The Winds of Change at Yahoo!

| About: Altaba, Inc. (AABA)
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Late Friday, a senior Vice President at Yahoo! issued a four page memo calling for significant changes at the company. Dubbed “The Peanut Butter Manifesto,” the memo points out how Yahoo! has essentially spread itself too thin by engaging in too many concurrent business ventures to effectively compete. It calls for a refocusing of Yahoo!’s efforts, a reorganization of the companies currently “bureaucratic” structure (which includes a suggested 15% to 20% reduction in headcount), and more accountability for top executives.

We view the release memo as a significant point in Yahoo!’s existence and believe the street will agree. This should be seen as a wake up call for the entire company, Yahoo!’s strong assets need to be leveraged properly and efficiently if they are to generate the financial returns that they should. A restructuring such as the one proposed in “The Peanut Butter Manifesto” would actually increase productivity while cutting costs, by enhancing interoperability within key business areas and the corporation as a whole while reducing salary expenses.

Cost cutting measures alone will lead to improved financial results. If the proposed measures occur, there exists an upside potential of at least $0.04 to our previous FY 2007 estimate of $0.72, based on headcount reductions alone. Also, a more focused approach should yield a much improved reinvestment rate, allocating more of their resources to a few core business initiatives rather than a myriad of ventures. Combined, Yahoo! would be greatly positioned to post some impressive results in 2007. We reiterate our Strong Buy rating on shares of Yahoo!.

Disclosure: The Marley Group has a long position in Yahoo!

YHOO 1-yr. chart:

Yahoo Investment

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