Monday, December 22, 2014

Yahoo's challenge with Marissa Mayer

The December 21 New York Times Magazine has an engaging article about Yahoo CEO Marissa Mayer entitled "No Results".  Mayer, a former Google wunderkind, took over as CEO of Yahoo two and a half years ago with the stock price at $15.90.  The stock slipped a little from there at first and it was suggested in a comment here as an opportunity.  The stock today is just above $51.  Revenues have fallen during her tenure and the article highlights her recent erratic behavior.

Investors generally and almost completely accurately think that the entire increase in the Yahoo stock price is due to the Yahoo investment in Alibaba made well before Mayer.  That's an "almost" because Mayer's hiring did create an attitude of promise in the investment community.  Then there was the IPO of Alibaba in September of this year and Yahoo stock dropped from $44 to $39.  There was a pervasive attitude among media observers and some investors of "that's it".  In a September 23 comment here it was suggested that the stock could go up to $50 as the remaining Yahoo Alibaba shares plus the value of Yahoo Japan provided a significant base that attributed little value to Yahoo itself.

The irony now is that just as Mayer's arrival in June 2012 created a bump in Yahoo's stock price, the thought of Mayer's exit now has created a bump of some consequence as well.  The NYT article highlights some of her mistakes which become humorous, at least here, as they have been observed closely for investment reasons.  Yahoo is my internet login page so that their "progress" can be watched.  Whatever algorithms Yahoo uses, if any, to relate to a home page user have pegged yours truly as a golf enthusiast.  Many days the lead stories are about golf.  I admit to being interested in the game but watch no golf except for the final rounds of the four majors.  I have not played a round of golf since 2002, and no miniature golf since maybe 2000.  What are they thinking?  Are they thinking?

The article highlights two of Mayer's terrible major hires.  One is Katie Couric as head content editor at a base of $5mm a year, that's Couric who has never had any currency here and seems to have little elsewhere.  The other was a self important advertising executive from Google named Henrique de Castro to be head of their advertising efforts and Mayer assured the Board of his qualifications and did not vet him at all.  It seems that Mayer did not really know anything of consequence about de Castro.  It turns out, according to the article, that he was known at Google by many by the name "the Most Interesting Man in the World" a joke based the Dos Equis advertisement.  He was generally seen as an arrogant pedantic nincompoop.  Mayer paid him $109mm before being forced to fire him after 15 months. This is too funny and potentially too libelous to not be true.

Otherwise Mayer's erratic behavior in the last year of often being hours late for meetings and requiring everyone in the world, literally the world, to be on her schedule is hard to fathom.  Her background in programming at Google as employee number 20 was exceptional.  Her management talent and vision now appears to be limited, and still here there is a latent desire to want to believe that somehow she is doing something right that as yet has not had time to fully form.  Now I am not at all sure of that.

Fortunately the September 23 comment here did express some concern and said "If she can't do it(turnaround the core Yahoo) somebody else will".  That is still the case and here it is believed that if the Board has some spine and does not allow her to do anything truly destructive, the stock still has room to grow, $60?, and maybe much more if she would go?

For whatever reason, for those who decided to invest when she came on, it's been a good ride.  Someone else is now needed to provide real value, that is unless as said there is some magic in her touch that has not yet been divined by the investment community.


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