Yahoo - a contrarian view

Wednesday, June 18. 2008

Yahoo - a contrarian view

This will no doubt make make me very unpopular, but I do think all the Yahoo doom and gloom is a bit overblown in the scheme of things. Consider these heretical thoughts:

- Yes, Yahoo walked away from a deal with Microsoft, but that would have eviscerated its strategic options going forward. Sure, those who wished to cash in on the trade are upset, as is Microsoft, but c'est la vie

- Yes, some top talent is jumping ship, but you know what - there are a lot of talented execs out there who could do these jobs, they are not rocket science. And every ego going out into the dark blue yonder lightens the ship and helps unglue the peanut butter.

- So Yahoo is outsourcing its search to Google - for a healthy revenue stream. Staying alive this year to fight next year is always a better strategy than falling on your sword, as is keeping your enemies close.

I sometimes wonder if people recall what Yahoo is, so to refresh memories (from Yahoo Finance, still a very useful site), in $bn:

YHOO - Revenue (ttm): 7.12B, Net Income Avl to Common (ttm): 1.06B, Total Cash (mrq): 2.61B

GOOG - Revenue (ttm): 18.12B, Net Income Avl to Common (ttm): 4.51B, Total Cash (mrq): 12.13B

MSFT - Revenue (ttm): 57.95B, Net Income Avl to Common (ttm): 16.42B, Total Cash (mrq): 24.02B

Not to mention its large user base and portfolio of useful assets. In other words there is lots of life in the old dog yet, and plenty of runway to learn new tricks. As Scott Karp says, the company that joins the dots in the new media could be the next Google. And Yahoo has a head start.

Looking at this, and putting myself into the position of a CEO on the bridge, its not immediately obvious to me why I would scuttle the ship just to make some short term financial players and a few noisy bloggers happy, and solve Microsoft's strategic problem as it battles for Chief Tech Behemoth. Underperforming? - hey, the whole planet's tanking, (up till yesterday its yearly performance was the same as mapped to the NASDAQ and Microsoft, and Google was seriously tanking till mid April) - so what's your issue

.

Sure, it probably needs a new course to be plotted, new sails to be set, and some new crew to come on board, but this is no ways the first company that has hit stormy waters as it comes of age. In some industries this sort of periodic crisis is traditional, almost.

Posted by Alan Patrick in Digital Media Web 2.0 at 15:01 | Comment (1) | Trackbacks (0)

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How refreshing. A fact-based Yahoo piece grounded in common sense, pragmatism and reality.

It does feel as though they could have handled the situation a whole lot better though (at least from a PR perspective, even if the outcome was the same).

And I also wonder about the whole shareholder value thing (not something that normally pre-occupies me), in terms of what's the likelihood of the shareholders recouping the lost income opportunity of the acquisition going through. Yang either believes that he can create more shareholder value by remaining independent, or just didn't want to deal at any price (for whatever reason). I haven't run the numbers, but how likely is the former to be the case? Was selling likely to be the best outcome for the shareholders (with a bird in the hand being worth two in the bush)? Wdyt on this?

Was also curious about the comparative shareprice performance of those involved (since these numbers & comparisons also seem to get fairly badly abused to make whatever point is desired), versus the relevant index (I prefer the FT.com markets data site, especially the option to overlay FT stories on the timeline - very cool). Won't try and construct the analysis/commentary right now, but thought this was interesting: http://screencast.com/t/G52hZGVEN (apologies to FT.com for screenshot, but couldn't save/share the chart from their interactive charting functionality).

As ever, time will tell. I'm personally long-term bullish, but they've got to sort the structure of the company out and get a lot more focus than they have (Yahoo Finance is a good example of where they seem to have lost their way and their ability to innovate - I feel like I'm in a time warp whenever I go there).

Right, enough diversion, back to work.

#1 Chris Osborne (Homepage) on 2008-06-18 16:30 (Reply)

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