Time To Stem The Yahoo Bleed, Jerry
Jerry can't do anything about the economy, but he sure as heck can do something about the executive exodus. And he has to, now, before more departures further damage his credibility.
Here's how he should do it:
Gather Yahoo's hundreds of vice presidents together and give them the Robert-DeNiro-motivates-the-troops-in-the-Untouchables speech. (Stalk around the table with a baseball bat, drone on about commitment and loyalty, and close by, um, dispatching someone).
Specifically, Jerry should deliver the following message:
- We're going to turn this company around.
- You're with me or you're gone
- Everyone who isn't with me will be gone by the first of July. How? By taking the voluntary severance packages we're now offering with nice benefits (option vesting, etc.). You have one week to evaluate these packages. If you want to leave, take one. After July 1, if you quit, you won't get jack.
- If you want to stay, we're going to load you up with stock options at the current pummeled stock price. We're also going to give you a 10% cash pay cut. That way, your interests, our shareholders' interests, and my interests will be perfectly aligned.
- Always wanted to work for a VC firm, try a start-up, or spend more time with the kids? Take the package. Want to double-down and help me make Yahoo a great company again? Double down.
There are a lot of talented managers out there, and Yahoo needs to recruit some of them. Most of all, Yahoo needs to build a committed, long-term management team and stem the bleed. If Jerry can't even convince his senior managers that he's going to get the company headed in the right direction, how on earth is he going to convince anyone else?
Wow. You may want to read that Joe Nocera article in the New York Times just one more time.
JERRY YANG DOES NOT OWN YAHOO. THE SHAREHOLDERS OWN YAHOO.
Maybe if you took the name "Yahoo" out of this story you would realize this is easily one of the biggest corporate blunders in recent history.
The thing I can't understand is that your articles and this site are amazing, except on this Yahoo disaster.
I think an examination is in order that deals with the cultural dichotomy that obviously exists between employees at companies like Yahoo and Google and the stark realities that exist when these companies go public.
Jerry needs to go!! Time to bring in a proven leader, the street has lost all respect for Jerry. The sooner the better!
In meantime, Jerry needs to get a handle on exodus.
You are way way way off here. With YHOO out of search, sooner or later, it becomes a really profitable media company. Its' P/E ratio is going to have to come back down to earth -- to the 15-20 range. If they do the right things, they can boost profit short term (goog, firings), but the growth piece will be harder to get to in order to justify a much higher multiple.
Therefore, the stock is going to end up behaving like an ordinary media business -- hopefully a well run media business -- which means they need to shift compensation to MUCH MUCH more cash weighted.
In other words, to keep kick ass people, deliver on the W2. Only a moron would still assume that there is significant value in the stock in the next few years. Cutting salaries is the opposite of what they need to do. He needs to:
a) just accept search is dead (ironically the MSFT offer for search business did this) and cut costs furiously here
b) cut evps, svps, vps to reflect reality of new business
c) signicantly boost cash comp across the board for those left to make competitive with other great media cos
Low and behold, Yahoo's PE is N/A. I sure hope they're not reporting a loss.
Anyway, bookmark has been changed from Yahoo Finance to Google Finance. All their service blow.
With the same fools running the show (even if you totally forget the Microsoft debacle, and even if you totally forget Google even existing, and base it solely on the continuous decline during and post-Semel), how in the world is this company supposed to "be a great company" again?
Y! built great products when the product managers and the engineers ran the groups. There need to be cuts. The cuts need to be huge.
Y!'s great products were built by very small groups (5-10 people) that management left alone. Y!'s giant fiascos were caused by senior management trying to manage tactical product decisions.
2) whoever wants to leave yahoo! at time of needs is not worth keeping and sweat over.
I don't see the point of this, other than selling ads around an empty/irrelevant article, or trying to stir some sentiment that a turnaround can be done. Or is it just that SAI does not know what else to write?
"That way, your interests, our shareholders' interests, and my interests will be perfectly aligned."
At no point in the entire train wreck of the past few months has Jerry shown his interests to be in line with anybody but his own. He doesn't care about shareholders and probably doesn't care much about his employees, he only cares about that his legacy that he sees Yahoo to be. The current poison pill at Yahoo isn't the severance package but Jerry himself.
You keep cutting away thinking that one more cut will finally get rid of the last vestiges of the cancer. Then the patient dies.
This is the paradox in Yahoo's situation. Cancer filled patient with "great bones" (content galore, millions of account holders using multiple services, many excellent services) but is Yang the surgeon to save the patient? Is their a core management team that can articulate a vision, strategy and tactical focus?
I haven't seen it or heard it and the talent exodus speaks for itself.
Cutting for cutting sake isn't the answer. Doing nothing just lets the cancer spread. But, also recognize that in these situations the people that leave are often the best people with the greatest options.
Often, those motivated to stay are the proverbial cockroaches on the sinking ship.
I say this respectfully, because I believe that Yahoo has great bones and that Yang earnestly cares about this company.
Now that they are putting their Google-envy to rest, they sort of have to figure out what Yahoo is first, how that will drive where they focus, what skills they need, and culturally what they want to change, which will inevitably define who needs to "get off the bus."
Solve-able to be sure, but given how Yahoo has historically been organized as a bunch of politically silo'd fiefdoms, that seems to require a skillset that is not Yang's strong suit.
http://finance.yahoo.com/tech-ticker/article/28274/Swishers-Short-List-of-Yahoo-CEOs%3A-Not-the-Answer
...but, hard as I try, I can't seem to conjur up an image of Carl bein' placated by the Google deal.
It'd be like thinkin' you have cancer and bein' placated by findin' out it was only AIDS.
Funny... Yahoo overloarding over Henry??... Funny.
http://businessmindhacks.com/post/post-microhoo-a-microsoft-facebook-play
(second half of the post)
Only it turns out that MSFT has many of the same problems. In fact, I would argue that for every problem that Yahoo has, MSFT's internet division has one to match or even exceed it.
Frankly I am appalled that pretty much not one of the Yahoo/Jerry bashers has even tried to disprove my basic point: That MSFT has 0 credibility when it comes to turning Yahoo around. If anything, they've done even worse, leading me to question the whole "destruction of shareholder value" argument.
For what it's worth, I have no particular love for Yahoo, and have only what you might call an average dislike of MSFT, simply as another burned user of their monopolistic, overpriced, underinnovated, unsecure-by-design products.
In that spirit, after all of the Jerry-bashing, I would actually like to see the Micro-hoo deal go through now (say at $30-31) just for the theoretical exercise of it to see if those that have warned against the deal were right. Let Ballmer prove that he could pull a rabbit out of a hat. I'd say his chances of dong that are no better than Jerry's, likely even worse.
I still think it would be an unmitigated disaster, and even the immediate/short-term stock valuations would be less than clear. If everyone that basically saw the deal as a way to cash out of Yahoo completely tried to do so all at the same time, that could spell big trouble. And of course it wouldn't be much of a vote of confidence for the deal.
And longer term I would see the Micro-hoo stock listing further or even tanking once all of the issues became apparent (a la AOL-Time Warner).
"they sort of have to figure out what Yahoo is first, how that will drive where they focus, what skills they need, and culturally what they want to change" - couldn't agree more.
It's at it's core a branding/positioning issue, more than a technology issue. Which is BTW something that MSFT also constantly fails to understand.
In a way it's unfair to bash the MSFT internet division for its lack of success, given that they have been fighting with one arm tied behind their backs the whole time, i.e. with their "mothership" basically wishing the internet would just go away.
This is the main reason why breaking up MSFT in 2000/2001 would have been such a great idea, and likely a boon to the stockholders of the successor companies. This is also why Henry's original proposal of splitting out MSN/Live into Yahoo plus cash for, e.g. 51% control would still to this day be the much preferable route to go.
Too bad that Ballmer either never heard about this idea, or, more likely, that his/MSFT's ego made this impossible to consider dispassionately.
If Yang and Bostock could turn back the hands of time to Feb 1, 2008, would they do anything differently?
I honestly don't have any clue what the answer would be. Many of you seem to think the answer is obvious, but I don't think it is.
It would be easy to now come to the conclusion that they ought to have been more cooperative with Ballmer... until you dig back through the history of the proposal and realize that behind the scenes they were being far more cooperative than the public was aware of.
They came down from 40 to 37 before we ever knew they did, and before Ballmer agreed to a "couple more bucks." Then, when Yang heard that Ballmer was no longer locked publicly on 31 but was sending signals that probably at least 33 was possible, Yang and Filo went to the Seattle airport, and Ballmer went to Walksterville. Regardless of what Yang says about the Seattle airport negotiations, and I believe him, it was possible then to reach 33 as the b-a-s-i-s for a definitive agreement workout, if Yang would've accepted 33, that is.
It might have been impossible for Ballmer to collar and assure 33 in any combination of cash and stock, but the Seattle airport meeting wouldn't have ended it. It would've ended with follow-up meetings between their bankers and other representatives over those difficult other terms, but not in the Seattle airport.
It would've still been very hard for Ballmer to reach 33 and do it with collars and regulatory assurance. To my mind the chances of a successful definitive agreement workout, even after the basis of 33 was agreed to, was at best 50/50 and that estimate might represent pure optimism on my part.
No, were I Yang and Bostock now, after the MSFT considerations are over, there's only one thing for sure I'd do differently if ever presented with a similar situation.
I'd have been more public during the process. I'd have informed the public in some way that I'd come down to 39, 38... on to 37... and why I was frozen at 37. I'd have taken the initiative and been public about MSFT's refusal to discuss regulatory approval tactics. I'd have sent representatives earlier to general discussions of both price and other terms, and made the fact that discussions were ongoing public as well.
None of that would've removed my capacity to negotiate freely or forced me to take whatever offer Ballmer wanted to make, but it would've presented the public with a different perspective about my cooperation in trying to find middle ground and a fair deal for both parties.
As it turned out, MSFT controlled all the body language that the public observed during the entire episode, right up even to the last recent meeting about a partial deal. MSFT in every way was able to effect a public image of Yang as being entrenched and resistant to any deal with MSFT. I don't think he was, but that's the image he allowed to be created. If I could assign one major fault to Yang, that's it... he allowed his image to be crafted for him by MSFT, rather than making it himself.
I lost money on Yahoo calls and leap calls, but I still can't blame Yang and Bostock. In fact, I only blame myself for getting suckered by Ballmer's outward projections of his determination to have Yahoo no matter what it took. Ultimately that publicly expressed determination is likely to be Yang and Bostock's best defense... because Ballmer fooled many, far and wide. Even taking just all our public discussions on SAI, it wouldn't be hard to make the case that Ballmer would probably swing for at least 34-35. It just wasn't going to happen because Ballmer was probably already in Walksterville before he went to meet Yang and Filo.
Need I list all the Bigs for you that Ballmer fooled?... No, you know all the names by now as well as I do. Ballmer fire-bombed all the Bigs just like he fire-bombed me, j-o-e-b-l-o-w.
The only way I could ever place blame on Yang and Bostock is if I knew they would have taken 33 in some fully assured value, because I think that was the tops that Ballmer was ready to try to put together.
I think I can safely assume they would not have taken 31, but if they had been willing to take 33, then Yang and Bostock were simply not cooperative enough with Ballmer to get past his reluctance to define and collar 33.
If they'd have ONLY accepted 34 or higher, then I just have to realize that my own assessment of Ballmer's intentions is what cost me my money... not Yang or Bostock.
LOL
Jerry: We've had an offer from Microsoft...
Yahoo!: Wow, that was unexpected!
Jerry: Yes... and we've sold!
Yahoo!: Yay! we get to take the money and run!
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