Yahoo... What Happens Next?

Since my last post here just blatantly outlined how Yahoo let go of about 100 or so employees, I saw it fitting to post an update on how they're doing after the fact. Yahoo has a new CEO (who's apparently paid millions), and a new management structure.

Here's Business Week's Robert Hof's take on the rehabilitation of Yahoo

Just six weeks after taking over as chief executive of Yahoo! from co-founder Jerry Yang, Carol Bartz has now made it quite clear who's in charge and what demands she'll place on her executive team. On Feb. 26, Bartz announced an overhaul of the embattled company's management. The new, streamlined structure is intended to make the company "a lot faster on its feet," Bartz wrote in a post on Yahoo's official blog.



In one of the biggest changes, Chief Financial Officer Blake Jorgensen, who joined Yahoo in June 2007, will leave in the next few months after a new CFO is chosen. Jorgensen was a close ally of former Yahoo President Sue Decker, who left in January after being passed over for the top job. Jorgensen's departure follows those of mobile chief Marco Boerries earlier this week and news head Neeraj Khemlani, who's leaving for Hearst as vice-president and special assistant to the CEO for digital media.

The changes, though largely expected after recent reports in the blog BoomTown, are no less momentous for a company that for years has been hobbled by slow decision-making and ineffective execution on those decisions. As far back as 2006, one executive who has since left, Brad Garlinghouse, penned a now-famous "Peanut Butter Manifesto" that outlined those management problems. The new management organization has all major executives reporting directly to Bartz, who lamented in her blog post that there's "plenty that has bogged this company down." "It looks like she isn't afraid to go in with a chain saw," says Kevin Lee, CEO of search marketing firm Didit.

Divestitures of Businesses Expected

In the most important leadership picks, current Chief Technology Officer Aristotle "Ari" Balogh will be head of all products and Hilary Schneider, current chief of ad, publishing, and audience groups in the U.S., will head North American operations. A new chief of international operations, to be chosen soon, will oversee what had been three separate global regions.

Although Bartz has kept her specific plans for Yahoo close to the vest, her revamped organization may pave the way for underperforming operations to be jettisoned more quickly. "We expect more significant restructurings and divestitures of various businesses will occur in the future as the simpler org chart leads to more of a focus on the company's core businesses," UBS Securities (UBS) analyst Ben Schachter wrote in a report after the announcement.

The more centralized management structure doesn't guarantee Yahoo will find its footing. Indeed, some observers fret that centralizing too much can hobble innovation. "We tend not to like that much concentration in product development," says Sanford Bernstein analyst Jeffrey Lindsay, who would prefer a structure that focuses on key strategic products such as search ads.

Trying to Speed Decision-Making

Still, he and others note that the new organization is a vast improvement over the previous "matrix management" system that handed multiple executives oversight over many products and new projects. That led to slow decision-making and little accountability, Yahoo insiders say. "Carol's patience for the whole matrix management is limited," one insider says with evident understatement. Indeed, the plainspoken Bartz said in her blog post that "you'd be amazed at how complicated some things are here."

By most accounts, the swing to centralization is the right move for Yahoo after so many years of decentralized product groups around the world, each with their own engineering and other functions. Yahoo has an "inability to stop doing good things that don't fit with their strategy," says Robert Sutton, a professor of management science and engineering at Stanford University, where Yahoo was founded in the dorm room of Yang and co-founder David Filo.

Besides the internal changes, Bartz made it clear that she aims to get much more direct feedback from customers as the flatter organizational structure makes it clearer who's in charge of what. In addition, she has created a Customer Advocacy Group whose chief will be chosen soon. "After getting a lot of angry calls at my office from frustrated customers, I realized we could do a better job of listening to and supporting you," she told customers in her blog post.

Wall Street Likes the News

Bartz also aims to restore some luster and visibility to Yahoo's brand, which remains well-regarded by many consumers. "Look for this company to kick ass again," she wrote. Bartz created a new chief marketing post, which will be occupied by Elisa Steele, currently senior vice-president for corporate marketing at NetApp, a data storage company on whose board Bartz serves.

Investors apparently liked what they heard, as Yahoo's stock rose 4% to 12.98, even as the broader market slipped, though it was nothing Yahoo executives hadn't said before. Many analysts view a Microsoft-Yahoo pairing as one of the few ways the companies could mount a credible defense against Google, the leader in online advertising.

Bartz has been coy about whether she's interested in revisiting a pair-up with Microsoft. One former Yahoo executive noted that Microsoft is probably willing to do a deal that involves paying Yahoo nearly all the revenue it now gets from search while letting Yahoo cut nearly all its considerable spending on search. In exchange, Microsoft would gain much needed scale in the lucrative market for advertising related to Web-search queries. "Jerry's and Sue's egos got in the way of a deal," this person said.

More Leverage in Microsoft Dealings

Others, however, note that Yahoo's profitable search operation has improved recently. It gained about a percentage point of market share in the past six months, after years of declines, and produced higher revenues per search query in the fourth quarter. Bernstein analyst Lindsay goes so far as to suggest that if Bartz manages to steady Yahoo, the company could turn the tables and propose a deal by which Microsoft would sell or outsource all of its own online operations to Yahoo.

Either way, Bartz's moves may give her some increased leverage in whatever deal might be struck. Any improvement in Yahoo's fortunes or stock price makes it look that much stronger than Microsoft, whose online operations have been struggling even more than Yahoo's. And as investors wait to see how the management overhaul works, they may give Bartz some time before getting vocal about a deal again. But to avoid a replay of Yahoo's lost year in 2008, when the failed Microsoft deal distracted many Yahoo managers from tasks at hand and led scores to leave the company, she will have to show progress sooner rather than later.

In a case like this though, Yahoo is so rock bottom there's nowhere to go but up

Yahoo's Very Public Lay-off

Last December 10, Yahoo laid off 10% of it's work force. This is equivalent to about 1,500 employees losing their jobs just a couple of weeks before Christmas. Affected departments include sales, marketing, content, administration, engineering, and acquisitions like Maven Networks and Right Media Exchange. Yahoo has been in trouble for a long time. Ever since the Microsoft billion dollar offer or probably even before that when they were so obviously lagging behind Google in advertising revenue.

This laying off was magnified because it became very public given that Yahoo is an advanced company plus everyone and their mother is online. The scenario was adjudged negative for Yahoo as a company but possibly redeeming for the newly unemployed.

"People in this business know the internet as their go-to place to express themselves," said managing director Don Leon, Stephen Bradford Search, to AdAge. "The benefits of […] getting your name out there and letting people know you're available outweigh the potential downside of being perceived as bitter."

Now care of Valleywag, here are some leaked power point slides that indicate how to lay-off people during this time. Apparently it is not to be called "firing" but "getting fit." Nevertheless it's still having people jobless and no matter what that is called, that still hurts

It's just sad when things like this have to happen. I have experienced having to lose a team of 12 before and compared to this the numbers are smaller ~ true. But that didn't make it any harder. I cried when the news was relayed. It's never easy, but it's management decision. Apparently cutting off some of the branches would make the tree grow better (or more financially stable - whichever turned you on)

For managers out there, this might be useful I think. I for one, am not good at following such orders and would have most likely lost my nerve and ended up getting fired myself. Here are the Yahoo "how to sack employees" slides

Yahoo CEOs Daughter Tells Guard To Google Her

Now it's rather ironic when Yahoo CEOs daughter says "Google me, you dumb f**k!" Not just because it's very rude and unkind, it's also promoting the competition. It's unfortunate that Courtenay Temel had to be in the drunken state to have blurted out those words. Ending up in this rather messy lawsuit.

Isn't Yahoo already in enough trouble as it is? Last October 30, Jaroslaw Jarczok claims he was working security last August at 4 in the morning at PureNightclub when Courtenay was "quite intoxicated due to alcohol and/or chemical or other substances."

Apparently it got out of hand because Terry Semel's daughter was eventually handcuffed to which she said, "Do you even know who I am, f**king idiot?...Google me, you dumb f**k."

And that will go down in history as one of the worst things she could have said, ruining not only herself but her dad as well. Haven't heard about Semel as Yahoo's CEO in business terms, it's such a shame his name is dragged in mud as a result of his daughter's drunken escapade.

The Separation Of Bill Gates And Microsoft

After 30 years, it looks like the end has come for Bill Gates and Microsoft. The end not being a termination of course of either but instead a change in relationship. Bill Gates is finally stepping down and is now just going to work part-time. Taking it easy I guess. Must be the stress.

Everybody thinks Gates is some genius. The college drop-out who was once the richest man in the world with one of the most innovative companies around.

I do agree that Bill Gates is sort of a legend now. It's good I guess that he's stepping down. Sort of sounds like the end of an era so to speak for the tech world. It would be a shame if he were to go down in flames, beaten bad by Google. So this is the smart approach to bow down in grace while still retaining the image that you're still at the top of your game.

Bill Gates was interviewed by CNet on what might it be like for him After Microsoft and what his thoughts were on the future of technology and Microsoft as a company. He also talks about the failed Yahoo buy-out. Apparently Microsoft already has a stand-alone strategy of its own. Probably as a Plan B, should the acquisition fail - which it did. But anyway, their goal is probably just the same as all the other companies. How do we grow? How do we scale?

Read the complete CNet interview here.

Yahoo's Re-organization - Damage Control?

Yahoo has been in a bit of trouble. It might have declined the Microsoft buy-out offer in a futile attempt to stay afloat. Yahoo, the company and as the brand is suffering extreme criticism from all sides. Executives are leaving for greener pastures, which only goes to show that something may be amiss within those hallowed walls.

That's not to say that not many have left Google and Microsoft. I'm sure many talents there have also left in search for the better opportunity. And may have found them through other smaller companies that are still able to provide them the leeway and freedom that most probably the big guns have now refused to shell out.

But as for Yahoo, the company is indeed on shaky ground. With one executive after another publicly exiting. There must be a very think atmosphere of frustration and anxiety there. I do hope the restructuring does help them figure out what happens.

Analysts seem to think that Yahoo is the result of death by product management. Perhaps it's true, but how come the multiple product perspective didn't impact Google? There must be something wrong with the business strategy or management that's affecting how the company operates from inside out.

It would be shame though to lose Yahoo. I do think they are still one of the best in the online business world and I do hope they figure this out. I've seen Yahoo grow throughout the years and they are still quite admirable although they aren't number 1. Number 2 still isn't a bad place to be.

Yahoo Dumped Microsoft Buy-out For Google Non-Exclusive Partnership. Has the Courtship Ended? Or is it just beginning?

Yahoo has finally made their call. They have finally said "NO" to Microsoft. Yes Microsoft got dumped. Yahoo didn't want a buy-out or maybe they did, but they just didn't think Microsoft's offer was good enough.

What they have done instead is partnered with Google. They have ceded their search capacity to Google. So right now, the ads that will come out on Yahoo are essentially Google ads. That's what it means.

The business strategy here being that revenues could potentially increase for Yahoo search. However the flip-side is that this gives Google even more power in the market. It's now closing into monopoly if I may say so myself as Google supplies other smaller search engines like Ask.com

CNet reports that Yahoo expects the revenue to help the company invest in its dual-pronged advertising strategy that's designed to offer advertisers an easy ability to buy text ads on search results and to buy graphical "display" ads elsewhere on Yahoo's considerable Internet properties.

"This agreement provides a source of funds to both deliver financial value to stockholders from search monetization and to invest in our broader strategy to transform display advertising and advance our starting-point objectives with users," Yahoo President Sue Decker said in a statement. "It enhances competition by promoting our ability to compete in the marketplace where we are especially well-positioned: in the convergence of search and display."

Under the deal, Yahoo will select the search terms for which Google will supply ads, the companies said. The ads will be displayed in the United States and Canada, and Decker took pains to say how Yahoo controls which Google results are displayed and when.

Yahoo's search ad engine, Panama, is competitive with Google's for many popular queries, but Yahoo plans to use Google with less common searches, Decker said. "Yahoo monetizes very competitively with Google for query ads but is not as competitive in the tail," she said, referring to the long statistical tail consisting of a large number of infrequent searches.

Google Takes Top Online Property Position For The First Time With Barely 1 Million Visitors Over Yahoo

Wow I always thought Yahoo had the edge in terms on online property, but recent study has shown that Google was victorious this month in routing visitors to their sites.



For more details on this web ranking report - visit Marketing Charts

Microsoft's Threat To Yahoo: Take Our Offer Or Else!

CTV.ca just published that Microsoft has set the clock ticking for Yahoo to accept its $41 billion buyout offer in a letter to the Internet pioneer's board Saturday, warning that if a deal wasn't reached by April 26 the software maker would launch a hostile takeover at a less attractive price.

"If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo board," wrote Microsoft Chief Executive Steve Ballmer.



"If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal," he wrote.

A Yahoo spokeswoman declined to comment Saturday.

In the letter, Ballmer said Yahoo's search share and page views, two measures of the strength of the Web portal company's business, appear to have fallen since the offer was made at the end of January. At the time, Microsoft's cash-and-stock offer was valued at $44.6 billion, or 62 percent above Yahoo's market value. Judging by Friday's closing share prices, the deal is now worth just under $41 billion.

Yahoo's board formally rejected Microsoft Corp.'s bid in February, saying it undervalues the company.

Since then, the Silicon Valley company has explored alliances with Google Inc., News Corp.'s MySpace.com and Time Warner Inc.'s AOL, but no alternative to Microsoft's offer has surfaced.

Ballmer acknowledged the alternative negotiations and questioned why, in the absence of another offer, Yahoo was still dragging its heels.

"This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares," Ballmer wrote in the letter. Ballmer said the Microsoft offer has grown stronger as the economic climate has weakened.

"We believe that the majority of your shareholders share this assessment," despite a forecast recently released by Yahoo that calls for the company's revenue to rise more than 70 percent during the next three years, he wrote.

Microsoft has said from the start that it would consider all possible ways of getting the deal done, including taking its offer directly to Yahoo's shareholders, as well as working to elect its own candidates to fill Yahoo's board at the company's annual annual shareholder meeting, and thus the deadline for Microsoft to nominate its slate.

Yahoo has not set a new date for the meeting. Before Saturday, it was known that Microsoft had hired a proxy solicitation firm to help with a hostile bid, but the software maker had made no pronouncements as to when that might happen.

How The Government Can Interfere With Company Mergers - The MicroHoo Example

Governments are taking active roles in the world of commerce. As mergers and economic situations occur left and right, the governments of the world feel the need to control and/ or at least review these major changes and how it might effect the economy as a whole. The New York Times article below accounts the possibility of Chinese law impeding on Microsoft's attempt to take over Yahoo. Read on...

Microsoft’s hostile-takeover attempt against Yahoo may encounter an unexpected hurdle in August after a Chinese antimonopoly law takes effect that will extend the nation’s economic influence far beyond its borders.

The law, which goes into effect on Aug. 1, is intended to strengthen an existing set of antitrust regulations the Chinese originally established in 1993. It will make China a third sphere of regulatory influence, matching the power of the European Union and the United States, according to legal specialists in this country and in China who have studied it.

Formally enacted by the National People’s Congress last year, the measure gives Chinese regulators authority to examine foreign mergers when they involve acquisitions of Chinese companies or foreign businesses investing in Chinese companies’ operations. Beijing could also consider national security issues, according to a report by the official news agency Xinhua.

The law could give China influence in Microsoft’s courtship of Yahoo because in August 2005, Yahoo, a premier search portal, invested $1 billion in Alibaba.com, China’s largest e-commerce business. The investment gave Yahoo about a 40 percent stake in the Chinese company. Alibaba officials have said they believe that a Microsoft takeover of Yahoo would set in motion a buyback provision, making it possible for them to gain independence from Microsoft.

Nathan G. Bush, an antitrust law specialist with O’Melveny & Myers in Beijing, said the law represented the ascendance of China “as another regulatory capital contending for influence with Brussels and Washington.”

“Multinational corporations will need to develop strategies for all the markets they operate in,” he added, “and China is a big market.”

Whether China would seek to review a Microsoft acquisition, and what kind of posture it might take, would be closely watched by regulators and global companies as an indication whether it will play a conciliatory or a nationalistic role on the world stage.

“I don’t think anyone has worked through the issue of where an Internet merger should be reviewed, given that it truly is a World Wide Web,” said Andrew I. Gavil, a law professor at Howard University.

There are potentially dozens of jurisdictions that could claim oversight in such a deal because of the global business interests of the two huge companies and because it could potentially transform the Internet into two megaportals, Google and Microsoft. Other parts of the world that might have an active interest in the outcome of a merger include South Korea, a vibrant Internet economy where an antitrust investigation into Microsoft was previously opened.

Executives at Microsoft and Yahoo declined to comment on the possible effect of the new Chinese law. In rejecting Microsoft’s takeover bid in January, Yahoo’s chief executive, Jerry Yang, said in a letter to employees that the offer substantially undervalued the company, in part because of the significant growth potential of the Alibaba business in China.

The issue of whether the Beijing authorities will harmonize the law with foreign antitrust laws or use it to fire a shot across the bow of global businesses was sharpened last week after an effort by Huawei Technologies to invest in 3Com collapsed in the face of national security concerns in Washington.

The Committee on Foreign Investment in the United States had examined the purchase, through which Huawei would have gained a stake in 3Com. The American company’s Tipping Point subsidiary makes Internet intrusion-detection software, a technology that the United States maintains has national security implications.

Before the attempted investment fell apart, senior Chinese officials were quoted as saying they thought that the deal did not have national security implications, and that American regulatory efforts were a cover for protectionist trade practices.

National security has played a role in other attempted deals involving Chinese companies. In 2005, the Chinese National Offshore Oil Corporation made a high bid to acquire Unocal, leading to a vote in the House of Representatives to block the deal. Soon afterward, the Chinese company, known as Cnooc, withdrew its bid and Unocal was acquired by Chevron.

In the case of the proposed Microsoft-Yahoo transaction, the Chinese have in recent years become more and more alert to the role the Internet plays in their economic and political affairs.

Last week, a vice minister in the State Council Information Office, which oversees the Internet, said there were 230 million Chinese users of the Internet. He said the Internet sector accounted for 7 percent of the country’s gross domestic product, and he expected that to rise to 15 percent in three to four years, according to a Reuters report.

The official, Cai Mingzhao, warned that foreigners should not use the Internet to interfere in Chinese internal matters, according to a report in The Guardian.

Even if the Chinese government did not try to prevent a takeover by Microsoft, a prolonged review could substantially damage the value of the business, a number of Internet industry executives said.

Management Advice For Yahoo

Many have made it a big deal how Yahoo has become so deep in trouble with regards to legal issues and other management concerns. Here are some advice from analysts and opinionated individuals as reported by Businessweek.com

1. Bernstein Research analyst Jeffrey Lindsay advised in a Jan. 11 report that Yahoo fire 2,000 employees. He said that would give Yahoo more profits to pursue initiatives such as mobile search and video as well as acquisitions. The company is mulling layoffs, but more in the range of hundreds of employees. Deeper cuts, flagged privately by people at Yahoo as unlikely, sound more like wishful thinking by investors than sound advice. They presume that Yahoo is stumbling toward death's door when it's not: In its fourth-quarter report Jan. 29, the company is expected to show a 15% gain in sales, to $1.4 billion, though profits are expected to fall.
   

   Yahoo's major acquisitions over the past year, such as Right Media, BlueLithium, and Zimbra, surely created redundant positions. If they haven't been eliminated already, it's time.
   
   

2. Lindsay and others also think Yahoo should give up on its search efforts and just pay Google to drive its search engine. It's easy to understand why. Yahoo keeps losing search market share to Google, whose engine handles from 56% to 66% of all queries, depending on who's counting. By contrast, Yahoo's share is usually from 18% to 21%. "The text-ad war has been lost," says Scott Rafer, CEO of ad network Lookery and former CEO of MyBlogLog, which Yahoo bought a year ago.

   But others think Yahoo would be crazy to cede such an important front, not to mention control of the Web's most lucrative advertising opportunity. "It's a pretty critical component of getting people to start with Yahoo and stay there," says Ned May, director and lead analyst at market researcher Outsell. Just as important, data from searches, still the most important indication of a user's intention to buy, ultimately may prove crucial for targeting display ads to individuals as well.

   Notably, marketers and ad firms are rooting for Yahoo because they want a stronger No. 2 just to keep Google honest. "I would hate to see Google become almost a monopoly," says Lee. If Yahoo can keep making even mild progress in search advertising—its revenue per search rose 20% in the third quarter—keeping it in-house seems worthwhile.

3. If there's one rumor that keeps coming back again and again, it's this one. And with every replay, the speculation seems ever more driven by investors looking for a quick exit than by any actual deliberations by Yahoo or Microsoft. The software giant, which only last year spent the most it has ever put into an acquisition with the $6 billion purchase of aQuantive, seems unlikely to put up the upwards of $27 billion it would take to buy Yahoo. Such a deal would also carry big risks, as the merged company would likely lose even more ground to Google in the time it would take to integrate Yahoo's and Microsoft's operations and businesses.



4. In an impassioned call on the blog GigaOm on Jan. 22, Mitra advised Yahoo to forget about downsizing and "please put up a fight." She said Yahoo has an unmatched opportunity on the emerging new Web, which she views as being dominated by highly specialized services. So, she advises, Yahoo should consider buying jobs site Monster.com (MNST) to complement Yahoo HotJobs, photo service Shutterfly to go with Yahoo's Flickr site, travel sites such as Expedia (EXPE) or Priceline (PCLN) and more, to fill out the portal's strengths in these specialized markets.

   Problem is, Yahoo doesn't seem to have the resources to get this aggressive. Its cash position of $2.2 billion trails laughably behind Google's $13 billion stash and Microsoft's $19 billion trove. And the stock market clearly isn't valuing Yahoo's shares enough to make them a powerful currency for deals. As much as Yang may want to follow this path, it's unlikely he can.