​Are deep cost cuts the Rx for Yahoo's ailments?

Among Yahoo's (YHOO) many problems, contends activist investor SpringOwl, is a Silicon Valley swagger that's lead to outrageously high spending.

Take its outlay on providing free food for its employees. It's not as if Yahoo workers don't earn enough to pay for their own lunches, given that a senior software engineer is paid an average of $134,000 annually, according to employment site Glassdoor. Despite this, Yahoo CEO Marissa Mayer has spent $450 million during the past four years on providing catered food for its Sunnyvale, California-based workers.

"That's half an Instagram right there," SpringOwl wrote in a 99-page presentation that it provided to Yahoo's board this past weekend. "The world's largest start-up? What start-up do you know that would spend $108 million a year on free food?"

The remedy from SpringOwl raises plenty of questions about the problems eating away at Yahoo's core, ranging from its high spending on perks such as iPhones for all workers and a splashy holiday party with a reported $7 million tab to an multi-billion-dollar acquisition spree spearheaded by Mayer.

Hints of a power struggle at Yahoo!

Yahoo declined to comment. The aging Internet pioneer has struggled for years to grow as digital competitors have emerged and surpassed it. Its annual revenue -- $4.6 billion in 2014 -- has been flat in recent years and its shares are down 36 percent from a 52-week high of $51.68.

Rebooting Yahoo's operations by taking away its Silicon Valley flash is unlikely to help spark a turnaround. That's because cutting the swagger from Yahoo might drive its workers into the arms of rivals such as Google (GOOG), which, after all, are located only a short hoverboard ride from Yahoo's headquarters. In the competitive labor market for engineers and software programmers, Yahoo can't afford to alienate its employee base.

Driving away Yahoo's workers might sit just fine with SpringOwl, however, given that it's advocating a massive purge of the company's rolls. Included in its 9-step plan for fixing Yahoo is the proposal to slash its worker count by three-quarters, taking it down to 3,000 employees from 12,000 currently.

SpringOwl, an asset manager run by Forbes contributor Eric Jackson, was prompted into action by Yahoo's announcement earlier this month that it plans to spin off its core business.

Jackson noted in a Forbes piece that there are plenty of risks with the spinoff plan, ranging from regulatory to financial issues. The spinoff could also take a year to play out. "And then the core is another year weaker. And then you probably don't have a core business you can turn around," he noted.

His recommendations include bringing in a new CEO, writing off Mayer's acquisitions, ending investment in search, and cutting its product development budget. Oh, and no more free food.

Investors are itching for something -- anything -- to be done, given that the stock has decline by about one-third in the past year. Google shares, by comparison, have increased about 46 percent during the same time period.

Still, gutting the perks of Yahoo's Silicon Valley workplace probably isn't the answer to healing its wounds. It may be better to focus on figuring out how to revitalize a business that hardly makes anyone want to yodel with joy. SpringOwl has some good ideas, such as investing in core assets such as Yahoo Finance and its Sports. The $64,000 question, however, is whether Yahoo is already past the point of saving.

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