The Only Way Marissa Mayer Can Avoid Yahoo's "Kodak Moment"

William Patalon III

When folks ask me why I'm such a business-news junkie, I point to the up-and-down sagas like the one that continues to play out at the Marissa Mayer-helmed Yahoo Inc. (Nasdaq: YHOO).

Thanks to Yahoo's pre-IPO stake in Alibaba Group Holding Ltd. (NYSE: BABA), the long-suffering shareholders of that wheezing Internet pioneer found themselves with a $40 billion windfall when China's top e-commerce firm went public in September 2014.

Not only was it a terrific drama, but my Private Briefing readers got the chance to clean up on the 50%+ rocket ride Yahoo shares took that year.

So watching Team Mayer fumble that victory – transforming it into another period of deep shareholder pain – has been profoundly disappointing.

But here's the good news.

I know exactly what Mayer needs to do to save Yahoo and its shareholders from absolute ruin.

You see, I've seen this before…

This Funeral Started as a Party

I used to cover Eastman Kodak Co. (NYSE: KODK).

And I was there to see the company, in essence, write its own obituary as a Fortune 500 company.

The Chicago Tribune referred to it – in a big headline – as "the Big Gamble."

The date was March 28, 1995, and on that day at a special "event" for investors, media, and customers in San Francisco, Calif., Kodak unveiled a sweeping plan that was supposed to break the film giant's stodgy bonds and vault it into the exciting new market for digital cameras, printers, and Internet imaging.

For a business journalist like me, the glitzy, executive-laden, and highly choreographed event was a lot of fun to cover.

But the whole strategy just didn't sit well with the one guy whose opinion really counted… Prudential Securities analyst B. Alex Henderson.

Every stock has an "ax" – Wall Street lexicon for the sell-side analyst whose opinion matters more than any other. Every widely followed company has an "ax." And they're worth watching – if only for the influence they wield.

On Kodak, Henderson was "the ax."

And he wasn't buying what Kodak was dishing out.

What Henderson Saw That No One Else Did

Kodak, you see, was hot-to-trot for the emerging digital market. It had fired its homegrown CEO and hired Motorola Solutions Inc. (NYSE: MSI) CEO George M.C. Fisher – betting that the wireless whiz-kid could do for digital cameras at Kodak what he'd done with cellphones at Motorola.

But Prudential's Henderson had been saying for months that Kodak lacked the innovative, quick-to-market culture the emerging Internet realm demanded for success. The "March 28 Event" – as it became known in Kodak lore – was the proverbial final straw.

For some time, Henderson had been pushing Kodak to go in a very different direction.

Join the conversation. Click here to jump to comments…

William Patalon III

About the Author

Browse William's articles | View William's research services

Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.

… Read full bio