It's no wonder Yahoo! Inc. (Nasdaq: YHOO) investors are pissed. I would be too if I owned Yahoo - but I don't.
Why not?
Maybe it's the four CEOs in five years, the botched sale to Microsoft in 2008, or a Chief Executive Officer who can't be bothered to verify his own credentials in SEC filings.
Or maybe it's the dysfunctional board of directors and the erosion of massive amounts of shareholder value over the years.
Add it all up and you have an unmitigated disaster on your hands.
Activist shareholder Daniel Loeb, who owns 5.8% of the company through his hedge fund, Third Point, LLC, has every right to be angry and vocal about it.
The way I see things, Yahoo is following what I call the Christopher Columbus School of Management: it has no idea where it's going, has no idea where it's been and has no idea what to do when it arrives.
Yahoo was ostensibly a search engine in the beginning. The latest outgoing CEO, Scott Thompson, had been trying to rebuild the beleaguered Silicon Valley company into one more reflection of his own strengths in data personalization as opposed to the bloated advertising-driven business it has become.
Whether or not Thompson would have succeeded is now a moot point. Incoming interim CEO Ross Levinsohn has an advertising background. Talk about a conundrum.
Here's the thing...
Whereas Yahoo was once regarded as one of the foundational bricks in the Internet wall of success, today it's a pariah struggling to remain relevant at a time when social media, mobile computing and personalized data delivery will ultimately determine its corporate viability...or death.
Advertising-based strategies--especially in Yahoo's world-- are challenging revenue models to say the least. And you can see how big the gap is between where Yahoo stands and where its competitors are if you look at the numbers.
For instance, Yahoo makes about $8 per unique user, whereas Google (Nasdaq: GOOG) generates approximately $24 per unique user and Amazon (Nasdaq: AMZN) takes down a whopping $189 per user, according to Business Insider (as reported in 2011).
Facebook (Nasdaq: FB), in case you're wondering, generates a mere $1.17 as reported by Bloomberg using data drawn from the company's most recent S-1 filing.
Still, the board seems to think something's worth salvaging.
I have my doubts but if I were in Levinsohn's shoes, here's what I'd do:
Whatever Levinsohn does, he better do it quickly. I think Yahoo's breakup value is only about $10 a share.
And that's on a good day with the promise of growing numbers that, frankly, I just don't see on the horizon.
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About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.