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Will New Directors Fix Yahoo? No, But Here's What Will

jerryyang4.jpgIt seems like months since Yahoo ended its fight with Carl Icahn by agreeing to add a couple of his antagonists to the board. It has been months since Yahoo could have ended shareholder misery by selling to Microsoft for $34-$35. And it will likely be years until Yahoo ever sees a stock price like that again.

But you could spend $30 billion and not build a global Internet platform and brand as valuable as Yahoo's (500 million users a month--500 million), and it's no mystery what it will take to fix the company. The answer, unfortunately, does not include adding Frank Biondi, John Chapple, and Carl to the board.

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How To Fix Yahoo

  • Purge and rebuild management team. Every senior manager at the company needs to be committed to a 3-year turnaround and be heavily incented with stock compensation to succeed. No one is too valuable to lose, and Yahoo simply can't afford any more of the slow bleed.
  • Streamline business and focus on critical products and services. Admit the search game is lost and emphasize display; fix email and other personal services; partner with world's best content providers to enhance "start page" strategy (and build a sisterhood-of-the-not-Googles coalition), etc.
  • Cut more costs and invest much of the savings in critical products. Firing another couple of thousand people probably wouldn't be a bad idea, especially as we head into a global recession.
  • Reignite the competitive flame. Yahoo used to have a passionate, innovative culture that was hell-bent on winning. Now, Microsoft fireworks aside, it has become AOL circa 2000: A fun place to punch the clock when you're not kitesurfing or driving your kids to soccer practice. That has to change.

There's no quick fix, and no magic bullet. It's just blocking and tacking. And it will take time.

Jerry Yang's strategy is fine. If he wants to stay CEO, he just needs to get a lot tougher and more demanding. Specifically, he has to be willing to make unpopular decisions, sack B-players, and be hated. This will be challenging for someone once universally revered as a quirky, cool founder. If Jerry succeeds, however, he'll end up with something even more valuable: the admiration and respect of those who earn the privilege of remaining.

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Jerry showed some serious cojones through the Microsoft battle, especially toward the end. If he wants to be the one to turn the company around, he now needs to bring the same passion to the internal fight. Yahoo is still in crisis, however. So he has to do it fast.

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