Carol Bartz was fired as CEO by Yahoo‘s Board last week. Fearing their decision might leak, the Chairman called Ms. Bartz and unceremoniously fired her over the phone. Expeditious, but not too tactful. Ms. Bartz subsequently informed company employees of her termination via an email from her smartphone – and the next day called the Board of Directors a bunch of doofusses in a media interview. Salacious fodder for the news media, but not helpful for Yahoo!
Remarkably, the Yahoo Board seems to have no idea what to do now. A small executive committee is running the company – which assures no directional change. And a pair of investment banks have been hired to provide advice – which can only lead to recommendations for selling all, or pieces, of the company. Most people seem to think Yahoo’s value is higher sold off in chunks than it is as an operating company.
What went so wrong? Can Yahoo not be “fixed”?
There was a time, a decade or so earlier, when Yahoo was the #1 home page for browsers. Yahoo! was the #1 internet location for reading news, and for doing internet searches. Yahoo pioneered the model of selling internet ads to support content aggregation, publishing and internet search. An early leader, Yahoo was a tremendous success.
Unfortunately, Yahoo kept doing more of the same as its market shifted. Alta Vista, Microsoft and others made runs at Yahoo’s business, but it was Google primarily that changed the game on Yahoo! Google invested heavily in technology to create superior searches, offered a superior user experience for visitors, gave unique content (Google Maps as an example) and created a tremendously superior engine for advertisers to place their ads on searches – or web pages.
Google was run by technologists who used technology to dramatically improve what Yahoo started. Their future scenarios were built on an explosion in users, web pages and advertisers. Yahoo was run by advertising folks, and they didn’t think through where the future market was headed – thus missing the technology upgrades and need for streamlined tools. Yahoo’s leadership locked-in to what it new (advertising) and their slowness to introduce new solutions and products resulted in the company falling further behind Google every year.
To turn the tide, Google hired what they thought was a technologist in Carol Bartz to run the company. She previously led AutoCad, which famously ran companies like IBM, Intergraph, DEC (Digital Equipment) and General Electric owned CALMA out of the CAD/CAM (computer aided design and manufacturing) business. She had been CEO of a big technology winner – so she looked to the Board like Yahoo’s salvation.
But Ms. Bartz really wasn’t familiar with how to turn an ad agency into a tech company – nor was she particularly skilled at technology or new product development. Her skills were mostly in operations, and developing revisions and next generation software. AutoCad was one of the first PC-based CAD products, and over 2 decades AutoCad leveraged the increasing power of PCs making its products better, faster and relatively cheaper. This constant improvement, and close attention to cost control, made it possible for AutoCad on a PC to come closer and closer to doing what the $250,000 workstations had done. Users switched to AutoCad because it was cheaper – not because it was a game changer. AutoCad had ridden the PC wave – not its own innovation.
Ms. Bartz was stuck on her “constant improvement and cost control” success formula. At Yahoo she didn’t create anything significantly new. She didn’t pioneer any new platforms (software or hardware) nor any dramatically new advertising or search products. She tried to do deals, such as with Bing, to somehow partner into better competitiveness versus Google, but each year Yahoo fell further behind the game changer. In a real way, Ms. Bartz fell victim to Google just as DEC’s leaders had fallen victim to AutoCad. Trying to defend & extend Yahoo’s early success formula was competitively insufficient.
The Board was right to fire Ms. Bartz. Cost cutting and improvements will not position Yahoo to compete in ad markets now driven by Google (search and adwords) and Facebook (display ads.) Nor is Yahoo a competitor in the rapidly growing markets – like social media or on-line gaming.
Breaking up Yahoo is the easy answer. If the Board can get enough money for the pieces, it fulfills its fiduciary responsiblity. The stock has traded near $15/share for 3 years, and the Board can likely obtain the $18B market value for investors. But “another one bites the dust” as the song lyrics go – and Yahoo will follow DEC, Atari, Cray, Compaq, Silicon Graphics and Sun Microsystems into technology history on Wikipedia. And most Yahoo employeees will have to find jobs elsewhere (oh yeah, that pesky jobs problem leading to 9%+ U.S. unemployment comes up again.)
A better answer would be to turn around Yahoo! Yahoo isn’t in any worse condition than Apple was when Steve Jobs took over as CEO. It’s in no worse condition than IBM was when Louis Gerstner took over as its CEO. It can be done. As those examples have shown the return for shareholders of a turnaround would likely be far higher than breaking Yahoo apart.
0 comments:
Post a Comment