Thursday, September 08, 2011

One More Parallel Between GE & Yahoo

After I wrote this post yesterday, I heard and read some more punditry regarding Yahoo. The salient points which I found insightful, as I don't follow Yahoo as if I were an analyst, were that the firm's breakup value is almost certainly far higher than its current value because of its passive investment in Alibaba.

Thus, another parallel between GE and Yahoo arose. Both essentially shouldn't exist as they are any longer. I've argued for years that GE should have been split up after Welch left. It appears that Bartz should have set about spinning out the Alibaba investment from the start, which would have increased shareholder value by putting that extra piece of equity paper into each shareholder's hands.

What was left could then have been either restructured to actually make some money, or sold for parts to another online-oriented firm.

One more parallel? Roy Bostwick, Yahoo's chairman, is a long-standing board member. When I heard how much he paid Terry Semel for presiding over the firm's stall- hundreds of millions of dollars- I realized that, like GE, Yahoo also has a lapdog board. Between Jerry Yang and Bostwick, the board's ineptitude is so enormous as to basically absolve Bartz of any failure. Bostwick is such a shadowy chairman that yesterday was the first I'd heard of him in ages. Yet, when his long, sorry involvement in the firm was catalogued by an analyst on Bloomberg, it became clear that Bostwick, far more than Bartz, owns the current Yahoo mess.

Reading the Wall Street Journal's piece this morning on Bartz's dismissal, I was amused to see that the board set as her goals to halt the viewership slide, raise revenues, and improve the price of the firm's equity. All reasonable over time, perhaps, but not on a quarterly basis. Further, if Bartz hadn't done it in two years, another 6 months was unlikely to matter.

No, what's becoming clear in Yahoo's case is that the real solution was and remains one that Bartz probably wasn't allowed to consider- sell or spinoff the valuable parts to unlock value, then deal with the detritus.

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