applications for Facebook. Google bought Slide for about $180 million two years ago, and Mr. Levchin left the Internet giant when it closed Slide last year.

“Max is someone I’ve admired throughout my career for his phenomenal sense for great products and keen focus on user experiences,” Ms. Mayer said in a statement. “I’m confident that his strong product and technology expertise will be a tremendous asset to Yahoo as we work to transform the world’s daily habits.”

Stephen Lam/ReutersMarissa Mayer, chief of Yahoo.Steve Marcus/ReutersDaniel S. Loeb, manager of the hedge fund Third Point.

He will serve as the fourth director nominated by Daniel S. Loeb, the activist hedge fund manager who joined Yahoo’s board in May after mounting a prominent challenge to the company’s directors. Mr. Loeb’s other directors, besides himself, are Michael J. Wolf, a media consultant, and Harry J. Wilson, a turnaround expert who served on the Obama administration’s automotive task force.

Since joining Yahoo’s board, Mr. Loeb has helped orchestrate a number of changes, including hiring Ms. Mayer.

Mr. Loeb was introduced to Mr. Levchin by Mr. Wolf, who had served on Slide’s board of advisers. They met in Silicon Valley ahead of the proxy fight, when Mr. Loeb was recruiting candidates for Yahoo board seats.

One of the departing directors, Mr. Smith, was a main supervisor of Yahoo’s turnaround efforts, including its talks with private equity firms about a capital infusion into the Web company and its eventual deal to sell some of its stake in Alibaba back to its Chinese Internet partner.

The other, Mr. Kenny, became the Weather Channel’s chief executive in January and was formerly the president of Akamai Technologies. Mr. Kenny had briefly considered campaigning for Yahoo’s top spot last year.

Both men were stepping down to focus on their respective companies, according to Yahoo.

“Both David and Brad played critical roles in bringing me to Yahoo, so I’m especially grateful for the opportunity and trust they’ve placed in me,” Ms. Mayer said. “We will miss their leadership and partnership, and I know I speak for everyone at Yahoo in wishing them the best.”

DealBook: Mayer Strikes First Deal at Yahoo With Acquisition of Stamped

Stephen Lam/ReutersMarissa Mayer, chief of Yahoo.

Marissa Mayer promised earlier this week that Yahoo‘s deal-making was likely to revolve around smaller add-on acquisitions. On Thursday, she proved that she meant what she said.

The Internet company announced that it had purchased Stamped, a start-up focused on mobile products, for an undisclosed amount. The deal amounts to an “acqui-hire,” Silicon Valley’s term for buying a start-up for its talent.

The Stamped deal fits into two major initiatives that Ms. Mayer, Yahoo’s chief executive, mentioned on the company’s earnings call on Monday. One was a focus on smaller deals, none of which were likely to be blockbuster size.

“Many acquisitions and most acquisitions, a vast majority, are less than $100 million,” she told analysts on the call. “And so we’re looking for smaller-scale acquisitions that align well overall with our businesses.”

The other is a race to build up Yahoo’s mobile offerings, an area that she described as lacking at the company.

“While we’ve made progress, Yahoo hasn’t capitalized on the mobile opportunity,” she said. “We haven’t effectively optimized our Web sites, we’ve underinvested in our mobile front-end development and we’ve splintered our brands.”

Buying Stamped is intended to help address those issues. The company produced an app that centered on recommendations of restaurants, music and other entertainment by users. Its investors included Bain capital Ventures and Google Ventures, and its advisers included Mario Batali and the Instagram co-founder Kevin Systrom.

“Their experience building fun, useful, personalized mobile products aligns well with Yahoo!’s vision to create the best everyday mobile experience for our users,” Adam Cahan, a Yahoo senior vice president of emerging products and technology, wrote in a blog post on Thursday. “They will be a great asset as we expand Yahoo’s mobile efforts and build a world-class mobile development organization.”

For its part, Stamped’s team — composed in large part of former employees of Google, like Ms. Mayer — wrote in their own blog post: “As entrepreneurs, it’s never easy to walk away from something you built from the ground up, but the folks we met with at Yahoo! are simply top-notch and we’re thrilled to be joining them!”

Yahoo Posts $1.09 Billion Net Revenue in Quarter

Mayer, once a rising star at Google Inc who took charge at Yahoo in July, told analysts on a conference call that she wanted to focus Yahoo's efforts around the "daily habits" of users such as email, the home page, Internet search and mobile devices.

"We're committed to going back to our roots as a consumer internet company focused on user experience," the 37-year-old Mayer said on Monday, adding that "we intend to win".

Rather than get into completely different businesses, Mayer said Yahoo would look to improve its performance and finding opportunities in its existing businesses, such as search which she said has "clear upside" potential.

But her top priority was to fashion a coherent strategy to manage the industry's transition to mobile devices, a fundamental shift that some of the most innovative Silicon Valley companies - from Facebook Inc to Google Inc - are struggling with.

"The mobile wave is a huge wave for us to ride," Mayer said on the conference call, adding that that the company had failed to capitalize on the shift to smartphones, underinvesting and "splintering" Yahoo's brands in its previous mobile efforts.

Mayer's comments, which she delivered along with third-quarter earnings results that beat analyst expectations, sent Yahoo shares up 4.6 percent to $16.49 in afterhours trading on Monday.

"For people who weren't sure how she was going to come across on her first call, she definitely proved herself tonight," said RBC analyst Andre Sequin. "It seems like she really recognizes what the company is, where the strengths are and what the opportunities are."

Some analysts also pointed to comments about using share buybacks to distribute the gains from the sale of Yahoo shares in China's Alibaba Group, and a preference for smaller-sized acquisitions rather than blockbuster deals, as buoying investor sentiment.

Mayer, Yahoo's third CEO in about a year, arrived after a tumultuous period in the company in which former CEO Scott Thompson resigned after less than 6 months on the job over a controversy about his academic credentials. Yahoo co-founder Jerry Yang had also stepped down as CEO, and an internal reorganization eliminated thousands of jobs.

Internet pioneer Yahoo, which makes most of its money from online advertising, has fallen behind more innovative rivals n recent years and missed out on the online social networking boom launched by Facebook.

Roughly 700 million users still visit a Yahoo website every month - putting it in the top ranks globally. But the amount of activity people engage in on many sites is steadily declining and its smartphone offerings are deemed lacklustre.

"She handled the call very well," said Gabelli & Co analyst Brett Harriss.

"You have the tone of a professional CEO who just wants to block and tackle better and move the company forward," he said, noting that he detected echoes of Google's business approach in Mayer's comments.

SHIFTING COURSE

Mayer is expected to focus on revamping Yahoo's technology and products, shifting course from the media-centric approach embraced by her immediate predecessor, Ross Levinsohn.

Still, Mayer noted that she did not plan to exit media entirely, noting that content was part of the company's appeal and that Yahoo would continue to invest in some original programming such as videos and coverage of events such as the Olympic games and the U.S. presidential elections.

Since taking the helm, Mayer has moved quickly to build a team to assist her, shelling out rich pay packages for a new chief operating officer and chief financial officer, among others.

Bits Blog: Carol Bartz on the Yahoo Board That Fired Her and Advice for Marissa Mayer

If Carol Bartz, the former chief executive of Yahoo, could go back in time, she would have changed one thing about her relationship with the board that fired her by phone last year.

Ms. Bartz would have spent more time understanding the relationships between the board members, she said Tuesday at Fortune’s Most Powerful Women summit in Laguna Niguel, Calif.

Alex Gallardo/Reuters Carol Bartz at Fortune’s Most Powerful Women event.

“I didn’t understand or have the time or take the time — that’s a much better thing to say, take the time — to understand the relationships they had between themselves,” she said.

How could she have done that as chief executive? “Well, you go in the men’s room,” she said. In reality, she added, she should have arranged dinners with two board members at a time.

Ms. Bartz gave Yahoo’s former board some credit — but also a little dig.

“Unfortunately for the board, they had gone through one year of the acquisition battle with Microsoft,” she said. “And in fairness to them, they just wanted it to be simple, like no more press, no more anything. But the business is tougher than that.”

Now Marissa Mayer has taken over as chief executive of Yahoo, with an entirely new board. Ms. Bartz said she and Ms. Mayer have spoken about the job.

Her advice for Ms. Mayer was to understand that change at such a big company is hard. Ms. Mayer is trying to change Yahoo’s culture in ways big and small, like serving free food and acquiring more startups.

“One piece of advice I would give her is changing culture is not a sprint, it’s a marathon,” Ms. Bartz said. “It’s very, very hard to affect culture. And you can get surprised thinking you’re farther down the path of change than you really are because, frankly, most of us like the way things are.”

Employees might nod when an executive suggests changes, she said, “then they go back to their cube and go, ‘I ain’t doing that.’ And so I think that’s important for all of us, is to realize how stuck individuals can be, much less 14,000 people.”

Ms. Bartz did not rule out taking another chief executive role, saying she is an opportunist rather than a planner.

“I grew up in a small town in Wisconsin,” she said. “I never thought I’d be where I am. I never thought I’d have bling,” she said, flashing the rings on her fingers before adding, with perfect comic timing, “that I bought.”

Ms. Bartz is the lead director of Cisco Systems, where she has been on the board for two decades, and she has also served on seven other public company boards during that time.

The difference between a good board and a bad one, she said, is not panicking, which she said the Cisco board achieves, and being genuinely interested in the company rather than prestige or money.

She said she has turned down board positions from banks because “I like banks because they keep my money safe, but I don’t want to talk about banks 12 times a year.”

Directors who are genuinely interested will take the time to get to know one another and the executives, but not be afraid to fire one another, she said.

“When trouble strikes, which it always does — bad economy, bad quarter, activists, takeover — when trouble strikes, those board members who don’t understand or are not committed are not helpful,” she said.

Watch List: ‘Cybergeddon,’ With Missy Peregrym, Hits Yahoo

Now Mr. Zuiker is taking his biggest step so far into new media with “Cybergeddon,” a nine-part series that will be released, beginning on Tuesday, on the Yahoo! Screen video site.

An executive producer, along with Matthew Weinberg and Bill O’Dowd, Mr. Zuiker is calling the video — which should total about 95 minutes and be available in 10 languages — a “motion picture event” distributed in installments directly to Yahoo’s huge worldwide audience, should that audience happen to find it. (It has its own tab at the top of the Yahoo! Screen home page.)

Judging from the first three installments, “event” might be an optimistic description of “Cybergeddon,” but “better than your average TV-movie thriller” probably fits. Written by Miles Chapman (“Roadhouse 2: Last Call”) and directed by Diego Velasco (“The Zero Hour”), it would look at home on the Syfy or USA channels and has a network star, Missy Peregrym of the ABC series “Rookie Blue.”

Mr. Zuiker’s show is a conspiracy tale, as was Yahoo’s first original drama, the animated series “Electric City,” created by Tom Hanks, which went up in July. But Mr. Hanks’s was set in a dreamy, postapocalyptic steam-punk future.

“Cybergeddon” is very much in the here and now, positing a malevolent European criminal mastermind (Olivier Martinez, Diane Lane’s lust object in “Unfaithful”), who begins a seemingly random series of digital attacks: the controls of a Los Angeles water plant, the accounts of a Hong Kong bank.

Ms. Peregrym plays a coldly ambitious F.B.I. agent who spots the pattern but, before the first 10-minute episode ends, has been framed and arrested for cyberterrorism herself. This is not a show in which you want to sweat the plot details.

This all happens quickly, as Mr. Chapman and Mr. Velasco, operating under standard Web video rules, squeeze more twists into each 10-to-11-minute episode than it should have to bear, a feat accomplished with the help of rat-a-tat dialogue out of an old movie serial. (“Agent Jocelyn! You’re under arrest on three counts of cyberterrorism!” “Are you kidding me?”)

Another sign that we’re online: Ms. Peregrym’s cleavage plays a larger role per minute than it does in prime time on “Rookie Blue.”

Ms. Peregrym, whose distinguishing characteristics as an actress are her sad eyes and her athleticism, makes a credible action hero but is perhaps not as convincing a tech genius. Helping Agent Jocelyn in her quest to clear her name and stop the cyberattacks is a jailed hacker named Rabbit, amusingly played by the Australian actor Kick Gurry.

It would be wrong to leave a discussion of “Cybergeddon” without mentioning the commercial impediments to unfettered creativity in online drama. Among the logos prominently displayed in the opening credits is that of the digital-security company Symantec, which served as a consultant to the production but also has a significant role in the story.

This isn’t the kind of product placement in which a company’s car or navigation system is used by the heroine — this is the kind in which a sponsor is turned into a heroic character.

Producers can make all the excuses they want, but that kind of synergy puts a hard cap on how seriously their work can be taken.

This article has been revised to reflect the following correction:

Correction: September 24, 2012

An earlier version of this article included a headline that misidentified the Web site where the series “Cybergeddon” is being published. It is Yahoo Screen, not YouTube.

Watch List: ‘Cybergeddon,’ With Missy Peregrym, Hits Yahoo

Now Mr. Zuiker is taking his biggest step so far into new media with “Cybergeddon,” a nine-part series that will be released, beginning on Tuesday, on the Yahoo! Screen video site.

An executive producer, along with Matthew Weinberg and Bill O’Dowd, Mr. Zuiker is calling the video — which should total about 95 minutes and be available in 10 languages — a “motion picture event” distributed in installments directly to Yahoo’s huge worldwide audience, should that audience happen to find it. (It has its own tab at the top of the Yahoo! Screen home page.)

Judging from the first three installments, “event” might be an optimistic description of “Cybergeddon,” but “better than your average TV-movie thriller” probably fits. Written by Miles Chapman (“Roadhouse 2: Last Call”) and directed by Diego Velasco (“The Zero Hour”), it would look at home on the Syfy or USA channels and has a network star, Missy Peregrym of the ABC series “Rookie Blue.”

Mr. Zuiker’s show is a conspiracy tale, as was Yahoo’s first original drama, the animated series “Electric City,” created by Tom Hanks, which went up in July. But Mr. Hanks’s was set in a dreamy, postapocalyptic steam-punk future.

“Cybergeddon” is very much in the here and now, positing a malevolent European criminal mastermind (Olivier Martinez, Diane Lane’s lust object in “Unfaithful”), who begins a seemingly random series of digital attacks: the controls of a Los Angeles water plant, the accounts of a Hong Kong bank.

Ms. Peregrym plays a coldly ambitious F.B.I. agent who spots the pattern but, before the first 10-minute episode ends, has been framed and arrested for cyberterrorism herself. This is not a show in which you want to sweat the plot details.

This all happens quickly, as Mr. Chapman and Mr. Velasco, operating under standard Web video rules, squeeze more twists into each 10-to-11-minute episode than it should have to bear, a feat accomplished with the help of rat-a-tat dialogue out of an old movie serial. (“Agent Jocelyn! You’re under arrest on three counts of cyberterrorism!” “Are you kidding me?”)

Another sign that we’re online: Ms. Peregrym’s cleavage plays a larger role per minute than it does in prime time on “Rookie Blue.”

Ms. Peregrym, whose distinguishing characteristics as an actress are her sad eyes and her athleticism, makes a credible action hero but is perhaps not as convincing a tech genius. Helping Agent Jocelyn in her quest to clear her name and stop the cyberattacks is a jailed hacker named Rabbit, amusingly played by the Australian actor Kick Gurry.

It would be wrong to leave a discussion of “Cybergeddon” without mentioning the commercial impediments to unfettered creativity in online drama. Among the logos prominently displayed in the opening credits is that of the digital-security company Symantec, which served as a consultant to the production but also has a significant role in the story.

This isn’t the kind of product placement in which a company’s car or navigation system is used by the heroine — this is the kind in which a sponsor is turned into a heroic character.

Producers can make all the excuses they want, but that kind of synergy puts a hard cap on how seriously their work can be taken.

This article has been revised to reflect the following correction:

Correction: September 24, 2012

An earlier version of this article included a headline that misidentified the Web site where the series “Cybergeddon” is being published. It is Yahoo Screen, not YouTube.

DealBook: Levinsohn Confirms That He's Leaving Yahoo

5:44 p.m. | Updated Ross Levinsohn, the executive who served as Yahoo‘s interim chief, confirmed on Monday that he was leaving the tech company after being passed over to fill the spot permanently.

The departure of Mr. Levinsohn was not surprising, after Yahoo named former Google executive Marissa Mayer as its new leader.

In an e-mail to friends reviewed by DealBook, Mr. Levinsohn did not disclose his next steps. But he praised the company as having an “amazing brand” and described his short tenure as interim chief executive as “one of the best experiences of my career.”

His departure comes just two weeks after Ms. Mayer stepped into the role that Mr. Levinsohn assumed would be his own. Mr. Levinsohn ran Yahoo’s media, business development and sales operations and assumed the role of interim chief after Scott Thompson, Yahoo’s last chief executive, left in May amid questions that he had embellished academic credentials on his resume.

As recently as mid-June, Mr. Levinsohn was interviewing candidates for senior positions at Yahoo and telling them that the role of chief executive would be his, according to one person who was interviewed by Mr. Levinsohn but declined to be named because they still work with their current employer.

Mr. Levinsohn had already brought on a few senior hires, including Michael Barrett, a former Google executive who was named as Yahoo’s top advertising revenue manager.

He had also successfully brokered a settlement with Facebook over a patent fight that began under Mr. Thompson, an agreement that included an expanded content partnership.

Yahoo employees had been hoping that Mr. Levinsohn would stay with the company and help run Yahoo in tandem with Ms. Mayer.

“That would have been the best case scenario — Ross is great at running businesses and delivering value to shareholders and Marissa is a product visionary– together those two could be a powerful combination,” said one employee, who spoke on condition of anonymity because he was not authorized to speak publicly about the matter.

Here’s a note that Mr. Levinsohn e-mailed to friends:

I wanted to let you know that my time at Yahoo has come to an end. It has been an incredible journey for me and I could not be prouder of what we accomplished over the past few years helping define Yahoo as a leader in digital media and advertising. Yahoo is an amazing brand and company, and I leave knowing we did all we could to help inform and entertain more than 700 million users each month. Leading this company has been one of the best experiences of my career, but it is time for me to look for the next challenge.

Azam Ahmed contributed reporting.

Yahoo Quarterly Results Show Challenge Mayer Faces

Revenue and net income were stalled at last year’s levels. Although Yahoo has amassed an enormous audience, some advertisers are looking elsewhere.

But on Tuesday, for the first time in a long time, people took an interest in Yahoo. The day before, Ms. Mayer left a senior post at Google to lead the company that Google had left in its wake.

Analysts and shareholders — desperate for signs of life from the moribund company — are eager to see whether Ms. Mayer, 37, can lure back advertisers, reinvigorate a muddled brand and improve morale at a company marred by executive churn, constant cost-cutting initiatives and mass layoffs.

“Bringing in Marissa Mayer gets people’s attention,” said David Hallerman, a principal analyst at eMarketer. “The sheer attention that they are getting because of hiring her will be helpful for a while. But it will only carry them so far,” he warned.

The first problem she faces is Yahoo’s identity crisis.

Previous chief executives — and there have been four of them in the last five years, plus two interim chiefs — have had a difficult time trying to define what Yahoo actually does. Most people cannot explain the company in a single simple sentence. “The age-old question with Yahoo has been: Is it technology first or is it media or content first?” said David Cohen, the chief media officer at Universal McCann.

Most recently, under Ross Levinsohn, who has been the acting chief since May, Yahoo seemed focused on content. It announced a number of prominent deals with ABC News, including a new weekly Web video show starring Katie Couric called “Katie’s Take.” During a presentation made to a room full of advertisers in April in Manhattan, Mr. Levinsohn highlighted Yahoo’s own coverage of sports, finance, the presidential campaign and the coming Summer Olympics.

With 700 million users, Yahoo still draws one of the largest audiences on the Web. More people use Yahoo’s e-mail service than any other service. Yahoo Sports, Yahoo Finance and Flickr, the photo site, are the most popular destinations in their categories.

But over the last few years advertising technology has grown more sophisticated and advertisers themselves have come under financial pressures, prompting many of them to buy ads more cheaply and more quickly through ad networks and auction-based sales. Yahoo’s advertisers are now experimenting with new platforms, most notably Facebook.

To challenge Google’s ad dominance, Yahoo formed a partnership with Microsoft and AOL last year on a deal to sell advertising for one another. And in January, Yahoo bought the online advertising company Interclick, which allows marketers to tailor ads to specific demographics.

The two moves led to the creation of Genome, Yahoo’s new digital advertising product, which offers advertisers data about their users and crunches that data so marketers can create custom ad campaigns. But Yahoo’s revenue from online display ads rose just 2 percent in the second quarter compared with a year ago, and it continues to lose market share.

The choice of Ms. Mayer, who oversaw some of Google’s most successful products — the search engine business, Gmail and Google Maps among them — suggests that Yahoo may turn its focus to new products, like mobile technologies. “Yahoo has a very healthy search advertising and display advertising business,” Ms. Mayer said in an interview on Monday. “I’m interested in what Yahoo can do with video and mobile, both of which are very promising.”

Brian Wieser, a senior research analyst at Pivotal Research Group, said advertisers had grown largely indifferent toward Yahoo. “What would get them more money is if they have a sexier brand,” he said. That’s where Ms. Mayer’s Google sheen could help the company. “We don’t know that she’s not the next Steve Jobs,” Mr. Wieser said.

Ms. Mayer may have the hardest time taking Yahoo into the mobile advertising arena, a market dominated by her former employer. Unlike Yahoo, Google and Apple dominate the mobile advertising space with hardware and software options.

And that’s where it runs headlong into its identity problem. “Yahoo is still mainly a media company. It doesn’t have an operating system. It doesn’t have the devices,” Mr. Hallerman, of eMarketer, said. “I don’t know if there’s room in the market for a fourth mobile platform.”

Asked whether she plans to run Yahoo as a media company or a technology company, Ms. Mayer said, “It’s not the right question. The most important thing is to give end users something valuable, inspiring and delightful that makes them want to come to Yahoo every day.”

Ms. Mayer skipped Yahoo’s earnings call Tuesday. Thanks to cost-cutting initiatives and restructuring, Yahoo’s second-quarter earnings beat analysts’ expectations, but revenue was flat at $1.22 billion. The company reported Tuesday that net income in the second quarter fell 4.2 percent from the same quarter a year earlier, to $228.5 million, or 18 cents a share.

Nicole Perlroth reported from San Francisco and Tanzina Vega from New York.