Exclusive: Loeb backs Yahoo's Alibaba cash move - source

The Yahoo! offices are pictured in Santa Monica, California April 18, 2011. Yahoo! will report its quarterly results on Tuesday.

SAN FRANCISCO (Reuters) - Yahoo Inc board member and activist hedge fund manager Dan Loeb was supportive of the decision allowing Chief Executive Marissa Mayer to re-evaluate plans for the cash it gets for selling a portion of its Alibaba Group stake, according to a source familiar with the board's thinking.

Yahoo said on Thursday it might rethink its previously announced plans to return the multibillion dollar cash windfall to shareholders.

Shares of Yahoo were down 5.8 percent to $15.08 in midday trading on Friday as some investors were disappointed about the potential change in plans for the cash.

Yahoo struck a deal with Alibaba in May in which Yahoo was to sell one-half of its 40 percent stake in the Chinese Internet company for at least $6.3 billion in cash and up to $800 million in new Alibaba preferred stock.

The board of directors, including Loeb, backs Mayer's long-term vision for Yahoo, the source noted. That vision could include more creative uses of the Alibaba cash than undertaking a share buyback, the source added.

The source declined to be named due to lack of authorization to speak about board deliberations.

Some analysts expect Mayer to use the cash to finance new acquisitions.

Mayer, a former Google Inc executive, was hired in July to revamp Yahoo. A one-time Web pioneer, Yahoo has seen its revenue fall amid competition from Google and Facebook Inc, and changes in the online advertising market.

(Reporting by Alexei Oreskovic; Editing by Jeffrey Benkoe and Phil Berlowitz)