Shareholder activist Daniel Loeb has scooped up shares of Yahoo Inc and is demanding that the company overhaul its board, saying the directors have made serious misjudgments and destroyed value for stockholders.

A reconstituted board with new directors who will bring fresh eyes, relevant industry expertise and increased investor alignment to the table is immediately necessary, wrote Loeb the chief executive of hedge fund Third Point LLC, which has about $8 billion under management and now owns about 5 percent of Yahoo shares.

In a letter to the Yahoo board, Loeb called for the prompt resignation of Chairman Roy Bostock and directors Arthur Kern, Vyomesh Joshi and Susan James.

Third Point said it has held discussions with a number of potential replacements for current directors.

Bostock fired Yahoo CEO Carol Bartz over the phone two days ago, less than three months after he expressed support for her during a shareholder meeting.

Third Point welcomed Bartz's departure but said the board ultimately was responsible for the company's performance.

From the failed Microsoft sale negotiations, to a subsequent bungled and disappointing search deal with Microsoft, through a series of misguided CEO selections, and most recently the Alipay debacle, this board's failures have destroyed value for all Yahoo stakeholders, the letter said.

Yahoo's board said through a spokesperson that it recognizes the critical challenges facing the company. Accordingly, the Yahoo board welcomes a dialogue about the concerns that have been raised by the Third Point filing. The board is committed to acting in the best interests of shareholders.

Additionally the board said that Bartz cannot stay on as a Yahoo director and is obligated to resign her seat.

The fact that shareholders are beginning to stir is not surprising given Yahoo's recent woes and share performance, said Scott Kessler analyst at Standard & Poor's.

It was only a matter of time before something like this happened, said Kessler.

Kessler pointed out that only one Internet company, Akamai, is represented on Yahoo's board. If you look at the board, it seems to me like you have more people with experience at airlines than you do at Internet companies.

Two decades ago, Yahoo was one of the world's hottest Internet companies -- in January 2000, at the height of the dot-com bubble, its shares traded at more than $125. It has since been mired in problems as it tries to hang on to its share of online advertising revenue, which is being siphoned away by larger and more nimble rivals Google and Facebook.

In 2008, Yahoo turned down an offer from Microsoft to buy the company for $31 a share. Shares of Yahoo closed up 6.1 percent at $14.44 on the Nasdaq on Thursday.

Third Point said its own analysis values Yahoo at more than $20 a share.

The hedge fund said that in four years Yahoo executives have not been able to set the company on the right course and that Bartz only aggravated Yahoo's problems, especially when it came to its Asian assets.

Ms. Bartz's poor decision-making and communication skills publicly alienated the company's highly respected Asian partners, as well as its shareholders, sell-side analysts, bloggers, customers and employees, the Third Point letter said.

Yahoo is currently worth about $16 billion, with much of that ascribed to its roughly 40 percent stake in China's Alibaba, the parent company of websites including Alibaba.com and Taobao. Yahoo, along with Japanese mobile company Softbank. own Yahoo Japan.

Relations between Yahoo's Bartz and Alibaba founder Jack Ma had frayed recently. In May, Yahoo revealed that Alibaba had abruptly handed Alipay -- one of Alibaba's crown jewels -- to a company controlled by Ma. Yahoo claimed it was blindsided by the move.

(Reporting by Paul Thomasch and Jennifer Saba; Editing by John Wallace)

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