Yahoo: Worst year ever?
Posted
Oct 08 2007, 01:02 PM
by
Kim Peterson
Rating:
It's been a horrible year for Yahoo. The company has derailed, and things will get worse before they get better. But for all the talk of a buyout or merger with Microsoft or another company, I just can't see it. Let's quickly review Yahoo's 2007 blues:
Missed earnings. First quarter profits came in below expectations, causing the stock to drop 11%. The second quarter met expectations but saw income fall year-over-year. Execs lowered guidance for the third quarter and the full year. After taking a hit this year, the stock price has been creeping up in September and closed today just shy of $28.
CEO turnover. Terry Semel resigned in June and co-founder Jerry Yang stepped in to lead.
The 100-day analysis. Yang launched an intense soul-searching at the company, heading a 100-day self-examination to craft a strategic plan. But reports say that a major overhaul is unlikely, and that Yahoo will not make any big announcements when the 100 days are over. I think there will be some announcements just for the sake of PR; too many people are watching.
Analysts ready to chop. As in break up the company. Sanford Bernstein analyst Jeffrey Lindsay boosted shares last week by reporting that Yahoo would be better off as three businesses -- display, search and subscription. Separating the three would raise their cumulative market value to $42.3 billion, up from the company's current market cap of $37 billion. Lindsay also said that it appears Yang has backed away from making any bold moves at the company, and as a result shares will suffer. Last month, Lindsay wrote that Yahoo's customer base "has been flat for some time and is starting to fray at the edges."
Competition rising. Google is only increasing market share. Microsoft is revving up new search and community tools. Upstarts like Facebook are drawing more social networking traffic.
This should have been the year for Yahoo to take off. The company's new advertising system, Panama, needed to soar instead of stall. Yahoo should have been rolling out big moves to monetize its incredible user base. I use Yahoo every day -- e-mail, IM, finance and Flickr. I don't pay a cent for these services. Would I? Probably. Would I accept more aggressive advertising in return for using them for free? Yes.
Yahoo has been dogged all year by rumors of being acquired or somehow combined with another company. Microsoft is most often
mentioned as a partner, though serious talk between the companies appeared to fizzle earlier this year. I can't see this marriage. The companies have too many overlapping strengths -- mail, search, finance, advertising -- and combining them creates no value.
The Yahoo of 2007 is mired in bureaucracy. Why Yang even needed 100 days to sort out a company he founded is beyond me. Yahoo needs to be nimble and execute quickly and perfectly. Starting now. Wasting any more time will only fuel the competition.
What do you think? Is Yahoo having its worst year ever or am I channeling the Simpsons' Comic Book Guy too much?
