For the longest time, I was a very public Yahoo (YHOO) hater. There was nothing to be excited about apart from its holdings which were not managed by the company. We had this streak of bad CEO’s from Jerry Semel to Carol Bartz and Scott Thompson. It was a running joke. What wasn’t a joke was how Yahoo had refused a $44.6 billion offer from Microsoft (MSFT) in 2008. Years later, it was worth a fraction of that. I’m very much a believer in doing a few things exceptionally well rather than trying, as Yahoo has done, to be good at everything.
On July 16th 2012, Yahoo finally gave in to Daniel Loeb and made a big change putting former Google star Marissa Mayer in as CEO of the company. Mayer, was going to change the culture in big ways. There were perks like the free food for employees, getting an iPhone, seeing Yahoo’s profile instantly upgraded. It also became clear that status quo would no longer be acceptable as quarterly goals were initiated for all employees, including Marissa.
The company promised to move faster than ever and focus on its key areas. That was a MAJOR change. Just read the latest earnings transcript and you can see that Marissa Mayer is more than happy to talk about areas where she does not want to compete but especially places where she does feel Yahoo must act fast. Basically, Yahoo wants to be a bigger part of our daily lives.
Just in the past few days, Yahoo unveiled a major Yahoo mail upgrade, a new Flickr iOs app, etc. These are small things that will probably have little financial impact in the short term. What they do though is change Yahoo’s perception. The company is no longer static, is willing to take risks, launch new products, move fast and fail at times. That is something that Google and Facebook have been very good at. Yahoo? Not so much. The next big change is a major overhaul of the front page, Yahoo’s most valuable property.
Will These Work? Who Knows..
The fact though is that Yahoo has very little to lose. The company was slowly becoming irrelevant, had lost its mojo, had more trouble attracting top talent, and had a core business that was basically worth $0… yes, you had read that right. The barely breakeven business was basically valued at $0 and most of Yahoo’s value came from its cash, holdings in Alibaba and others. That is quickly changing as you can see:
I am late in joining the party (I had said I would likely be going long Yahoo but I’m now enough of a believer to get in. The timing is unclear but I do think I will end up buying. I do believe the upside is greater than the downside and while Mayer’s moves are somewhat expensive (big hires, costly initiatives, etc), the upside is significant.
This Might Take A While
Having a CEO that employees believe in and products that are actually solid is a critical first part but turning around Yahoo will take some time so I don’t expect this to take a few months. But I do think that over a few years, Mayer will lead Yahoo to greener grounds.
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Am I the only Yahoo believer here?
Disclaimer: No position on Yahoo yet, likely to go long as a long term speculative position in the next few weeks