Weekly wrap-up for Yahoo! October 16 to 20: Cramer vs. Semel

Posted Oct 21st 2006 9:56AM by Melly Alazraki
Filed under: After the Bell, Deals, Management, Competitive Strategy, Yahoo! (YHOO)

What a week! Early in the week, on Tuesday, Yahoo! has reported third quarter earnings that have disappointed the Street. Worse, Yahoo! lowered its Q4 guidance, continued to show lower rate of growth and troubles with advertising revenue -- Yahoo! just can't seem to monetize as well as Google. It also exhibited a lack of overall strong, focused strategy, which caused the Street to lose confidence in management. The one saving grace -- Yahoo!'s new advertising platform is now (finally) live.

Immediately, everybody started -- actually, more like continued the trend that started with the Google-YouTube deal -- giving advice to Terry Semel, Yahoo! CEO. The most common one was resign or hope you get fired, which isn't so much a piece of advice, more like a wish, but I'm digressing.

The advices usually revolved around acquisitions, mergers, or possible companies to acquire Yahoo!. Topping all advisors was Cramer, who held a special series this week about how to save Yahoo!. Cramer holds the stock in his charitable portfolio.

Yahoo!, Cramer said, should save itself, grow, through acquisitions. Here are Cramer's choices: Bankrate, Inc. (NASDAQ:RATE), The Knot, Inc. (NASDAQ:KNOT) and Monster Worldwide, Inc. (NASDAQ:MNST). Each are very different businesses. Bankrate is an Internet-based consumer banking marketplace, The Knot offers online and offline services to the wedding market in the United States, and finally, Monster provides online recruitment services worldwide. (cont)

Of the three, RATE has the smallest market cap of around $550 million, KNOT around $650 million and MNST, the largest of the bunch, is just shy of $5 billion. Yahoo's market cap is now $32 billion (excuse me a moment while I shake my head sadly).

Of course, Cramer is no CEO. While he's a respectable money manager, despite his dressed-up showmanship, he may "forget" certain issues that a CEO would have to take into account before taking on any acquisition. For example, my colleague Sarah Gilbert raised the question of possible anti-trust complications if Yahoo! buys Monster given that Monster already has 48% of the market and Yahoo!'s HotJobs holds a significant share as well. Or, I just recently read that one of The Knot's board members is also a regional director at Google. You see - it's not that simple.

Don't get me wrong. I wish Yahoo!'s management did something in a way of acquisitions, and it is their job as top management to smooth out any difficulties arising (Microsoft and Google don't seem to care much about anti-trust issues, now do they?). So should we replace Semel with Cramer? Call me nuts, but I don't mind taking my chances with Cramer now...

This week's highlights: