Yang Fiddles While Yahoo Burns

It's hard not to feel a smidgen of sympathy for Yahoo Inc. (YHOO) co-founder and CEO Jerry Yang. Not if you're a shareholder of his company, mind you--they're busily tying a noose, as Yahoo!'s stock price recedes ever farther from that $31 a share Microsoft Corp. (MSFT) was offering only a few months ago.

Since then, of course, all hell has busted loose in the global financial markets, punishing Yahoo even more. Meanwhile, Yang, by all accounts a nice guy (not to mention a terrific entrepreneur), is fiddling a familiar tune. Here's what he said during Yahoo's July 22 conference call to discuss the company's second-quarter results:

Now, about a year ago, this management team started to perform a comprehensive review of Yahoo's strategy and create a long-term strategic plan for the business. The company has been executing against that aggressively ever since. As we will discuss with you in more detail, the indicators of Yahoo's progress are promising. Frankly, I think Yahoo's ability to perform is especially impressive in light of the extraordinary events surrounding the company this year.

Standard-issue conference call spin? Maybe. But that's the problem. Given the company's problems, which now include forecasts of sagging display advertising revenue, Yahoo!'s bread and butter, Yang needs to dispense with the corporate Kabuki and get real. In the July call he went on to say that Yahoo is "executing and delivering against the strategy we laid out." Nuh-uh.

Ironically, at $12 or so Yahoo shares may well be undervalued. This remains a company with enormous strengths, including a huge global business, robust advertising platform, potent search technology, copious Web 2.0 offerings (assuming that still counts for something) and strong position overseas (although less strong than that of key competitors). In the short-term, Yahoo's stock could also get some relief in the fourth quarter, which historically is its strongest for display ads.

But what afflicts Yahoo, not unlike the disease felling U.S. investment banks, is a crisis in confidence. After rejecting the biggest tech buyout in history, Yang and president Susan Decker have utterly failed to reverse Yahoo's slide. And now the company, along with the rest of corporate America, is caught in the grips

of something even nastier than Microsoft. Yahoo is running out of time as fast as it's running out of moves. It may have to do something dramatic--like overhaul management--simply to restore hope that it plans to at least go down fighting. -- Alain Sherter

Comments

[Castlelock:]

If there is a runup in the tech sector the share price will improve. That much is certain. Someone tell me why they must sellout? Why?

2008 Oct 13 10:48 AM

[Castlelock:]

If there is a runup in the tech sector or the overall market, the share price will improve. Why must Yahoo sell out? Why are they 'Running Out of Time'? Is someone afraid the stock will rebound solidly thereby making the deal impossible or more costly? Sounds to me like the finaciers for this potential 'deal' are licking their chops at the prospects of the money they would make. Those individual investors that are long on this stock (and hoping for a rebound) will lose their shirt if the moneymen get their way. Why must they capitulate and sell?

2008 Oct 13 10:55 AM

[Peridot48:]

Surely you understand that we are in a recession. Since that's now a fact, not a hypothesis, Yhoo - like all companies - will feel that word. And that translates to less revenues created; less profits and less shareholder value. Additionally, there is no news EVER coming out of Yhoo except that Jerry and Filo wanted $36 out of Microsoft last summer. Pity. I hope this POS tanks after/if it bounces.

2008 Oct 13 11:11 AM

[bull911:]

Gee that's a great thought for all the employees that are loyal and back the owners. That company i am happy stuck up for its shareholders and employees not to get low balled by the big ugly hand of Microsoft. I am buy there stock right now actually, betting it will go up.

2008 Oct 13 03:53 PM