Perspective: Yahoo's Turnaround Efforts Are Straight from Steve Jobs' Playbook

Last Updated Dec 1, 2009 12:55 PM EST

We were at a cocktail party, and [former Apple CEO] Gil Amelio
was explaining Apple's predicament to us, and he said: "Apple
is a boat. There's a hole in the boat, and it's taking on
water. But there's also a treasure on board. And the problem is,
everyone on board is rowing in different directions, so the boat is just
standing still. My job is to get everyone rowing in the same direction so we
can save the treasure."After he turned away, I looked at the person
next to me and asked, "But what about the hole?"

Larry Ellison, founder and CEO of Oracle, describing an
encounter in 1997

Yahoo CEO Carol Bartz


Carol Bartz, the still new CEO of Yahoo, convened her first meeting
for Wall Street analysts a few weeks ago. Forget the specifics for a moment. She
could have been talking about another iconic Silicon Valley company that had
gone astray under experienced but ineffectual leaders who had been brought in
from other industries to shore up damage done by the company’s
precocious founders.

When Steve Jobs returned as interim CEO in 1998, Apple was perilously
close to financial collapse. Jobs acted decisively in his first few months, killing
the Newton PDA,
rescinding the company’s nascent “Mac Clone”
strategy, paring a gangly product portfolio down to two basic machines, and
sealing a controversial deal with archenemy Microsoft that gave Gates &
Co. a chunk of Apple stock in exchange for an investment of more than $100
million and the commitment to keep developing software for the Mac.

Bartz, who has occupied Yahoo’s corner office for barely
10 months, has had to move quickly to repair a hemorrhaging brand and restore
morale to a company that was a pioneer of Internet cool. She wasn’t a
returning founder, but she had street cred as the successful href="http://en.wikipedia.org/wiki/Carol_Bartz">CEO of Autodesk, the
leading maker of 3-D design software. In Jobs fashion, Bartz shut down dead-end
services such as online
video site Jumpcut
and Web 1.0 darling GeoCities, and she is expected to
kill plenty more. She has eliminated layers of management, cut 5 percent of the
workforce, and wasted no time hammering out a search/advertising deal with big,
bad Microsoft — the suitor that her predecessors, led by former CEO and
co-founder Jerry Yang, had spurned more out of emotion than as an expression of
shrewd business strategy.

The nettlesome shareholder activist Carl Icahn was so
pleased that in October he stepped down from Yahoo’s board. In href="http://blogs.wsj.com/deals/2009/10/26/carl-icahn-to-yahoo-ceo-carol-bartz-i-wish-you-could-be-cloned/">his
resignation letter, he told Bartz: “I wish you could be cloned
because so many of the companies in the country could use a Carol Bartz as CEO.
My resignation in a way is a compliment to you in that I do not believe that
Yahoo any longer needs an activist shareholder.” In its most recent
quarter, Yahoo surprised Wall Street by tripling profits and projecting a
return to revenue growth.

In short, Bartz has made Yahoo’s business coherent
again, not just to Wall Street but to her own 13,500 employees. And like Apple
after the return of Jobs, Yahoo again has a reason for being.

Her presentation to the analysts was a brilliant reality
check for all who had written off Yahoo as a hopeless has-been. “Here
we are, a 14-year-old Internet company that somehow got boring,” she
said. “But we’re the largest communications engine in the
whole world. When we can serve up impressions of 9 billion ads a day through
our networks, that’s innovation, and that’s scale. You don’t
just start up an Internet company and do that. We know how to do these things.”
She was just getting warmed up: “We’re not a search
company; we’re not a display company. We’re a broad-based
Internet company that serves up content to millions of people. We’re
not here to wow you today; we’re here to intrigue you and impress
you.”

Jobs went on to build Apple
back up into a multidimensional business that has grown right through this
lousy economy. But early on, he knew better than to try to fix everything at
once. Apple’s most important asset at that time was its brand —
it was, after all, the creative force that had unleashed the personal computer
industry. That strong brand identity helped Apple retain top-notch engineering
talent despite meandering leadership. So when Jobs scaled back the number of
products, Apple’s engineers were able to move faster yet also crank
out better products. Each success bred more confidence and built a stronger
base from which the company could methodically broaden its product reach.

Yahoo isn’t all that different. More than any
other first-generation Internet company, Yahoo took the intimidation out of
exploring the Web and demonstrated that the user really could find his way
around. The company also was the first to recognize the value of the
demographic data it could glean from tracking what surfers were looking at. Despite the
drama of the past couple of years, Yahoo continues to rank up there with Google
and Facebook as one of the most trafficked sites in the world. It possesses brand
recognition that money can’t buy.

Yahoo will have to prune back even more to blossom and grow
again. And the deal with Microsoft, not unlike Apple’s deal with
Redmond, buys Yahoo time and gives it a partner that lends it stability and
credibility.

Of course, Yahoo is not Apple, and Carol Bartz is not Steve
Jobs coming back to rescue his baby. But Microsoft’s role in the
comeback strategies of each (once its deal with Yahoo wins regulatory
clearance) is key: For Yahoo, just like for Apple, the deal serves to remove a
degree of strategic uncertainty at the very core of the company’s
business. The lesson here is that when you are called on to bail out a sinking
ship, it helps to lighten the load and fix the holes first, and only then
figure out where you really want to go. Do that, and your crew will fall in
with you.



Perspective
aims to take a long-term view of the technology business, analyzing where it
has been and where it’s going. Brent Schlender has covered the
industry for 30 years at the Wall Street Journal and Fortune magazine.


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    Paul Sloan has been a San Francisco-based correspondent for Fortune magazine, an editor-at-large for Business 2.0 magazine, and a senior producer for CNN. He's now an executive editor at CNET News. When his fingers aren't on a keyboard, they're usually on a guitar. Email him here.

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