Thursday, August 30, 2012

How long will Yahoo! survive?

From misjudged partnerships to acquisitions of misfits, Yahoo! has done all to curdle its business model & jeopardise its future. Time is less & dollars are precious. Can Carol Bartz fight inevitability? by Steven P. Warner

Sixty-one year-old Carol Bartz, the CEO & President of Yahoo! Inc. is a Texas Tower. Hard to ignore, she has been an exemplar of success, personally & professionally. Having seen a tough childhood, she worked as a 75 cent/hr teller at a bank, played a cocktail waitress while at the University of Wisconsin, and was diagnosed with breast cancer on her 2nd day as the CEO at Autodesk Inc. Many had written her off, but she returned to office after just four weeks of medical leave. 14 years later, when Bartz left Autodesk, its revenues had grown by over 400% to $1.5 billion – incredible growth for a company that only focussed on 2-D and 3-D technological designs. Bartz had insisted on maintaining that “core focus” all along.

Her next job was to restore order in the house of Yahoo! (she was appointed as the its CEO in January 2009). Many called it Dutch courage. They were right. Today, Bartz rates her first year at the job a “B-minus”. But such mea culpa won’t help her cause. She needs to have an answer ready for investors who have an enigmatic poser for her – “What is Yahoo!?”

Vexatious is what you would call Yahoo!’s financials for the past two years. Even the last quarter was disappointing. On July 21, 2010, Yahoo! reported a stagnated quarterly topline growth. Its revenues for Q2, 2010, stood at $1.6 billion, 0% change y-o-y, a time when rivals like Google reported a 24% rise in topline. At a time when ad-spends had started increasing, Yahoo! had failed to suck dry the opportunities. But this was just a trailer. As per estimates by Oppenheimer & Co., Yahoo!’s annual revenues will fall y-o-y by 28.7% to touch $4.64 billion for FY2010. Spencer Wang, Analyst, Credit Suisse tells B&E from New York, “We believe the 2Q10 results highlight our longer term concerns surrounding the relevancy of portals & monetisation. Yahoo! attributed the revenue shortfall to a late quarter pullback in ad spending. We remain concerned about the potential for share losses in display to newer competitors. In addition, usage metrics remain on a down trend. This is worrisome and may suggest Yahoo! has not solved its relevancy issue .” True, Yahoo!’s page views record has worsened over time. It was down 4% in Q2, 2010, as compared to 0% in Q1, 2010, +2% in Q4, 2009 and +5% in Q3, 2009. Jordan Monahan, Analyst at Goldman Sachs in the US, adds to B&E, “Yahoo! may prove the canary in the media coal mine who first signals a slowdown. Other media companies have reported/cited no slowdown. We suspect that many advertisers view Yahoo! display as a more discretionary buy than online/offline mass media.”

Over the past few years, Yahoo! has lost direction. Bartz started with promises – slashing jobs by 5% (till date), closing down NPAs like its Personal dating and GeoCities sites, cutting Marketing and R&D costs (total opex for FY2009 fell by 23.3% y-o-y to $3.21 billion, a figure that is forecasted by Goldman Sachs to fall by 8.7% to $2.93 billion in FY2010). But even today, much remains undone.



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