A year after Microsoft buyout offer made, Yahoo struggles to define itself

Feb 02, 2009 By Elise Ackerman, San Jose Mercury News

Soon after he was named chief executive of Yahoo, Jerry Yang turned to Steve Jobs for advice.

On stage before several hundred senior Yahoo executives, Yang asked the Apple CEO how he had pulled Apple out of a death spiral a decade earlier. Jobs replied that he'd made decisions: He got out of the hand-held business, consolidated product lines, decimated Apple's work force, and made a deal with Microsoft.

It was the end of September 2007, and Yahoo was losing ground to Google. What should Yahoo do? Yang asked.

Don't be afraid to make tough decisions, Jobs said. Decide whether Yahoo is a technology company or a media company. And be ruthless about your priorities.

It was tough advice to follow, and Yang didn't.

Sunday, 16 months after that meeting and one year after Microsoft CEO Steve Ballmer made his initial fateful offer to buy Yahoo for $45 billion last Feb. 1, Yahoo is still struggling to find its way. Its stock price has fallen almost 75 percent from a peak in January 2006, top engineering talent has been streaming out the door, and there are rumors of more layoffs.

Brad Williams, a spokesman for Yahoo, last week defended the company in an e-mail, noting that Yahoo beat analysts' expectations for the fourth quarter Tuesday, "despite increasingly challenging market conditions and major distractions in 2008."

But investors are demanding to know: How will Yahoo compete with Google and cope with the rising popularity of sites like MySpace and Facebook, as well as new applications like Twitter? And, more importantly, will the company strengthen itself through a deal with either Microsoft or AOL?

Answers to these and other questions no longer will come from Yang. Earlier this month, he handed over leadership to Carol Bartz, a battle-hardened survivor of corporate warfare. "I love managing," Bartz told Wall Street analysts the day her appointment was announced. "I love making decisions."

"With a new CEO in place," Williams wrote, "Yahoo is focused on better leveraging our tremendous global assets with strategic clarity and operational discipline."

Analysts aren't expecting Bartz to make major moves, or deals, any time soon.

"Clearly, her ideas about the future of Yahoo are still being worked out," wrote Benjamin Schachter, an analyst with UBS, following a conference call with Bartz to discuss Yahoo's earnings Tuesday.

"We think any potential deal with Microsoft or AOL will have to wait at least until the new CEO learns the business, which we think could take most of 2009," said analyst Jeffrey Lindsay of Sanford C. Bernstein.

That means Yahoo's investors and employees, many of whom supported a deal with Microsoft last year, will have to hunker down and wait.

"If you have the tenacity and perseverance to stick around 12 to 14 months, it might really work out very well," said one of a dozen former Yahoo executives and employees who left over the past year and who spoke to the San Jose Mercury News about their frustration with the company's lack of leadership.

This executive said Bartz appears to be living up to her no-nonsense billing. He said friends who attended her first companywide meeting praised her moxie and lack of buzzwords.

In conversations with analysts, Bartz has been echoing some of Jobs' advice to Yang. She has promised to sharpen Yahoo's strategic direction and streamline its operations.

But on the question of whether Yahoo should be a media or a technology company, Bartz said: "Media versus tech, I think that's a lot of nonsense."

Allan Weiner, an analyst with Gartner, said he also thinks the debate, which dates back to the days when Yahoo paid Google to use its search technology, is now moot. "It's quite possible that a technology company is a media company in 2009," he said.

The traditional media company produced content that it used to attract an audience, which it then sold to advertisers. Today, Weiner noted, there is "much more money to be made in facilitating media" than in producing content.

David Filo, Yahoo's co-founder, has argued that it would be very difficult to separate Yahoo's search technology from its media assets, since search is used not only to help people find news stories they want to read and videos they want to watch, but also to more closely target advertising to Yahoo's 500 million users.

But executives who attended Jobs' talk said the overall message still rings true.

"His message was pretty clear," said an executive who left but remains in touch with friends in Sunnyvale. "He said, 'Yahoo is a great brand and you can be anything you want to be. Anything you focus on, you can be the best at.' "

___

(c) 2009, San Jose Mercury News (San Jose, Calif.).
Visit MercuryNews.com, the World Wide Web site of the Mercury News, at www.mercurynews.com.
Distributed by McClatchy-Tribune Information Services.

Explore further: Strong iPhone 6 demand boosts Taiwan export orders

add to favorites email to friend print save as pdf

Related Stories

Convenience of technology comes at a cost

Nov 29, 2013

As he rose to his feet from a knuckle-dragging crouch, primitive cave man wrapped his newly evolved opposable thumbs around the handy tools of his time - a club or spear - and instantly his life got easier. Two million years ...

Don't bet newspapers will get rich shunning Google

Nov 30, 2009

(AP) -- There's an intriguing idea floating around the media: Microsoft Corp. wants to undercut Google so badly in Internet search that it might pay newspapers to withhold their content from Google. Just don't count on that ...

Time to clean up your digital closet

Aug 05, 2009

Let's jump ahead 50 years. Imagine your grandchildren are rummaging around in your attic, looking through old boxes and trunks. They discover laptops, hard drives wrapped in cloth, DVDs, and maybe even a real antique: A ...

Recommended for you

New iPhones deliver big profits for Apple

5 minutes ago

The new big-screen iPhones helped propel Apple's profit and revenue in the past quarter, as the California tech giant delivered stronger-than-expected results.

Facebook sues law firms, claims fraud

1 hour ago

Facebook is suing several law firms that represented a man who claimed he owned half of the social network and was entitled to billions of dollars from the company and its CEO Mark Zuckerberg.

IBM 3Q disappoints as it sheds 'empty calories'

1 hour ago

IBM disappointed investors Monday, reporting weak revenue growth again and a big charge to shed its costly chipmaking division as the tech giant tries to steer its business toward cloud computing and social-mobile ...

MasterCard, Zwipe announce fingerprint-sensor card

Oct 18, 2014

On Friday, MasterCard and Oslo, Norway-based Zwipe announced the launch of a contactless payment card featuring an integrated fingerprint sensor. Say goodbye to PINs. This card, they said, is the world's ...

User comments : 0