Yahoo: Can We Please Have Jerry Back?

Last November we all knew Yahoo (YHOO) cofounder Jerry Yang would be stepping down after a disastrous tenure as CEO. He spurned Microsoft (MSFT) without realizing the consequences, and he had no ability to describe an alternate path for the company. We weren’t alone in calling for his dismissal, and the hope was that Yahoo would find the right leader to restore their former glory. They didn’t.

In the few months between Jerry’s resignation and the beginning of the Carol Bartz era at Yahoo, there was much speculation in Silicon Valley about who might lead the once great company. People I spoke with thought Yahoo would go one of two ways. The first would be to try to find the great product visionary to lead the company forward. Their Bill Gates or Steve Jobs (Mark Zuckerberg may someday be on that list). With the right product vision Yahoo could push boldly into new territory and renew its bid to create a lasting brand and company. The second way to go would be to hire someone to sell the company, whole or in parts, and maximize shareholder value in the short run.

It’s pretty clear Yahoo went with door number 2 and chose someone who could negotiate a deal over the next great product visionary of our time. You can’t really blame them – true visionaries are by definition rare. And it’s unlikely they’d want to go to swim upstream at Yahoo during the hard rebuilding years.

So in came Bartz, and the deals started happening. We’ve mostly kept quiet. Any new CEO deserves a honeymoon phase, and Bartz barked at journalists to keep their opinions to themselves on her first day at Yahoo: “It’s been too crazy. People outside Yahoo deciding what Yahoo should do, shouldn’t do. That’s got to stop.”

But the honeymoon ended when Yahoo signed away its most important asset for next to nothing. Yahoo went from being in the enviable position of no. 2 in search to just another portal, albeit a big one. And despite what Bartz said, she held out hard for a big up front cash payment. Microsoft never gave in, and Yahoo caved. Now they’ll watch their search market share dwindle, just as AOL’s did after surrendering search to Google (GOOG) earlier this decade. And since all the people have left or are leaving, there is no way for Yahoo to ever recover what they once had. What in the world will happen to them if the government rejects the search deal? They’d be in very serious financial trouble almost immediately. I almost wonder if Microsoft secretly hopes for exactly that to happen.

Bartz played an excellent game of checkers. It’s just that her opponent was playing chess. And the history books will not be kind.

So what’s next for Yahoo? There’s talk of social stuff, but no one believes it. Products are being sold and shut down left and right. Yahoo may stumble along for years without a forced sale. But there are no real product gurus left there to do anything spectacular and risky. What’s Yahoo’s equivalent of the iPhone? They don’t have the stomach to try it, whatever it is.

Bartz says not to worry, that middle America still loves them: “When you get outside New York and Silicon Valley, everyone loves Yahoo.” You know who else used to say that as they began their long, slow decline? MySpace. But what they miss is that the new generation of Internet users is all about Facebook and Google, no matter where they live. Without a bold and risky plan to reshape the company, there is no way to get back those users.

Do I really want Yahoo to bring Jerry Yang back? No, not really. He loves the company but he certainly wasn’t the leader Yahoo needed. His tenure as CEO was a sad affair. But he did have passion for the product, something Bartz lacks. And frankly, he seemed willing to turn down every offer from Microsoft. After declining the initial takeover offer, maybe that was the best strategy. Giving away search hardly seems strategic.

I miss Yahoo. They used to be warriors, with a bite to back up their bark. You can throw F-bombs all day long, but if you don’t have the product muscle to back up the bluster, eventually it just gets old.

Original post

Comments

[Tom B:]

"Bartz played an excellent game of checkers. It’s just that her opponent was playing chess. And the history books will not be kind."

It's pretty sad when you are outmaneuvered by a dim bulb like Ballmer.

"Bartz says not to worry, that middle America still loves them: “When you get outside New York and Silicon Valley, everyone loves Yahoo.”"

Yea, right. They say the same thing about the Republican party. I hear they're still popular in Alabama.

Sep 23 08:00 AM

[birder:]

I still like Yahoo. But then I am middle America. Darn shame.

Sep 23 09:10 AM

[Duude:]

I don't know about Bartz strategy, but bringing Jerry back? Gimme a break! Unless you mean Ben and Jerry or Tom and Jerry, forget it. Jerry would have spurned all deals till Yahoo was forced off the Nasdaq. Then he'd try an end game maneuver of suing Microsoft with a merit-less claim. Yahoo's weak bargaining position now will always rest with Jerry's competence.

Sep 23 09:11 AM

[romanzy:]

Who the hell brought up Carol Bartz to lead Yahoo? My 1st instinctive thought was: "Gosh, that can't be true"! Autodesk is like IBM in the old (bad) days. Look at her! She looks IBM. She is an opportunist, willing to cash as quickly as possible, nothing else. Vision? Strategy? Blaaaah! Just unbelievable that they gave her that position. She will destroy Yahoo, you'll see. Of course Microsoft wants that to happen. Maybe she is just a Microsoft puppy.

Sep 23 09:15 AM

[whispered:]

Shareholders brought this upon themselves. They deserve every single drop.

Sep 23 09:50 AM

[noirblood:]

It is so ignorant when people say there are no product visionaries at Yahoo!, as if just because some talented people left there's no way the people who were working for them could have any skill at all. That's like saying when Albert Pujols retires, the Cardinals will be a doomed franchise and never again win a baseball game. Its just ridiculous. People who are at lower levels of companies move up in time, and there's absolutely no reason they can't be just as successful if not more so than the people who moved up before them. Everybody starts at the bottom, and new innovators are born every day.

I agree the MSFT deal doesn't seem like a great one, but let's see what it actually does for the company over the next few years before dismissing it entirely. Yahoo! has used other search engines to power their search results (including Google from 2000-2004). If anything, improving the technology behind the Y! search results will only make them better. I'm not sure how selling the back-end is an inevitable negative to the front-end.

What's Yahoo!'s version of the iphone? Well, they're not a technology company. That's like saying, where's Apple's search engine! Or personals site! Come on, they're slacking!

Yahoo! is a content portal with web services. The exciting things they will be doing will be in the display advertising market. Not as sexy as an iphone, but plenty lucrative.

Sep 23 09:58 AM

[Dean M:]

Yahoo search wasn't worth much, that's why it didn't fetch a big windfall.

Sep 23 10:36 AM

[pacalis:]

A rational analysis of the MSFT, YHOO relationship by looking at cash flows, assets etc... will get the pricing right but miss the boat. Microsoft wants to kill Yahoo. That's the one thing that Jerry got right and Icahn and most of the analysts got wrong. And the analysts were wrong over and over and over again on this deal (i.e. Yahoo is worth more, MSFT will raise the bid, Ballmer's ego to big to let it go, Icahn will make it happen, MSFT will not come back after they dropped the deal etc...).

What MSFT is doing is eroding the competitive capacity of a major portal competitor in the shadow of google's strength in search. What MSFT got wrong, a bit, was that in FUDing Yahoo, they wiped out a good chunk of their stock price (thank's Ballmer for the indecision after your drop dead offer you giant retard!). And what Jerry got wrong, is that even though Jerry get's MSFT he can't run a company.

Sep 23 11:50 AM

[Financial S...:]

Still kicking myself for not shorting YHOO back when Jerry was in charge, just after it got the pop from the Mr. Softie™ offer.

Sep 23 12:58 PM

[Tom B:]

If you want a list of stupid MALE CEO's. I'm sure any reader of Seekingalpha could give you one. It ain't what's between the loins that matters (in business), but what's between the ears.


On Sep 23 11:40 AM Buckoux wrote:

> I won't own stock in a company that has a woman as CEO, or participate
> in a partnership with a woman as senior. I won't hire a woman attorney
> or, knowingly, a company run by a woman if I can help it. Or, as
> Lord Chesterfield so eloquently put in his letter of Sept. 5th.,
> 1748 to his son: "Women then, are only children of a larger growth;
> they have an entertaining tattle, and sometimes wit; but for solid
> reasoning, good sense , I never knew one that had it, or who reasoned
> or acted consequentially for four and twenty hours together. Some
> little passion or humor always breaks upon their best resolutions.
> ....for they love mightly to to be dabbling in business(which, by
> the way they always spoil) ;....."
>
> Carly Fiorina (ex-HP) Meg Whitman (ex-eBay), Anne Mulcahy (ex-Xerox)
> are contemporary examples of Chesterfield's astute observations.
> Meg Whitman is doing her best to destroy her chances of becoming
> California's next governor by opening her mouth and saying either
> the wrong thing or nothing at all.
>
> Yahoo, like California, desperately needs some testosterone in the
> executive suite. And yes, I am a chauvinist. I make no apology for
> it and the really smart women I know agree with me.

Sep 23 02:32 PM

[Tom B:]

"Microsoft wants to kill Yahoo. That's the one thing that Jerry got right and Icahn and most of the analysts got wrong."

MSFT is a boa constrictor. Granted, an arthritic, toothless boa, now, but one nonetheless. Start with the small mice (Yahoo) and work up to the nimble primate (GOOG).


On Sep 23 11:50 AM pacalis wrote:

> A rational analysis of the MSFT, YHOO relationship by looking at
> cash flows, assets etc... will get the pricing right but miss the
> boat. Microsoft wants to kill Yahoo. That's the one thing that Jerry
> got right and Icahn and most of the analysts got wrong. And the analysts
> were wrong over and over and over again on this deal (i.e. Yahoo
> is worth more, MSFT will raise the bid, Ballmer's ego to big to
> let it go, Icahn will make it happen, MSFT will not come back after
> they dropped the deal etc...).
>
> What MSFT is doing is eroding the competitive capacity of a major
> portal competitor in the shadow of google's strength in search. What
> MSFT got wrong, a bit, was that in FUDing Yahoo, they wiped out a
> good chunk of their stock price (thank's Ballmer for the indecision
> after your drop dead offer you giant retard!). And what Jerry got
> wrong, is that even though Jerry get's MSFT he can't run a company.

Sep 23 02:35 PM

[awgie:]

How prescient. It might be portentious of darker days to come but lately my Yahoo home page has been breaking apart. I'd open it to go to Finance, and the link's not there on the left, nor could I find it until I opened another browser. Drat! Then...I go to send an email to client and attach an invoice, and what do you know but the attachment's not there. What in the heck is going on with Yahoo services??

Sep 23 02:43 PM

[reluctant:]

Yahoo!'s services to me ended abruptly. I tried to end the relationship as much as possible, but they are everywhere. Maybe they try to do too much with too little.

Sep 23 03:07 PM

[alrightiimhere:]

I have Yahoo for my home page, my main e-mail address (can use no matter who I have internet service with) and usually use them for searching the web. I have for years. No problem.

Sep 23 03:42 PM

[GorillaPete:]

I am dumbfounded how so many journalists and analysts are getting this all wrong. First: Carol is putting the spine back into Yahoo, showing Yahoo how strong and important it is - eventually the media will see the light again. Second: the MSFT deal was super smart - Yahoo gets to print money, own the experience, and drive the advertiser relationships; Ballmer get something from the deal too but this is a win-win, especially for Y!. Third: at Carols demand Yahoo has been making smart changes to be leaner, meaner, stronger, smarter, faster, and ahead of the industry. Finally: Carol is right - comparing Yahoo to Goog is not apples to apples so anyone doing so needs their head examined.
Exec's need to be held to a high standard and their moves are worth questioning, but this piece is the tech journalist equivalent of an FM radio Morning Zoo stunt - mildly controversial and desperate for attention but nothing of value.

Sep 23 05:18 PM

[Rick S.:]

Bill Gates was never a product visionary. He was a marketing visionary. He took other people's product visions and successfully marketed them again and again.

Steve Jobs iwas and still is a product visionary.

Get your visionaries right. If you don't, you will continue to wind up with the wrong smart guy in the slot to be filled.

Sep 23 05:58 PM

[Alvis:]

Yahoo Canada is running some deal to use their search engine for earning Airmiles reward points. So I used Yahoo search 50 times a month. Their search results are so poor, I have to redo the search on google in 90% cases.

Probably get rid of the poor search engine is good for the company. Get some niche and ads will still be there.

Sep 23 07:42 PM

[ron_paulite:]

You are absolutely right!


On Sep 23 11:40 AM Buckoux wrote:

> I won't own stock in a company that has a woman as CEO, or participate
> in a partnership with a woman as senior. I won't hire a woman attorney
> or, knowingly, a company run by a woman if I can help it. Or, as
> Lord Chesterfield so eloquently put in his letter of Sept. 5th.,
> 1748 to his son: "Women then, are only children of a larger growth;
> they have an entertaining tattle, and sometimes wit; but for solid
> reasoning, good sense , I never knew one that had it, or who reasoned
> or acted consequentially for four and twenty hours together. Some
> little passion or humor always breaks upon their best resolutions.
> ....for they love mightly to to be dabbling in business(which, by
> the way they always spoil) ;....."
>

Sep 24 01:19 AM

[ron_paulite:]

I still use Yahoo. My home page is Yahoo. Yahoo Finance is fantastic. In fact, I come to SeekingAlpha site from my SeekingAlpha RSS feed on my Yahoo home page. But I use Google for search and map. It is sad that Yahoo has not been innovating for so long now. Most of the new stuff seem to be coming out from Google nowadays. But I like Yahoo better than Google.

Sep 24 01:25 AM

[DonFurio:]

YHOO has been dead money for years. They have good content, but never knew how to properly bring it all together. Anyone who bought it in late november of last year did pretty well, but in general there a bunch of other companies I'd rather be in.

Sep 24 09:01 AM