Yahoo, Yang-less, Needs Riskier, Bolder Plan

Jerry Yang has finally figured out there's life beyond {complink 6518|Yahoo Inc.}. The co-founder and chief Yahoo of the search engine provider quit his positions at the company on Tuesday and said he would be pursuing “other interests outside of Yahoo,” according to a news report.

Yang should have taken this step four years ago when {complink 3426|Microsoft Corp.} made a hostile $44.6 billion bid for the company in 2008. That offer was a “62 percent premium above the closing price of Yahoo! Common stock,” the day before the offer on January 31, 2008, Microsoft said in a press statement at the time. As I have pointed out in a previous blog, Yang should have taken the offer, but Yahoo was his baby and the co-founder didn't know how to let go. He didn't seem to understand then that his life was not entirely wrapped up in Yahoo and that he could do and enjoy doing something else. (See: RIM, Yahoo: Knowing When to Fold or Hold.)

Yang's refusal to agree to the sale of Yahoo to Microsoft four years ago shouldn't stop us from acknowledging his contributions to the company or the technology industry. He and David Filo, a college friend, started Yahoo in 1994, and the company grew into a phenomenal enterprise that enabled millions make sense of the Internet. As doctoral students at Stanford University, Yang and Filo understood the Internet would come to play a major role in human activities and offered fledgling users a way to make sense of the tangled mess of the Web.

Yahoo blazed the trail for other search engines, including {complink 2294|Google}, which now dominates the market and which was established in 1998 by Larry Page and Sergey Brin. Today, Google is the unrivaled leader in the market for Internet search, but even its dominance is under assault from new technologies that have since emerged, including social networks like {complink 10867|Facebook}, which don't lend themselves easily to the type of cataloguing offered by Google, Yahoo, and Microsoft.

This is one of the reasons why Yang's decision to step down from Yahoo is important for the company's future. Although it cannot rekindle Microsoft's interest (Steve Ballmer, Microsoft's CEO, has said the company was “lucky” it didn’t buy the company), Yahoo, under its newly appointed CEO Scott Thompson, should be able to explore a wider range of options, including either the sale of the company or parts of its operations.

Thompson won't be encumbered by the legacies of Yahoo's past and lacks the emotional involvement with the company that hobbled Yang. That's a plus for the company and one that should benefit also the board of directors as they consider options for Yahoo's future. The company is expected to sell some of its overseas operations, including a minority stake in {complink 9937| Hong Kong Ltd.}, China's biggest online marketplace, and Yahoo Japan. Yahoo's interest in Alibaba and Yahoo Japan is estimated at 40 percent and 35 percent, respectively. The money generated can be used to explore new strategic targets or fund expansions.

So far, most discussions about the future of Yahoo have centered on it being a consolidation target. But this is not the only option or even the best strategic choice for the company. True, its sales — compared with Google's — have stagnated at about $6.3 billion vs. $29.3 billion for the rival search engine provider. Yet Yahoo can benefit from its low debt leverage. In fact, the company has zero long-term debts and, as at the end of the September quarter, had more than $7 billion in cash and short- and long-term investments. It can easily borrow more money and look for opportunities in adjacent markets.

With Yang gone, it's time for Yahoo to go bold again. Suggestions welcome.

14 comments on “Yahoo, Yang-less, Needs Riskier, Bolder Plan

  1. bolaji ojo
    January 18, 2012

    Anna, I have a proposal for Yahoo. After reading your blog, I responded to the question you posed. I think Yahoo should do something unexpected. Rather than simply wait to be acquired, it should go and do an acquisition. The surprise candidate I have for Yahoo will be disclosed in a separate blog I expect to post later today. Let me know what you think.

  2. Wale Bakare
    January 18, 2012

    What advantage would it be for Yahoo should it end up as part of Google's portfolios in nearer future?

  3. Anna Young
    January 18, 2012

    Bolaji, good proposal. It's not clear as to what direction Yahoo intends to take. However, I don't think acquisition is an option at this present time. The speculation as you know  might be to sell off part of the company. I will not be surprised if the company opt to merge with another like company

  4. bolaji ojo
    January 18, 2012

    Wale, I doubt Google will try to acquire a part or all of Yahoo. Anti-trust objections alone would kill such a deal. Plus, Google doesn't really need Yahoo. The search engine business is fast turning into old news and even Google is trying to diversify its business as a result. It would not make sense for the company to add a similar operation. There isn't that much leverage Yahoo can add to Google.

  5. Anna Young
    January 19, 2012

    @Wale, I don't think it'll be a smart move. Considering the two companies are struggling in the social networking arena to compete with rival companies. It won't work – I think.

  6. Wale Bakare
    January 19, 2012


    The fact that Facebook's ramping more users, that's apparently impacting on all others within the circle of web-socialising scene. This is clear distinction of strenght indepth of individual internet technology firm operating in this area. Could you predict success of facebook in search engine should it try to? And that same goes to Google with Google+.

    Nevertheless, Yahoo!'s search engine can hardly match Google. If online news and video streaming worthwhile consider as main focus for Yahoo. I think, acquiring Yahoo for those only 2 reasons may not be bad as such. What do you think?

  7. Ariella
    January 19, 2012

    For all of its problems, “zero long-term debts and, as at the end of the September quarter… more than $7 billion in cash and short- and long-term investments.” are certainly strengths that Yahoo could build on.

  8. t.alex
    January 21, 2012

    I am eager to know would like to acquire. Perhaps just an investment banker.

  9. Wale Bakare
    January 21, 2012

    @t.alex do you think investment bank or bankers would take the risk? Just from technical innovation point of view, has Yahoo really dig deep into any new thing? If there's please educate me. What a costly rejection of an offer! Its board should have accepted Microsoft offer at over $44b and half just years back.

  10. jbond
    January 23, 2012

    With Yahoo having close to 7 billion in cash and no long term debts, do you think it's a good idea to try and seek out a purchase? They obviously need to do something rather quickly and it should be an unexpected move, but if they guess wrong they could sink the ship for good.

  11. Houngbo_Hospice
    January 24, 2012

    I think Yahoo should now try to breack into the social networking market. Any suggestion about the social networking company they might want/need to acquire?

  12. itguyphil
    January 24, 2012

    a like company?? Maybe Microsoft???

  13. Himanshugupta
    January 25, 2012

    Google has already burned its fingers in social networking domain. The main problem for any company trying to break into the social networking domain is to bring something innovative to the table to woo people. 

    One field which will comeup is online entertainment. Right now people are connected via social network but there are not enough online entertainment sites. There are apps to download on mobile but we need more. 

  14. t.alex
    February 1, 2012

    Wale, you are right. Banker would probably not want this company which is losing the marketshare itself.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.