A reader pointed out to me today that Yahoo, minus its Alibaba and Yahoo Japan stakes plus cash, is now worth less than nothing according to Wall Street. This says a lot about Yahoo but even more about Wall Street, since the core company is still profitable if in decline. If I were a trader (I’m not) that would argue Yahoo is a buy since there’s likely to be a future point at which the company will be free of those other riches and even Wall Street will be forced to give the carcass a positive value.
But when I heard about the negative value story the first thing that came to mind was something my old friend Joe Adler said long ago about one of my startups. “Your company is starting to have a stench of death about it,” Joe said. And Joe was right.
Yahoo may be profitable, may have billions in investments, but still the company has about it a stench of death. This less-than-tangible corporate characteristic is dragging the company under and there is only one way to deal with it: change everything.
Three years into her tenure as Yahoo CEO, Marissa Mayer has tried a lot of things to improve her company’s prospects but she hasn’t changed everything. Her current path seems to be spinning-off the Alibaba stake to get activist investors off her back, then spinning-off Yahoo Japan when those activist investors realize they can suck the same blood a second time, then finally Ms. Mayer will be in command, 2-3 years from now, of a slimmer, trimmer, and I-guarantee-you totally worthless Yahoo. That’s because you can’t use an old turnaround playbook for what’s essentially a new market.
Yahoo can’t go back to its former greatness because that greatness is no longer available to be got.
Think about that statement because it’s as true for Google and Microsoft as it is for Yahoo. PC search has peaked, PC operating systems and applications have peaked. It’s just that what Yahoo does — functioning as a web portal — peaked around 2001.
It’s popular to say that one definition (some people say the definition) of insanity is doing the same thing over and over expecting a different result. I’ve put some legwork into tracking-down that quote and found it isn’t true. But when it comes to Yahoo or any Yahoo-like company trying permutations on half a dozen restructuring techniques, I’d say there must be some insanity involved because they are changing all the wrong things.
Their corporate objective is unachievable not because Yahoo isn’t smart enough but because their intended destination no longer even exists.
So what’s to be done? Well it’s pretty darned obvious to me that Yahoo’s current path is the wrong one. It is, in fact, absolutely the wrong way to go. Yahoo would be far smarter to do the exact opposite of everything it has recently proposed.
Ask Warren Buffet how to get rich and he’ll eventually talk about preservation of capital. If you have a ton of money or assets sitting on your corporate books about the worst thing to do is to give them away, yet that’s exactly what Yahoo will be doing by spinning-off to shareholders its Alibaba stake.
The whole point of the Alibaba spin-off is to placate investors, buying Mayer extra time to fail.
If the present goal is unreachable, giving away two thirds of the company to buy more time to reach it makes no sense.
Now let’s pause for a moment and consider two famous tech turnarounds — Apple and IBM. Each of these companies had an amazing turnaround beginning in the 1990s that will be held up as examples of what Yahoo could do, too. Except Yahoo isn’t IBM circa 1993 or Apple circa 1997. Not even close.
Both of those companies were actually in worse shape than Yahoo is today, but their markets weren’t. Apple and IBM had to recover from horrible mismanagement while Yahoo has never lost a cent. Yahoo’s problem is the world is less and less wanting the solutions it offers. And Yahoo’s solution to this, which has been to nudge a little in one direction or another, simply isn’t bold enough.
Preserve the capital, not the business.
Yahoo shouldn’t be spinning-off anything. Mayer should be selling every operating business she can while it still has trade value. Search, advertising, content, the various portals like Yahoo Finance — these all should be for sale, primarily to Google and Microsoft.
Let them fight for economies of scale in an industry that has already peaked.
When Marissa Mayer came to Yahoo three years ago she had a mandate for change but she didn’t change enough. Conventional wisdom says that mandate has expired and can’t be renewed. In this case conventional wisdom is wrong. Ms. Mayer has a chance to renew her mandate if she proposes changes that are bold enough to shock and awe Yahoo shareholders.
Sell everything that moves, turning it into dry powder for the real battle that lies ahead. Then explain to shareholders the precise strategy through which the New Yahoo will turn $50 billion into $500 billion over the next decade. That will be enough to renew Mayer’s mandate.
But only if she’s smart enough to do it.
And what’s this amazing strategy? I explained it all right here 13 months ago. Here’s that entire column from September 2014 with not a single word updated or changed. It was true then and it’s still true today, though time is quickly running out.
Alibaba’s IPO has come and gone and with it Yahoo has lost the role of Alibaba proxy and its shares have begun to slide. Yahoo’s Wall Street honeymoon, if there ever was one, is over, leaving the company trying almost anything it can to avoid sliding into oblivion. Having covered Yahoo continuously since its founding 20 years ago it is clear Y! has little chance of managing its way out of this latest of many crises despite all the associated cash. But — if it will — Yahoo could invest its way to even greater success.
Yahoo CEO Marissa Mayer, thinking like Type A CEOs nearly always seem to think, wants to take some of the billions reaped from the Alibaba IPO and dramatically remake her company to compete again with Google , Microsoft , Facebook, and even Apple.
It won’t work.
Those ships have, for the most part, already sailed and can never be caught. Yahoo would have to do what it has been trying to do ever since Tim Koogle left as CEO in 2003 and regain its mojo. There is no reason to believe that more money is the answer.
It’s not that Mayer isn’t super-smart, it’s that the job she is attempting to do may be impossible. She has the temperament for it but the rest of Yahoo does not. Even if she fires everyone, Yahoo still has a funny smell.
In practical terms there are only two logical courses of action for Mayer and Yahoo. One is to wind things down and return Yahoo’s value to shareholders in the most efficient fashion, selling divisions, buying back shares, and issuing dividends until finally turning out the lights and going home. That’s an end-game. The only other possible course for Yahoo, in my view, is to turn the company into a Silicon Valley version of Berkshire Hathaway. That’s what I strongly propose.
Mayer seems to be trying to buy her way ahead of the next technology wave, but having been at this game for a couple of years so far, it isn’t going well. Lots of acqui-hires (buying tech companies for their people) and big acquisitions like Tumblr have not significantly changed the company’s downward trajectory. That’s because that trajectory is determined more by Google and Facebook and by changes in the ad market than by anything Yahoo can do. It’s simply beyond Mayer’s power because no matter how much money she has, Google and Facebook will always have more.
It’s time to try something new.
While Berkshire Hathaway owns some companies outright like Burlington Northern-Santa Fe railroad and GEICO, even those are for the most part left in the hands of managers who came with the businesses. At Coke and IBM, too, Berkshire tends to trust current management while keeping a close eye on the numbers. Yahoo should do the same but limit itself to the tech market or maybe just to Silicon Valley, keeping all investments within 50 miles of Yahoo Intergalactic HQ in Sunnyvale.
Yahoo’s current stakes in Alibaba and Yahoo Japan are worth $36 billion and $8 billion respectively and Alibaba at least appears to be on an upward trajectory. With $9 billion in cash from the Alibaba IPO Yahoo has at least $50 billion to put to work without borrowing anything. $50 billion is bigger than the biggest venture, private equity or hedge fund.
Mayer is smart, but maybe not smart enough to realize the companies in which she is interested could do better under their own names with a substantial Yahoo minority investment. That would leverage Yahoo’s money and allow a broader array of bets as a hedge, too. Mayer can pick the companies herself or — even better — just participate in every Silicon Valley B Round from now on, doing a form of dollar cost averaging that puts $15 billion to work every year. With future exits coming from acquisitions and IPOs (and possibly winding-down its own tech activities) Yahoo ought to be able to fund this level of investment indefinitely. Yahoo would literally own the future of tech.
Silicon Valley companies that make it to a B Round (the third round of funding after seed and A) have dramatically better chances of making successful exits. Yahoo wouldn’t have to pick the companies, Hell they wouldn’t even have to know the names of those companies, just their industry sectors and locations. Forty years of VC history show that with such a strategy investment success would be practically guaranteed.
As opposed to the company’s current course, which is anything but.
The TL:DR version: sell off or shut down all the Yahoo floundering portal/media businesses, figure out how Yahoo managed to get such a large stake in Alibaba or Yahoo Japan in the first place, and then try and replicate that.
tl;dr — Yahoo is a hedge fund or venture capital fund. They haven’t been a tech company worth mentioning for decades now.
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The article leaves out the most important point. ARE THEY GOOD AT VENTURE CAPITAL??? I bet their return on investment is a major fail. Turn off those lights.
great idea on the berkshire hathway clone. too bad y-combinator is already doing the only version that fits the valley. i guess yahoo can be the dumb money and buy all the half baked ideas that don’t want to go directly public like dropbox etc.
Well said Bob. Sad to see Yahoo fail so badly. They were a pioneer back in the day.
There are some basic business strategies that seem to have worked for those willing to take the risk and do the work. One is to find a need and fill it. Another is to find an opportunity and exploit it. These are not quite the same idea. One is customer/product oriented and the other is business/investment oriented. Yahoo might be able to use one of these strategies to achieve greatness again. They just need to abandon what isn’t working and put their resources to better use.
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Of course, this is easier to accomplish by someone new. Someone who isn’t connected to the past endeavors.
Well, I don’t pore myself into keeping up with business and business strategies like I used to. But about 5 or so years ago I picked up a book written, either by or about Warren Buffet and his business strategies.
I distinctly recall reading he was adverse to buying into industries and businesses that need constant capital injections. “How Wringley’s chewing gum is made, packaged, distributed and sold hasn’t changed much despite the advent of the PC, the internet, and the smart phone.” (Paraphrased from memory).
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The simpler the business model paradigm a business runs in, the better.
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I gathered, he didn’t really want to be in – say the cell phone manufacturing business, like Samsung & Nokia – along comes Apple and they change the market. The only way Samsung survived was it was prepared to throw tons of capital into producing every kind of phone, smart or not, imaginable, for every possible market, until it found something that stuck to the wall..
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However, I think Buffet needed tech investments in its portfolio. Investing in IBM simplified doing that – it comes closest to translating into the sort of thing Buffet understands, which is more traditional, simple business models. IBM manages the tech portfolio for him, and all he worries about is the returns.
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So, while I recall reading the September 2014 piece and admiring it, I do recall thinking that being the Warren Buffet of Tech is not as easy as it sounds. Buffet has some basic principles/strategies/paradigms that he follows – and other than snooping around the clearance bin of the checkout isle or our economy for potential investments that map to his business philosophy, that approach takes a lot of the thinking out of his game. Yahoo would have to develop all that kind of thing. That’s not easy, but its a great challenge to unpuzzle and presumably that ability is why Marissa Mayer gets the big bucks.
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I believe that almost all jobs and all companies are about the alignment of things. What Jobs did was align capacitive touch screen tech, with capabilities that already existed in cell phone and computers tech, and with a little imagination, tying them together with good software which Apple developed. But all my buddies around 2000 were already imagining “total digital convergence” – one device that does all things. Jobs just brought it together. Yahoo-Capital might think along those lines.
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The other thing is to look at where all the big problems in society and the globe lie. The bigger the problem, the bigger the opportunity. (I think that’s what impels Elon Musk) And opportunity is the mother of invention. (There would be no opportunity without patents, and there would be far less innovation & invention without patents). My two cents.
But that’s not the point I was making about Buffet at all. Conserving capital in this context doesn’t mean buying capital-intensive businesses. On the contrary it means a penny saved (not spent) is a penny earned, as Ben Franklin put it. It’s a strategy for maximizing wealth, not for choosing companies in which to invest. In Yahoo’s case they are already wealthy and I see throwing-away most of that in a stated attempt to stay wealthy as pure folly. I’m sorry I wasn’t clearer.
Hi,
Why doesn’t Yahoo just buy into YCombinator (49-51, just like how LVMH buys onto its designer-led brands!).
It would give Yahoo reach and credibility with all the personal/media networks you need to maximise attention and leverage that are needed in silicon valley.
Alternatively, the spin-out idea as a potential absolute was damn stupid, why not create a global colossus by the merger/spin-in/cross-invest of Alibaba and Yahoo! Japan which would then also, if my memory’s correct, give you giants in online Pay, email, Video and Micro-Blogging, even Mobile OS’s and Apps and even handsets, with market-leading positions across India, China and Japan, which would ensure a deeper gravitational pull for western attention and development by 3rd-parties.
Another alternative, look at the long-range stable apps across categories and OS’s, and just buy and re-brand the top 50 independent ones.
How about buying Vonage and Steam and folding into Hulu for a hardware-less multi-content i.p. play (I call it Virtual 4-play)?
It’s not that Yahoo! has the smell of death about it, it’s that after a bit of change when she first joined, there’s not much narrative change or reason for it, their PR department in itself is abysmal, compared to the attention that the other big tech. giants can generate – that’s about story, buzz and free stuff!!!
Yahoo just doesn’t seem as hungry, ambitious or aggressive, which would force restlessness and creativity..
It also seems like the modern equivalent of the old Aol – where companies went off to die…..
Yours kindly,
Shakir Razak
Yahoo, Facebook, Twitter, even Google – make the bulk of their revenue from advertising. Many of the startups are copying the same playbook. That is the race to the bottom as advertisers wake up to the fact that they are throwing good money after bad.
With $50B and some great minds on board, Yahoo could be out there solving Real Problems(TM) – investing in companies that are along the way to solving problems with energy, water supply, food supply. Most of those areas need both brains and big brave investments.
Google did that and dropped it deciding it was impossible.
Unfortunately there is more profit and much less risk in solving “first world problems” , from what I can see, so that’s what tech startups tend to go for.
Yahoo is like a zombie curiosity from an earlier time. Once advertisers realize online advertising is completely worthless, Google will follow Yahoo to great tech graveyard in the sky.
As long as Flickr survives I care not what happens to Yahoo. I don’t think there’s a better photo site on the internet. I only use it to share photos with people, so I don’t actually lose anything if they go away. But they are the only site I know of that allows you to use Creative Commons licensing. I usually use “attribution- share alike”. Been using it since 2009.
This formula is wrong: Yahoo, minus its Alibaba and Yahoo Japan stakes plus cash, is now worth less than nothing according to Wall Street.
The correct formula is Yahoo, minus Alibaba and Yahoo Japan, plus cash, minus taxes paid on the sale.
The spinoff was a tax strategy. The plan was to spinoff the company into a separate entity to avoid paying 40% taxes on their BABA stake. The spinoff is a gamble that may not workout because the IRS only allows tax-free spinoffs for real companies. This is especially true because the IRS raised questions about the deal and is not giving its blessing while YHOO is going ahead anyway.
So basically, Wall Street doesn’t think it has the stench of death. If anything, I think it’s overvalued.
Part of me says you’re right; part of me says maybe Yahoo should become AliBaba?
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A big part of me thinks back to Steve Jobs returning to Apple. You’ll know this better than I, and I’m half quoting back to you your stories but I believe it went like this:
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He’d have these away weekends with the designers and engineers where he’d ask for ideas, put them on a board and discuss them. Then he’d say that Apple isn’t that big a company, so they can’t do all those projects. He’d then start to decide what they could do and what was the best value to Apple. And those he’d run with.
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Mix this up with the B Seed funded companies, giving technical assistance from Yahoo and it could work. The key being that help isn’t just financial but technical too.
Maybe (just maybe) Yahoo could remain a portal. But acting as a paywall consolidator.
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I’d like to read the Wall Street Journal and The Economist and my local paper. But I don’t want the hassle of keeping up with multiple subscriptions. I just want one trusted site that I pay each month (one that won’t spread my card number around the world) that manages the subscriptions and gives me one-click access to the content I’ve paid for. And doesn’t have trashy click-bait headlines.
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It’d be a win for the subscription sites, as they’d have to manage fewer subscriptions & do fewer card authorizations. And perhaps they’d gain readers since it’ll now be lower friction for people to visit & pay.
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It’d be a win for Yahoo, since it does play to a historical strength of theirs. They add a small management fee ($2 per month for the first 3 subscriptions, 50¢ for each subscription thereafter) and they can tell the publications that “Now that you’re getting paid, you can block Google News from scraping your content and giving it away for free.”
there y’go, I’ve said that many times. for “print online” to grow, it has to have a consolidator to manage one-timers’ micropayments. said that many times over the past several years.
the Redwood Falls Gazette is not The New York Times, nor is the Fargo Forum or the Des Moines Register. one is not going to pay the average $10-20 a month to a hundred papers. but if we pay that to our local rag, plus maybe $10 to a consolidator and get 40 looks elsewhere, that’s going to fly.
if I won the lottery, I’d try and set that up by hook (voluntary signups) or by crook (pay $20 to the CrocDanger Weekly as “IBSneaky” and steer the clicks.)
but maybe Yahoo or Verizon (formerly AOL) will steal the idea and be able to make it work.
Yahoo does have Flickr, the fantasy sports franchise, a decent financial portal, and…?
Just hope none of this affects my beloved Yahoo Sportacular Sports app for my iPhone. The best (and free) app that I own. As an avid sports buff, my daily goto for MLB, NBA, NFL, NCAAFB etc. Gold. I even watch ESPN far less because of it and almost never revisit their sports app on my phone.
It’s politically incorrect to say this, but It sure needs to be said.
How many high profile female CEOs can you think of that haven’t run their companies into the ground? I’m sure there must be a handful, but I can’t think of one off the top of my head. IBM, Yahoo, and GM are all slow-motion train derailments. Carly Fiorina is probably the poster child for epic female CEO fail, but I suspect even her stellar record may get eclipsed sometime in the near future.
It has been pointed out before that companies on the way out are more willing to appoint female CEOs.
Correlation is not causation.
Indra Nooyi has been CEO of Pepsi since 2006 and the company has done quite well during her tenure.
Indeed, Pepsi has been stealing plenty of restaurant accounts since she took over. No longer can you say that all restaurants serve Coke except for KFC Taco Bell Pizza Hut
I fired Yahoo (mail) because they delivered a time sensitive email about a week late. Whether it was due Hadoop or they get thier kicks out messing with people, it doesn’t matter. I could careless if they turn around. Count me in as one of the gwakers watching for this train wreak..
Where is it written in concrete that companies have to grow, and grow, and grow every year and every quarter? Yahoo is a useful website. For that matter, Twitter is a useful website, and so is eBay. Bjut Wall Street only tolerates shiny-object companines that promise infinite growth. How about this. Some smart investor takes Yahoo private, they do the things they do well, well, and they do NOT grow. They keep making the same amount of money more or less forever.
Utility stocks used to be like that. Safe, stable, regular dividends. But the stock market is a *market* which like all other markets, must provide what customers want, and stock market customers today demand stock price appreciation, so corporations structure their businesses to supply market demand.
Investors are actually interested in return on investment. Yahoo dividends have been zero: https://ycharts.com/companies/YHOO/dividend_yield so all that’s left to consider is growth.
the other option is a rising stock price, and buying back stock does that for companies that can’t get anything else done. for a while. it is not a perpetual-motion machine. you buy high. sell low to get more cash to buy high, and… uh… hey, let’s do it again!
I see that happening, I smell death.
piling-on time… I see IBM stock, down after poor results, again, is being bought back by the company, again.
what a crap thing to do with money, buy sinking stocks with IBM having the insider knowledge no other market watcher has about why the stock is sinking, and why using that money to fix the issues won’t work.
this is why I smell death in these deals.
No adjustment to your past column for the fact that Google created the Berkshire Hathaway of Silicon Valley in Alphabet?
I’m just going to add that I don’t think Marissa Mayer is doing a terrible job. A lot of the web has matured, but we’ve not seen a new function appearing. The only fault is that she’s not found that new function!
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The only mis-step is perhaps some of the changes to Flickr which has irritated photographers. Trying to make it social-friendly has taken away some of the ease that pros liked, but hasn’t really improved it’s social media credentials.
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Consider Léo Apotheker by comparison. He very nearly killed off HP. Someone else commented on male vs female, but here’s a case where the male messed up and the female Meg Whitman has to fix those mistakes.
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Can you imagine an HP which didn’t do hardware and printing? Can you imagine how much they over paid for Autonomy? He was trying to dump everything good about HP and turn it in to the much smaller company of Autonomy with a vain idea to take on SAP. He played to his experience, but his experience was wrong for HP.
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It seems that the real criticism of Yahoo and Mayer is stagnation rather than having discovered the next big thing. And if it was that easy I’m sure they’d have already done it!
“Can you imagine an HP which didn’t do hardware and printing?”
Yeah. It’s called HP Enterprise.
I think they still do hardware, don’t they?
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Just did a search and found Meg Whitman going on about the logo. Absolutely nothing about what the company was going to do, but she did point out how symbolic joining the two “tt”s in Hewlett was. Maybe I was being too kind to Whitman as really the logo sucks.
Wow Bob, very good. This makes one pause to think.
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Common sense says one should keep the things that are of the greatest value and produce the most benefit, and fix or ditch the rest. I think this is an excellent example of the true motivations today of Wall Street. They don’t care if the business fails. They want the most value they can get out of it, and if that means cutting out vital organs or bleeding it to death so be it. To companies like Yahoo, Wall Street has become a cancer.
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Maybe Michael Dell has it right. Maybe its time for firms like Yahoo to go private.
It looks like any opportunity Bob has for putting Marissa Mayer’s picture on his blog, he takes it. 🙂
I have not seen nearly as many pictures of Ginni Rometty or Carly Fiorina.
No judgments here, though. She is quite the photogenic CEO.
If I never see another picture of Ginni it will be too soon. What she is doing is morally despicable.
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I fear we’re going to be seeing a lot more of Carly. I’m not sure her tenure at HP qualifies for the top job at the White House. However as CEO’s go, she seems to be a lot smarter and better qualified as The Donald.
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I must admit California’s recall election rules are beginning to look a lot better.
Re: “Forty years of VC history show that with such a strategy investment success would be practically guaranteed.” If that were true, wouldn’t we all be VCs?
Hi Ronc, I don’t know about you but I imagine most of us don’t have enough capital for that. Small scale VC – well you could end up backing a bunch of flops. But back thousands, well, they won’t all be failures. I guess Bob means that Venture Capital averages out positive if it’s carried out at the scale that Yahoo can manage, that is over a huge number of investments.
We all have enough capital to participate in a mutual fund that backs thousands of VC-type investments. Such funds would exist, especially if, as Bob said, “investment success would be practically guaranteed”. But I suspect they don’t exist because the guarantee is not there.
I never understood the attention towards Yahoo. It’s stock exploded upwards but with the dot.com collapse it should have gone away.
The idea of investing in tech sounds “smart” until you remember the history of tech, the real history. There aren’t too many companies that actually do well for very long. Mostly you have bubbles that burst. Yahoo is typical.
Everyone chases software because it’s potentially so lucrative, but it’s basically a type of writing. Only a few people get rich while many spend time and never make a penny. Of course, software does all sorts of important things, but it’s not the moneymaker it’s made out to be.
Yahoo could have just as well bought a bunch of real estate and waited for the next bubble in that area. Then you start thinking about Wall Street and the Fed and realize tech as this huge producer of wealth is an illusion. In fact, that is exactly what Warren Buffet said during the dot.com bubble. This was reinterpreted as him not understanding tech. He didn’t say that he didn’t understand it.
Indeed, there was a time Yahoo owned the Internet. Now it can’t even filter spam properly from its for-pay Yahoo Mail, something Google does for free, and well, with Gmail.
I use Yahoo mail as a backup email account. Its spam filter appears to do absolutely nothing. Completely obvious spam appears in the Inbox. By contrast, Gmail has virtually no spam in the Inbox.
If Yahoo can’t even get a decent spam killer for their pay email, you can anyone take them seriously?
gmail filters spam effectively because Google is responsible for 99% of the spam on the web. Bandits dont’s poop on their own doorstep…
[…] page. Of course the “portal” term itself is at least a decade out of style (remember Yahoo?), but knowing where to find the good stuff is still valuable. When some bit of the good stuff goes […]
Buy Twitter.
Yahoo has tons of data and analytic capability. Yahoo Groups is really the only reason I even retain a yahoo account. Groups contains massive amount of knowledge. Bolt an expert system to that knowledge base and serve it out through a twitter engine, or a siri/cortana engine. Yahoo used to be about it “knowing” the web and asking it to help you understand it. That need still exists. Just bigger and on mobile devices.
I remember many years ago when a major USA airliner was having financial difficulties. Their solution was to sell their most profitable routes to raise cash. That cash would stabilize the rest of the company. It worked for about 2 or 3 years, then the airliner went under. If they had kept their profitable routes and stopped service on the least profitable routes, they’d be in business today.
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Sometimes the motivations and pressures from Wall Street and activist investors cause companies to make poor business decisions. As a regular user of Yahoo’s services, I too know there is tremendous value and potential there. There are new services with huge growth potential that Yahoo is uniquely positioned to exploit. Yahoo could be a 10x bigger company in a few years, if they chose to do so. It starts by listening to the market and one’s customers, not Wall Street. Yahoo has two very valuable assets that can generate the money needed to grow the business.
Alibaba? “February 11, 2015 Yahoo recently announced it would be spinning off its most valuable asset, a 15 percent stake in Alibaba worth nearly $40 billion. The move was applauded by shareholders but raises questions about what will happen to Yahoo once its biggest prize is no longer a part of its portfolio. The sell is set for the end of this year and Yahoo’s stake in the company will spin off and become a company called SpinCo. CEO Marissa Mayer said the move will save shareholders $16 billion in taxes. Yahoo investors will be given shares of SpinCo based on the size of their stake in Yahoo.” https://www.cctv-america.com/2015/02/11/yahoo-to-sell-its-most-valuable-asset
Tuesday, October 27, 2015. In today’s news is an announcement that IBM will be buying back another $4B of its stock. At least today $4B will buy a lot more shares than it would several months ago. That is hardly much consolation. IBM’s business plan is still firmly locked to what Wall Street wants. Yet IBM continues to forget who buys their products and services, and generates their “revenue.” It is definitely not Wall Street.
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A publicly traded firm cannot ignore its obligation to its shareholders, however there must be some degree of balance. A firms customers, employees, and business deserve some consideration and investment too. This one sided business plan could be the end of some great companies — like IBM and Yahoo. When will Wall Street realize that good financial performance is the result of a good business plan. You have to fix the business, not cook the books…or spin off high value parts to raise cash for investors.
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This stuff is just wrong.
Having just got back from vacation in Pittsburgh to read this column, I agree that Yahoo is mostly doing incremental things that won’t matter to its big picture of doom (acquiring Tumblr was big, but also not enough).
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However I strongly disagree with Bob’s prescription. Here’s why: I think the whole tech industry has been in a bubble that’s popping. What I’m talking about is a scientific bubble of physics advancement that began in the late 19th century with quantum physics and (later) quantum mechanics. Moore’s Law and silicon chicanery may still squeeze out a few more transistors on a die, but clock speeds have plateaued around 3 gigahertz for a decade. Systems aren’t getting faster and there’s almost no differentiation between last year’s product and this year’s product. Everything in the whole tech sphere is becoming a commodity.
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Where does Silicon Valley VC business fit in a commodity market? It’s inside that popping bubble too. Economies of scale will matter more in a commodity market than some niche startup with a better mousetrap.
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Tech companies have come and gone milking the prior advances in physics, a few big names remain. This time is different: Yahoo is a canary in the coal mine of the whole tech landscape. It’s all about “cheap” today, lowering costs through ruthless efficiency, which marks the death spiral of an industry.
“vacation in Pittsburgh” 🙂
It was fantastic! Of course ride the Incline, but I highly recommend the Mattress Factory museum and Arsenal Cider house. Don’t leave without eating a Primanti sandwich (which has french fries _inside_ it).
Which isn’t surprising since the globalists’ goal all along was to destroy the IT industry.
> The only other possible course for Yahoo, in my view, is to turn the company into a Silicon Valley version of Berkshire Hathaway.
Funny, that’s precisely what I’ve said about IBM. They need to stop trying to be a monolithic high-tech company, and face the hard but true fact that they are simply incapable of top-down management of a manufacturing and services company. IBM needs to make itself a holding company that owns **BUT DOES NOT OPERATE** a group of independent, small and flexible sub companies. Don’t try to turn every solution/platform into an Eclipse platform, don’t micromanage, in fact don’t try to manage the sub-companies AT ALL. They should even change their name to something like “Computer Technology Resources (CTR)”. OK, that last comment is a bit of an attempt at humor (if you know anything about IBM’s origins), but the rest of the idea still stands.
Of course, if they don’t take that path, I’ll just have to continue wishing them a very swift yet very painful demise.
Yahoo’s $50B could basically buy the antithesis to the tech sector, most of the western world’s gold mining sector.
Yahoo would thus possess a countercyclical hedge which is certain to pay off when the tech sector collapses into a cauldron of deflationary overcapacity (if it isn’t there already).
Sometimes the most profitable business strategy is packing up and refusing to do business in a sector, especially if one is a marginal player, has decent liquidity, and the sector they ordinarily participate in is well past its prime.
Who knows, maybe Yahoo could swoop in and pick up the remnants after dot-com collapse 2.0 takes place. That is, if they invested appropriately.
Media lies, lie one the moon landing no human can pass thru the Van Allen radiation belts around the earth. lie two, nuclear weapons don’t work Tokyo Hiroshima Nagasaki were carpet bombed, lie three, the earth turns at 1600 KPH take a plane and fly the same distance east to west or visa versa takes the same time. lie four Darwin’s theory on evolution is a hoax the human gene is so complex now scientists say could be made by intelligent design not natural selection,
Well it seems the board might have been listening to you Bob.
ARKHE SANAT
Güzel Sanatlara Hazırlık ve Resim Kursu
Hayallerinizi somutlaştırmak ve eşsiz sanat eserleri üretmek adına bizleri seçerek doğru yolda ilerleyebiliriz. Geleceğiniz için hızlı ve ağır adımlar atın ki ayağınız kaymasın . Türkiyenin en iyi resim kursu ile arkhesanat sizlerle…
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