Why is a Chinese company so important to Yahoo shareholders? Because Yahoo's ownership of 43 percent of Alibaba represents a value of $2.3 billion, or almost 18 percent of total stockholders' equity, according to the March 31, 2010 consolidated balance sheet. That's about 11.5 percent of Yahoo's current market cap. Not only has Bartz been unable to turn Yahoo's business around, but her personal style now endangers what investors see as a vital relationship. It's likely to be the last straw of the bale that will make her continued presence impossible.
Not that Alibaba is a shining light of corporate rectitude. It recently shook up its management because of a big fraud investigation. What set off Yahoo was that Alibaba transferred a valuable property, Alipay, the Chinese equivalent of PayPal, to a Chinese company controlled by Alibaba CEO Jack Ma in August 2010.
Alibaba says that the transfer was necessary to comply with new Chinese regulations. But the disagreement is not over why the transfer might have happened, but when Yahoo learned of the transfer. Bartz and her management team claim they heard nothing until March 31. However, board member Jerry Yang is also on Alibaba's board and Ma claims that he told his board of the upcoming transfer in 2009. At best, Yang was out to lunch. At worst, all of Yahoo was.
Bartz has an abrasive style and relations between the two companies have not been good, according to an interview with Ma in Forbes last month:
Ma's relationship with Yang's successor at Yahoo, Carol Bartz, began badly at their first meeting at Yahoo headquarters in March 2009. Yang introduced the two CEOs, then left the room. Bartz proceeded to dress down Ma in front of his entire senior management team over Alibaba's handling of Yahoo China, according to people in the room. "I'm going to be blunt because that's my reputation," she supposedly told Ma. "I want you to take our name off that site," she said, referring to Yahoo China, which by that time had withered into irrelevance. Yahoo declines to comment on the episode.Ma says that he doesn't trust Yahoo, an extraordinary comment considering the chunk of Alibaba stock the company owns. The two CEOs clearly have a poor working relationship, and their joint announcement that they would solve the current dispute only suggests how much pressure that big investors have brought to bear.
Executives who are trying to repair a business often get a fair amount of leeway from investors and boards of directors, who want to see things improve. But when things don't change, eventually patience dissipates and CEOs find themselves looking for another position.
And things haven't changed at Yahoo. Bartz is notably combative and short on the results you'd expect after two years. That Bartz would get into a pissing match with Alibaba and have such poor communications that she wouldn't know about what might be a major shift in the value of Yahoo's holding will be the crowner. Why would anyone think that things will change going forward?
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- Alibaba's Fraud Scandal Constrains Yahoo's Maneuvering Room -- Again
- Yahoo Earnings: How Bad Can Revenue Get? Pretty Damned Bad
- Yahoo To Lay Off Employees: 5 Reasons CEO Bartz Should Join Them