BUSINESS BLOGS
BUSINESS BLOGS
category: business
30 Jan 2008
related tags: Yahoo! |

With the Super Bowl around the corner, pardon me for making the following sports analogy, but I could not resist.

I think Yahoo! needs to be honest with itself, and it’s not presently: Yahoo! needs to do the blocking and tackling and if it’s not willing to do so, then it needs to bring in people who will.

The problem is, the roots of the problem go all of the to the top.  During yesterday’s earnings report, I lost confidence in CEO Jerry Yang, Sue Decker and Blake Morgensen.

I’m a Yahoo! shareholder because Yahoo! is the best positioned new media company in the world.

I’m a Yahoo! shareholder because I believe Yahoo! can generate over $10B in annual revenues with profits over $3B per annum.

I’m a Yahoo! shareholder because I believe Yahoo! should command a market capitalization of $100B.

But, I no longer think that the people in charge should remain.  Last year Terry Semel was forced to go.  He was overly praised for his work when the company rose back from the ashes in the 2001-03 period and he was also excessively demonized when the company lost the lead to Google.  While Yang is a great person I am sure, he’s simply not fit to run the company as a CEO.  For most of his tenure as Chief Yahoo, no one reported to him.  It was wise for him to come in as CEO to replace Terry Semel, but he’s already overstayed his tenure, because clearly he won’t make the really tough calls.  Most importantly, he’s not candid with himself, or shareholders.

Warren Buffett always stressed the importance of investing in people who displayed candor.  During yesterday’s call, the trio lacked it.  Sue Decker seemed lost.  She could not provide any insight or guidance (I understand as a publicly traded company you need to be careful with anything forward-looking but you should demonstrate competence and instill confidence).  None of them seemed competent, none of them exuded confidence.

I was hoping to hear: we’re not executing well, we realize we should be creating more value for shareholders.  Nothing like that.  To them, it’s the market.  It’s the system.

It’s time to go.

With the company sitting at $25B, with a net-of-holdings value of $10B, Yahoo! will not be independent by July 4th.  Good thing that is the case, because the company’s operations - while strong - give investors no reason to invest.  With the demand and supply dynamics for the shares being what they are, the only thing holding them up will be the specter of a sale or merger.

The opportunities to sell to AT&T or Microsoft, or merge with CBS, Viacom, eBay are great, but they also present challenges.  As such, we believe a private equity firm is preparing the paperworks as we speak.

A PE firm could step in, clean house, and much like it happened to Doubleclick sell back a stronger company to the public.

Note: Long YHOO