Thursday, April 19, 2007

Yahoo's Disappointing Results

Yesterday's Wall Street Journal carried the following piece:

Yahoo Slumps on Earnings Drop

Shares of Yahoo sank $3.78, or 12%, to $28.31 on the Nasdaq Stock Market. Investors have pushed up the company's stock price in anticipation of Panama, its overhauled online-advertising platform, but Yahoo said the financial benefits of the system won't materialize until the next quarter.

I cannot say I am surprised in the least. Susan Decker, the new CFO, notwithstanding, this seems reinforce Yahoo's inability to pull a consistently superior-performing business out of a collection of various online initiatives.

In this case, the blame is placed on their new ad system. Even if Panama had delivered, does anyone expect Yahoo to overtake Google in this product/market? I don't think so.
As the Yahoo-sourced chart above, comparing Yahoo, Google and the S&P500 demonstrates, the Yahoo has plateaued for the last two years, while Google has outperformed the index from its IPO date.
In this post from March, I discussed how Yahoo had squandered its rich deal with AT&T in 2001, only to have it about to be renegotiated upon its expiration next year. Yahoo failed to use the funds to develop either leadership in the areas in question, or new services which would continue to differentiate it in the online marketplace.
Now, one of the few paying services it has, online ad sales, is faltering as it tries to compete with Google and Microsoft. Perhaps it's time for the Yahoo board to consider replacing Terry Semel, before the only major decision they have left is to whom to sell, or with whom to merge, to salvage some value from the Yahoo brand franchise.

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