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Yahoo’s Problems Are Beyond Repair

Unfortunately, the company is neither succeeding nor failing


If a Yahoo (NASDAQ:YHOO) investor screams in a shareholder meeting, and everyone ignores him, did he make a sound?

Shareholder meetings are usually dry, sterile ceremonies where individual investors get to feel appreciated for once, and where rubber stamps are waved over votes decided long in advance. Occasionally, you get the odd activist investor raising a stink.

For most of Yahoo’s meeting last week, it was just such a stuffy affair. Then Steve Landry – who described himself as a “personal investor” who somehow advises institutional investors – stood up and for five minutes poured a steady stream of ice water onto the proceedings. For anyone who has watched Yahoo’s stock stagnate around $15 for the last few years, the ice water was a refreshing change.

Landry cited an unnamed blog post (it’s apparently on TechCrunch) that said Yahoo is looking for a replacement for Carol Bartz, Yahoo’s CEO since 2009. He also mentioned Yahoo’s’ fumbling of its 43% stake in Alibaba, a Chinese Internet giant with whom Yahoo has a strained relationship, as well as reports that Yahoo may buy Hulu.

In short, Landry said Bartz should go as soon as possible. If not, more talent would bolt from the company. He thought Yahoo shouldn’t pussyfoot around with a big Hulu merger at such an uncertain time, although he did like Hulu CEO Jason Kilar as a replacement for Bartz. Finally, he suggested the company be sold, in whole or in pieces.

“No more excuses. No more victory laps,” Landry concluded in a tight but patient voice. “It’s time for a change and a sense of urgency.”

Bartz shot back, without missing a beat, with a response that was pure Bartz: “Thanks for your opinion, the bloggers’ opinions and the rumors.” Then after a pause filled with dread: “What else..? Wonderful. That was certainly a downer.”

The recording made its way online, of course (those darn blogs!). And it’s worth a listen, if for no other reason than to hear the dispirited tone in Bartz’ voice. Words cannot describe it. This was once one of the most vibrant and respected CEOs in technology, but then she met Yahoo. Yahoo almost seems like some kind of corporate vampire that drains CEOs of their lifeblood. It’s gotten to Bartz.

Bartz’ immediate departure from Yahoo would probably be the best thing for Bartz, if not for Yahoo. The question isn’t who could succeed her, it’s: Who would want to? Kilar is a great candidate, but I wonder how badly he wants the job. He could easily find himself in a shareholder meeting in another two years, with investors dressing him down. What a downer that would be.

Yahoo’s history is a case study in the dangers of making it up as you go along. Improvisation might work in stand-up comedy, but in the business world it leads to, well, comedy. Afer 20 years, Yahoo ended up with bunch of fragmented properties tangled together in ad-hoc management. Bartz tried to untangle it all and ended up with a brand new tangle.

Yahoo doesn’t need a turnaround, because any Yahoo turnaround can only exist in theory. It’s fallen so far behind innovative companies like Facebook, Twitter and Apple (NASDAQ:AAPL) that catching up seems impossible. Google (NASDAQ:GOOG) is slipping behind, too. Next to Yahoo, however, Google seems to be quite innovative.

But Yahoo isn’t quite a failure either. According to comScore, its unique visitors rose 11 million around the world to 689 million in May. That’s a little faster than Google’s 8% growth, but Google has more than 1 billion visitors. And it’s much slower than Microsoft’s 15% and Facebook’s 30% – two companies with more visitors than Yahoo.

What Yahoo needs is a caretaker who can oversee it while it decays into oblivion. It’s not coming back, but it’s not going away. After last week’s shareholder meeting, Yahoo’s board stood behind Bartz. But it probably shouldn’t have. Bartz is a fighter. And Yahoo is a company that doesn’t need to fight. It needs hospice care.

Article printed from InvestorPlace Media,

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