What next for Yahoo?

19th January 2012

The California-based company share price has slumped from $110 at the height of the dotcom boom in late 1999, to $30 in 2007, and now to around half that, although Yahoo made the announcement today after the close of U.S. markets. The Yang resignation – he had previously been the CEO – saw the price gain about 50 cents initially but then fall back, ending largely unchanged. In 2009,  Microsoft made an offering valuing Yahoo at $44bn -now it's worth $19bn.

Yang's is the second major departure at the once high flying company in six months.  Last September, then CEO Carol Bartz was shown the door. She was finally replaced this month by Scott Thompson.  Thompson becomes the fourth CEO in five years at the revolving door world of Yahoo.

Last summer, The Guardian called Yahoo the the Woolworths of the Internet .

What is Yahoo good for?

In the fast moving online world, there is nothing as redundant as yesterday's brand. For many, Yahoo was the search engine they used before Google. For some, it's an email address and source of early online groups which users alternatively bless and curse.   And a few will remember, even cherish, its search engine partnership with Microsoft that led to Bing.  But most internet users would be hard-pressed to come up with reasons to include Yahoo among their favourites.

It does, however, have strong suits in investment and sports news. ).  Yahoo has acquired a portfolio including Wretch, a Taiwanese social networking site, a  Vietnamese celebrity news/gossip portal, and there's Flickr and Yahoo Answers.

New CEO Thompson, who came from PayPal, has to keep these positives on the road as well as look for new opportunities.

Where does it go from here?

Thompson said on his appointment. "Yahoo is all set to return to "the forefront on innovation online and with the businesses that benefit from online."  Easier said than done against a background of a company with no great vision for years and seen as cautious, losing market share, shedding jobs, and failing to gain investor trust. Investors see Thompson as a technology innovator rather than a manager so that could indicate his course – he needs a big idea. But what? The mobile market is divided between Apple, Google/Android and – in third place – Microsoft. There would appear to be no room for a fourth player.  It needs a category killer in the world of tablet computers, maybe.

Many, however, see Thompson's role in preparing Yahoo for sale. Yang had opposed the Microsoft deal but now he has gone, then the cards could be back on the table.

Who will put the yin back into Yahoo?

 Website Benzinga has a list of possible futures – none in line with Yang's founding vision in the mid 1990s

·       Thompson could get the company going in the right direction or Yang's departure could make it easier for Thompson to sell the company outright. A Yahoo takeover has been a takeover tip for years. Benzinga reckons investors play this one either directly or through First Trust Dow Jones Internet Index Fund (NYSE: FDN) an ETF's where Yahoo has a noteworthy presence.

 ·       Will Microsoft want to get back in bed?  Matters move on quickly in Silicon Valley-land so this is pure speculation.  What is the value to Microsoft?

 ·       Google  has been eroding Yahoo's market share for a decade. It does not need Yahoo so the price would have to be very affordable to tempt it into the market.  But there were reports last autumn that Google had consulted Wall Street firms about a Yahoo deal.

·       AOL  has also suffered from a chequered past and is in the same pigeon-hole  as Yahoo with the identical problem of having a brand that was once powerful but is now "So who? So what?" Does a merger of two 1990s firms create a company for 2020?

 

More on Mindful Money

What can investors learn from innovative failures?

Wikipedia blackout highlights the complexity of copyright in the internet age

Microsoft and Yahoo – a match made in heaven or hell?

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