CEO Upheaval at Yahoo and The Fundamentals Preventing Dominance.

To this day, Yahoo is still one of the top 3 largest players in online search engines and is a highly valued entity in the tech world because of the massive directory of email users it possesses. Yet it carries a persistent stigma that the game has passed it by. After all, it was Google who took dominance of search and rode it’s Adwords to record breaking revenues for an internet company. In the process, Google perfected a model for massive income creation online by basically monetizing every set of eyeballs who used search. The key being that it owned the most set of eyeballs.

Then it was Myspace, Facebook and Twitter who foresaw and capitalized on the socialization of the internet. All the while, Yahoo seemed to be playing catch up on both fronts. Timing and perception are such key factors in internet dominance and it always seemed that Yahoo lacked in both areas.

It was amid this backdrop that Carol Bartz took the helm as Yahoo CEO in January 2009 succeeding Founder Jerry Yang. Her strategy centered around the sell-off of parts of the Yahoo whole, coupled with cost- cutting measures including firing large numbers of management and staff. The larger strategy centered around using the excess cash from the sales to locate and acquire emerging businesses in the internet arena. These businesses were meant to augment and upgrade Yahoo’s ability to compete with Google and Facebook. Basically, Yahoo wasn’t willing to go full throttle investing in creating and testing their own emerging ideas. Instead they were gambling on both being able to spot the next big thing from outsiders, and also finding a smooth way to integrate them.

Many analysts such as Trip Chowdhry of Global Equities Research take a pessimistic view of Yahoo’s move to fire Bartz, but not because these analysts saw great potential in her leadership. Rather the installation on an interim basis of Tim Morse as her replacement signals that Yahoo’s Board of Directors was in agreement with Bartz’ fundamental approach. The reason for this view is that Morse served as Chief Financial Officer under Bartz and was a primary driving force in implementing her “slash and vulture” strategy.

Bartz’ short tenure of roughly 30 months was hallmarked by the same trend that was seen before her leadership: loss of market share to Google and no answers that seized the timing and perception initiatives from either Google or Facebook. Yahoo’s strategy appears fuzzy currently. It seems likely, according to reports, that a new CEO will be hired and Morse will not be that person.

For her part, Bartz was blunt in her assessment of Yahoo’s Board describing them as “doofuses”. The performance of Yahoo’s stock the last decade seems to support her conclusion. However, there is also a widely held view that Yahoo is only one visionary, creative leader away from recapturing pre-bubble burst glory. Who? and how? are still the questions on the table. Stay tuned.

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