Yahoo!

Not soo happy times at Yahoo

Not soo happy times at Yahoo

Yahoo is in the headlines, with the future of the company under intense scrutiny. 

It's been over three years since rock-star CEO Marissa Mayer was brought in, and investors have apparently grown tired of waiting to see improvements in the company.

Brought in with nearly universal critical acclaim, opinions seem to have shifted dramatically, particularly over the last few week.s

Orbituaries are now being written for Marissa's tenure at Yahoo.


The signs of troubles have been there for a while. Rumblings of discontent have previously leaked, especially from upper management. A few members of the C-suite abandoned ship, raising a few eyebrows.

At first glance, Yahoo! has been doing not too shabbily at least if one considers its share price since Marissa Mayer took charge.. It's suffered a decline since topping last year, but overall has done ok. Nasdaq is up +67% versus +109% for Yahoo over the same time period. Google has done better, at +159%.

The problem is that much of that increase appears to be tied to Yahoo's stakes in Alibaba and Yahoo! Japan. In fact, Yahoo's core business is currently valued below zero. 


A critical report

Investor in Yahoo, hedge funder  Eric Jackson decided to take matters into his own hands and we have a  99-page report  critiquing Yahoo.

Highlights:

  1. EBITDA is down 55% from 2012, Revenue growth is basically flat.
  2. If Marissa stays on board for another 1 1/2 years  at the helm of Yahoo, she will have earned her a staggering $365 million . Only 3.3 % of that package is tied to the performance of Yahoo's core business. 
  3. Burned through $3 Billion in M&A with very little to show for it. 

    Pretty hard to dispute,.

Meanwhile where's the plan from the current board/CEO to turn around Yahoo? We've gone from talks of spinning its Yahoo! Japan & Ali Baba stakes, to not-spinning, to spinning. I think we're back to not-spinning. All this back and forth cannot be a good sign, especially because it has nothing to do with Yahoo's core business.

 

Lessons

Struggling companies are incredibly hard to turn around. Today's hottest company may be tomorrows has-been

 

What to do?

Hunker down, conserve cash, and defend margins. The future may no longer belong to Yahoo, but it may find a spot as a stable, profitable boring company.