Yahoos in charge: Blame the board
COMMENTARY Carol Bartz is a big girl with a potty mouth who can take the heat. And rest assured, there will be no shortage of criticism directed her way now that Bartz is out as Yahoo chief executive officer (fired on the phone, no less.) But as Bartz's name gets inscribed onto the lengthening list of failed Yahoo CEOs - a roster which also includes Tim Koogle, Terry Semel and Jerry Yang - there are a couple of salient points to remember as revisionist versions of this chapter in the company's history start turning up.
- Don't pay attention to the meme that Yahoo is ungovernable because it's become the proverbial lost cause. The company still has enormous assets and remains one of the best-recognized Internet brands in the world.
- With a board of directors as incompetent as this one, even the most talented CEO would be hard pressed to engineer a Yahoo turnaround.
The surprise is that Yahoo has hired the wrong people for critical jobs. When the board let Yang, a company co-founder, try his hand at running Yahoo at CEO, they put their bets on a technologist who had never been a chief executive or had deep operational experience.
After 14 years running Autodesk, Bartz was a known quantity. But she had no advertising or consumer experience. Still, that was good enough for the board of directors to hire her. I suppose there is precedent for parachuting CEOs into new situations where they have little or no experience with a tech company's actual business. Think Lou Gerstner at IBM. But Gerstner, one of the best tech CEOs ever, was an exception to the rule. With the benefit of 20-20 hindsight, the flameout of the board's last couple of choices to fill the top role are that much more predictable.
"It's a terrible board," a person with deep ties to Yahoo told me late today after hearing the news of the latest corporate reorganization.
For board critics, Yahoo's refusal to accept Microsoft's $44.6 billion buyout bid is Exhibit A (maybe going all the way to Z.) Back in Feb. 2008, Microsoft's $31-per-share stunner constituted a 62 percent premium to Yahoo's trading price at the time. Considering how badly Google was beating Yahoo in search, this could have been the proverbial life safer but Yahoo balked. Yang and board chairman Roy Bostock rejected the offer as too low. After Bartz came on board Yahoo and Microsoft settled on a lesser deal In which Microsoft outsourced search services to Yahoo in return for a cut of search ad revenue. OK but not the sort of world-beating, transformative, shock & awe impact of a Yahoo-Microsoft hookup. But that chapter is now history and given the different trajectories taken since then by Yahoo, Google and Microsoft, it's hard to imagine that another suitor might ever dangle that kind offer again.
Besides blowing the Microsoft deal, the board is also on the hook for thinning out a roster that once was filled with experienced executives, such as the ad sales head, Greg Coleman, or the chief sales officer, Wenda Millard. Both knew the business that Yahoo was in and for whatever reasons, the board got rid of both of them.
"It's Bostock," this one Yahoo observer argued. "He's the same guy who blew the Microsoft deal."
None of this means that Yahoo can't pull itself together and make another run. But it presupposes that the board comes to a Socratic juncture where it knows itself. Yahoo's fate remains bound up with audience aggregation and audience monetization. As one of the top three biggest sites on the Internet, the company should be able to squeeze more profit out of a huge user base, even if it's not growing at Google-like rates.
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