Will Yahoo Regain It’s Swagger?

by Joe Sesso on February 20, 2012

I remember in 1996 when Yahoo went public. It was the hottest IPO offering of the year and everyone was talking about it. I was sitting in a business class in college and a student next to me told the professor that she bought Yahoo on its first day of trading for $32. It was trading at $34 at the time (either the same day or the day after the IPO) and she asked him what he thought she should do with it. “Sell it,” he said with a chuckle. “It’s gotten a lot of fanfare but it’s got no fundamentals,” he said. I don’t know if she sold it or not, but the professor was dead wrong at the time. Yahoo’s stock would shoot up to more than $300 per share and become a major player in the media and tech world. But times have changed…

In 2008, Microsoft attempted a hostile takeover of Yahoo for the amount of $47.5 billion. Yahoo successfully fought it off, but it might have been one of the biggest mistakes the company ever made. It seems that after the failed takeover, Yahoo began to slide down a slippery slope, both with investment and personnel decisions. Microsoft CEO Steve Ballmer would later go on to say that he dodged a bullet by having talks break down between the two companies.

The downfall didn’t start long after the merger was defeated. First, Carol Bartz was hired on as CEO to revitalize the hopes of sharelholders after the battle with Microsoft. It didn’t work and she was famously fired in 2011. She didn’t go down lightly. “Yahoo f–ked me,” she said. It then got worse.

Jerry Yang came back into the fold. As one of the original Co-Founders of Yahoo (David Filo being the other), Yang had left the top spot years before but hung around as the company’s “Chief Yahoo.” It wasn’t long before shareholders and board members lost faith in him as well. They determined that they wanted to move beyond the Co-Founder to take the company in a different and better direction. On January 4th, they hired Scott Thompson, formerly one of the top dogs at PayPal. Two weeks later, Yang resigned and walked away from the firm he founded. He resigned from the Board of Directors as well, severing all ties with the company. Thompson then began to clean house on the Board, as Chairman Roy Bostock resigned last week.

This shakeup could mean big things for Yahoo. Thompson was a superstar at PayPal and was set to make $10 million per year. Yahoo really wanted him and paid up, as his compensation could reach upwards towards $30 million per year. This could be huge for the company, as Thompson is known as a person with great vision. He will need this vision to make things work at Yahoo, a company with a serious identity crisis. The biggest problem is that Yahoo needs to decide if they are a technology company or a media company. It seems that trying to do both won’t make them a powerhouse in either. They have to choose, and that decision seems to rest soley with Scott Thompson. Thompson does have a few nuggets to work with, however.

Yahoo Mail is currently number two on the internet, which drives traffic to their homepage. Between their homepage and Mail, Yahoo still brings a ton of traffic to its site, which means huge advertising dollars. This is all media related, as is its real estate search, which is consistently in the top four websites for real estate searches, according to Hitwise. If Yahoo chooses to become a technology company, these top rankings could go away. We will have to wait and see what Scott Thompson and company decide to do. Stay tuned…

 

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