Tuesday, February 22, 2011

Wither Yahoo Now?

This past Tuesday's edition of the Wall Street Journal contained a long piece on Yahoo's coming to terms, as it were, with Facebook, entitled Yahoo Decides to Friend Facebook.

The piece chronicled the firm's changing attitudes toward it's most recent nemesis, Facebook. Nothing has changed since my last Yahoo post only a few weeks ago.
The first nearby, two-year price chart, compares Yahoo, Google, Microsoft and the S&P500 Index.
Begun near the market's spring lows of 2009, shortly after Carol Bartz took the helm at Yahoo, it depicts just how badly Yahoo has lagged even the moribund Microsoft. Both trail the Index by significant margins.

Here's another view. Since the late 1990s, Yahoo's absolute stock price peaked, as expected, during the bubble, then collapsed. But what's more interesting is that it was already flat to down by 2005, well before the latest equity market crisis.

Reading that Yahoo is now desperately trying to put links to Facebook on its own pages seems rather pathetic. Thanks to Terry Semel's inept choices while CEO of the firm, and Jerry Yang's subsequent incompetence in the role after Semel's departure, Yahoo just marked time with no particular strategy or mission in sight.

Now, it's too late. Even the typically-competent Bartz can't seem to do more than get a few dollars for using Bing and doing an ad deal with Microsoft. But Yahoo isn't lighting the world on fire with free content anymore, and missed its chance, long ago, to be a profitable, earlier version of Facebook.

To have seen its stock price fall from over $100 to under $18 in 11 years makes me wonder just who still owns this turkey? Back in mid-2008, Carl Icahn briefly ignited interest, amidst Microsoft's attempt to do some sort of deal with the firm. In retrospect, Yang missed a chance to let Ballmer make a huge blunder and give his own shareholders a way out of Yahoo's long, slow decline.

Where to now? With no clear mission for the firm going forward, what would a current investor do? I'd say sell. The risks of further erosion are probably at least as great, if not moreso, than Bartz magically getting a higher value now for selling the firm to someone who would, by some stretch, need whatever it is of value that Yahoo still offers.

There seems to be no solo act for Bartz at Yahoo which will do shareholders any good. Continuing to operate the firm will probably just result in a declining share price. Shutting it down would destroy value. I suppose, at some price above zero, some other tech firm will see some kind of value in the firm's assets, if only its internet traffic.

It's truly been sad watching the firm manage to evade natural exit strategies over the past few years, now to languish behind even the moribund Microsoft, watching upstart Facebook move on without even noticing Yahoo in the same general product/market space.

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