Thanks to a weakening business, painful talent exodus and stagnant stock price, Yahoo is a house divided. And as many great figures have proclaimed before, “a house divided against itself cannot stand.”It’s no secret that Yahoo is struggling. The company hasn’t staged the dramatic turnaround that its investors envisioned CEO Carol Bartz would lead. Almost half of its market value is derived from its 40% stake in Alibaba, the China Internet giant with a market cap ofapproximately $8 billion. Most importantly, Yahoo hasn’t been able to create growth or articulate a clear vision for substantive growth. The result has been turmoil. Yahoo is fighting with Alibaba over online payment system Alipay (the two sides have yet to settle) and the former Internet giant has been experiencing a massive talent drain (Yahoo ranks as the worst in terms of talent retention when compared to other tech giants). The calls for Bartz’s head have been rising as well, and that has created more headaches for a company that already has a migraine. And it’s not just from the media; investors are publicly and privately questioning the former Autodesk CEO’s leadership. At Yahoo’s annual shareholder meeting on Thursday, one investor took the microphone and made scathing remarks about Yahoo’s chief executive: “The last thing Yahoo needs right now is a lame-duck CEO. The buyout talks over your contract need to start today and a search needs to be accelerated,” investor Steve Landry said. After railing into Bartz for several minutes, the meeting was brought to an abrupt close.
For their part, the board is giving Bartz its full public support. And to Bartz’s credit, Yahoo’s stock price is up a respectable 30% since her arrival (the company’s share price was 11.59 the day before her appointment was announced). Still, an argument can be made that much of Yahoo’s growth comes from Alibaba and not Yahoo’s core businesses.
The Battle for Yahoo
“The hard-won progress that we have made is why this board is very supportive of Carol and the management team,” Yahoo Chairman Roy Bostock stated at Thursday’s investor meeting. “I want to make it very clear about that support. We are confident that Yahoo is headed in the right direction.”
It’s no surprise that Bostock came out strongly in favor of his company’s CEO, especially given the rumors that Yahoo is quietly looking at replacements. He really can’t say anything else if he wants to keep the confidence of Yahoo’s employees, executives and shareholders intact. Two factions are beginning to form at Yahoo though, despite Bostock and Bartz’s upbeat tone at Thursday’s investor meeting. One side advocates staying the course (or at least not changing captains in the middle of a voyage). The other demands an immediate change at the top so that new ideas can be infused into the momentum-less company.
Let’s be clear: unless Yahoo suddenly collapses, Bartz’s job is safe. She’s approaching the fourth year of a four-year contract, giving Yahoo’s board the opportune time to either retain the often-bombastic CEO or give her the boot. Multiple reports confirm that Bartz is probably safe for now. Yet as long as Bartz is in charge, there will be two camps battling for the future of Yahoo: the group that wants to give Bartz a chance, and the faction that wants change now. This internal battle will only create more friction and distractions for the company, unless Bartz can find a dramatic way to silence the growing chorus of critics.
Neither side seems to have an answer to a more fundamental question, though: how Yahoo becomes “the world’s premier digital media company,” the company’s recently stated goal? Bartz had better find an answer to that question soon, before Yahoo’s shareholders start looking to someone else for the answer.
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