Will the changes at Yahoo! be enough?

Posted Jun 30th 2008 9:17AM by Steven Mallas
Filed under: Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO)

I read an article over the weekend about Yahoo! Inc. (NASDAQ: YHOO) and its reorganization attempts. Make no mistake about it, this company needs to alter its DNA if it intends to survive in a world without a Microsoft Corp. (NASDAQ: MSFT) taking it over.

In a nutshell, it looks like Yahoo! wants to retool its divisions so that it can more efficiently react to changes in the online marketplace. Yahoo! apparently feels that its current organizational structure inhibits growth and is looking to create new teams dedicated to developing products that will capture eyeballs and advertising opportunities as quickly as possible. The company also wants to focus on cloud computing, a technology that is important to the business sector.

Well, from the point of view of an investor looking at Yahoo!, I don't see anything here that persuades me to buy the stock. Synthesizing a new plan of corporate attack is pretty much par for the course for any company that is doing terribly and is looking to get back on the good side of Wall Street. But is there anything really exciting in the plan? No. It's just Yahoo! doing something. There's nothing too revolutionary going on. Centralizing this and that might add value. It also might not. It's all in the execution, and I'm not sure I want to trust a company that rebuffed Microsoft's reasonable buyout offer to execute anything at this point.

If Yahoo! wants to remain on its own, I have no doubt that it will survive and will be here a decade from now. But will it be a good investment for the long term? That's uncertain at this point. It has incredible brand equity to web surfers, it's a popular portal that will always be of value to advertisers, but Google Inc. (NASDAQ: GOOG) has proven that Yahoo! cannot thrive simply on its name and image.

Carl Icahn will tell you that Microsoft is the only solution to Yahoo!'s problems. Unless Yahoo! comes up with a good plan for the future (and I'm not sure the current one will suffice), Icahn may be proven right. There was a time when I was very bullish on the company and stock. For now, that feeling is a memory.

Disclosure: I don't own any company mentioned; positions can change at any time.

Tags: Carl Icahn, CarlIcahn, GOOG, Google, inthenews, Microsoft, MSFT, yahoo, YHOO

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Reader Comments (Page 1 of 1)

6-30-2008 @ 5:20PM

Sharma said...

Are there any cultural issues that Yahoo must solve? A web application that allows users to express their views on any company, shows some very interesting tags associated with Yahoo, such as 'Back stabbing', 'Lack of Passion', 'Chaotic', 'Directionless', 'Social Good', 'Work-life Balance'.

You can check out the details at:

http://apps.facebook.com/office-book