Third Point appeals to Yahoo founder Yang for change (Reuters)

(Reuters) – Yahoo Inc shareholder Daniel Loeb appealed to the company's co-founder Jerry Yang to fire Chairman Roy Bostock and several other directors to revive the Internet media company after years of poor performance.

The letter comes as the Yahoo board prepares to discuss a variety of options facing the troubled Internet firm during an all day meeting on Wednesday.

Loeb heads hedge fund Third Point LLC, which holds a 5 percent stake in the company.

After calling for Bostock's resignation last week, Loeb spoke on the phone with him and Yang on Monday, urging for a "desperately needed leadership change."

During the phone call Bostock did not "acknowledge any responsibility" for the company's problems and said that he was "not likely" to step down from the board, Loeb said in a filing with the U.S. Securities and Exchange Commission. Bostock then hung up on Loeb, according to the filing.

Loeb then fired off a letter to Yang, issued on Wednesday, expressing support and offering a list of candidates "who could help bring Yahoo back to its rightful place among the world's top digital media and technology companies."

"As a Founder and major shareholder of the Company, the abysmal record of the current leadership must be heart-rending to you personally, as well as damaging to your net worth. We urge you to do the right thing for all Yahoo shareholders and push for desperately-needed leadership change," Loeb wrote to Yang.

Yahoo declined to comment on Loeb's SEC filing.

Third Point's call for ousting members of Yahoo's board follows the firing of Chief Executive Carol Bartz last week.

Yahoo has gone from one of the hottest Internet companies two decades ago to one mired in challenges for the last several years as it tries to hang on to its share of online advertising revenue, which is being siphoned away by larger and more nimble rivals such as Google and Facebook.

Yahoo, Microsoft and AOL are reportedly teaming up to form an ad partnership, selling each others' inventory in order to shore up their position against Google, according to AllThingsD.

Yahoo's share of the U.S. online display market is expected to decline to 13.1 percent this year from 14.4 in 2010, according to research firm eMarketer. Along with Microsoft and AOL, the combined estimated share is about 22 percent.

Meanwhile, Google's share of the online display market -- representing big splashy ads that appear on webpages -- is growing and is forecast to reach 9.3 percent this year, up from 8.6 percent in 2010.

By 2012, eMarketer estimates that Google and Yahoo will be in a "dead head" for online display ad share.

(Reporting by Jennifer Saba; Editing by Derek Caney and Tim Dobbyn)

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Factory and housing data point to weak growth (Reuters)

WASHINGTON (Reuters) – Factory output in the U.S. central Atlantic region dropped to a two-year low in August and new home sales hit a five-month low in July, the latest signs to suggest the economy is at risk of stalling.

The Richmond Federal Reserve Bank said on Tuesday its index of factory activity in its district fell to minus 10 from minus 1 in July as new orders and shipments weakened sharply.

It was the lowest reading since June 2009.

While the survey covers only a small portion of U.S. manufacturing, it follows a report last week that showed a steep decline in factory activity in the mid-Atlantic region, signaling a potential shrinking in the sector that has shouldered the economy's recovery.

"The manufacturing sector was one of the most consistent pockets of strength in this recovery and all of a sudden it seems to be taking a very severe beating that goes beyond the supply chain disruptions related to the Japan earthquake," said Anthony Karydakis, chief economist at Commerzbank in New York.

The Institute for Supply Management's index of national manufacturing activity stood at 50.9 in July and economists said it would likely fall below the 50 mark in August, which would indicate a contraction.

The index has been steadily declining since March, but that weakness had been blamed mainly on supply chain disruptions from Japan. The August survey will be published on September 1.

The Philadelphia Fed said on Thursday that an index covering factory activity in its region dropped to a near 2-1/2 year low in August.

That survey covered businesses in eastern Pennsylvania, southern New Jersey and Delaware, while the report from the Richmond Fed covered the District of Columbia, Maryland, North Carolina, South Carolina, Virginia and most of West Virginia.

Analysts cautioned against interpreting the regional weakness as a sign the economy was already in recession.

RECESSION RISKS UP

The Philly Fed survey has a very small correlation with the national ISM index and much of the decline this month reflected the extreme turmoil in financial markets, which has eroded both business and consumer sentiment.

"Our forecast is for ISM manufacturing index to fall below the 50 mark for the first time since mid-2009, though it will remain above the 46 mark which is consistent with overall economic contraction," said Millan Mulraine a senior U.S. macro strategist at TD Securities in New York.

Economists estimate the odds of a contraction in overall economic activity as high as 50 percent.

Those risks were reinforced by a Commerce Department report showing new single-family home sales slipped 0.7 percent in July to a 298,000-unit annual rate, the lowest since February.

Economists polled by Reuters had forecast sales at a 310,000-unit rate. In the 12 months through July, new home sales rose 6.8 percent.

July's weak sales pace left the supply of new homes on the market unchanged at 6.6 months' worth.

"The recovery cannot count on the housing sector adding much to growth," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

Despite the soft data, U.S. stock prices rallied on speculation that a string of weak data could prompt Federal Reserve Chairman Ben Bernanke to announce stimulative measures to support the economy at a gathering of gathering global central bankers in Jackson Hole, Wyoming, later this week.

Bernanke will deliver a keynote address on Friday morning. Traders expecting the Fed chief to outline plans for a new round of bond purchases are likely to be disappointed.

Instead, he is most likely to outline gradualist measures, such as how the Fed could tweak its balance sheet as a way to put further downward pressure on medium- and long-term interest rates.

(Additional reporting by Jason Lange and Glenn Somerville, editing by Neil Stempleman)

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