Bartz Is Yahoo's Last, Best Hope - Barron's

New CEO Carol Bartz could be Yahoo's (YHOO) last, best hope, writes Barron's Mark Veverka, and whether the company sells itself to Microsoft (MSFT) or not, investors are set to win.

While she was CEO of Autodesk, Bartz successfully remade the business, boosting profit margins, earnings, revenue and share price in the process. She also proved her ability to run an engineering-centric software company. As CEO of Yahoo, Bartz's first major initiatives have already suggested where she's headed and it looks like improved operating efficiency and profitability are at the top of her list. She's recruited Timothy Morse, a proven cost-cutter, as CFO and cut Yahoo's workforce by 5% in April. She's also begun to shed divisions that aren't central to the company's strategy.

Yahoo's search engine has steadily lost marketshare to Google (GOOG) and faces new competition from Microsoft's Bing, and repeated attempts to change the business' operating model have been unsuccessful. Yahoo also bungled a $33/share bid from Microsoft. But unlike former CEO Jerry Yang, who was a software genius but not a natural leader, Bartz brings with her a strong set of financial skills and management focus, and is expected to make Yahoo better organized.

As part of her re-organization, Bartz plans to clean up redundant legacy software codes that inhibit innovation and slow down the execution of new products and services. Bartz also wants to make it easier for advertisers to buy ads using its website, and a new, more interactive home page will be test launched by the end of the year. Improving Yahoo Mail, the largest free e-mail site in the U.S., is on Bartz's list of top priorities too.

Bartz has made it clear that she didn't come out of retirement just to repackage Yahoo for sale, and would prefer to try and turn the company around on its own. However, she has stopped short of completely ruling out a sale to Microsoft.

If Bartz plays her hand right, Yahoo will emerge as a more tightly focused, profitable and faster-growing business that can either function on its own or profitably sell itself to a suitor like Microsoft. Investors would be wise to tune in on Thursday when Bartz oversees her first annual meeting.

• Mark Mahaney, of Citigroup, rates the stock as a Buy and thinks shares are worth $21, a 35% premium over Friday's $15.80 close.

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• Earlier this month, Barclays upgraded Yahoo to Overweight and raised its price target to $20 from $15. Yahoo "is focused on the right core initiatives, is now better structured, has a renewed sense of innovation, and is well positioned to benefit from an eventual rebound in advertising."
• Bartz has said Yahoo is open to a Microsoft deal if offered 'boatloads of money.' In the meantime, she said the company's interested in acquiring social-networking and video start-ups.

Comments

[tedster98:]

Ever since Yahoo explicitly endorsed Barack O'commie, I closed my paid email account. Too bad they had to back such an anti-American president. I will not support such a business.

Jun 21 08:50 AM

[Windsun33:]

One of Yahoo's consistent money makers has been its merchant services - online stores. Yet over the past 5 years they have fallen further and further behind on the current state of the art. In the past few years only token updates and improvements have been done.

So far I have seen no changes, but Bartz has not been there that long.

Jun 21 11:08 AM

[Walt17:]

I hope Bartz does make a difference. Yahoo has been my internet starting point and primary email for years. But the last year reliability of both has been going down.

Jun 21 01:33 PM

[lyingtoours...:]

Carol will bury Yahoo, I don't know who helped her rise to where she is today, but she will destroy yahoo trying to keep up with or mimic other portals ideas, while stifling creativity. She is just another insecure bully, who hides behind a fake optimistic know-it-all facade.

Just like so many other managerial business leaders in this once great country.

Jun 21 05:20 PM

[jayminho:]

this bartz girl is delusional.
seriously.
here we are at jun 21st.
I wonder what (if) mrs. carol will be talking 6 months from now.

Jun 21 09:18 PM