NEW YORK (TheStreet) -- Shares of Yahoo Inc. (YHOO) are down by 1.38% to $42.84 in early afternoon trading on Monday, as shareholder Starboard Value is urging the company to undertake a "major overhaul," cut costs, buy back between $3.5 billion and $4 billion of shares, and separate Yahoo Japan's stake in a tax-productive way.

In a letter to Yahoo, Starboard called the Alibaba (BABA) - Get Report spinoff a "good first step toward creating significant value for the benefit of all Yahoo shareholders," but added that more is needed and the stock is still undervalued.

Starboard's suggested steps could end up unlocking $11.1 billion of shareholder value of close to $11.70 per share, the letter said.

Starboard was critical of Yahoo's recent acquisitions and substantial investments in new areas, saying it believes the search engine company should be focusing on rejuvenating its core business.

"Management has shown extreme reluctance to right-size Yahoo's cost structure and achieve appropriate profitability in the core business, and has instead indicated that it will continue making acquisitions. We believe taking immediate and aggressive action to reduce costs is critical," the letter, written by Starboard managing member Jeffery Smith, said.

"Continuing to delay cost reductions will only exacerbate the additional revenue decline expected in 2016 and 2017 due to the end of the Technology and Intellectual Property Licensing Agreement (TIPLA) amortization and the expiration of the Search agreement with Yahoo! Japan, which together we believe will result in a $350 million drop in EBITDA. We believe Yahoo's Core Business should be highly profitable, but unfortunately it is currently saddled with an enormously bloated cost structure," Smith said.

Separately, TheStreet Ratings team rates YAHOO INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate YAHOO INC (YHOO) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity, reasonable valuation levels, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

• YHOO's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, YHOO has a quick ratio of 2.01, which demonstrates the ability of the company to cover short-term liquidity needs.
• Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Internet Software & Services industry and the overall market, YAHOO INC's return on equity exceeds that of both the industry average and the S&P 500.
• The gross profit margin for YAHOO INC is currently very high, coming in at 84.00%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, YHOO's net profit margin of 13.27% significantly trails the industry average.
• Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
• You can view the full analysis from the report here: YHOO Ratings Report