Yahoo's Turnaround Is a 360 Degree Spinout

Last Updated Jul 21, 2010 6:00 PM EDT

There are two parts to any turnaround: containing costs so the company can show a profit, and finding the right direction to move forward. Yahoo (YHOO) announced its second quarter results yesterday, and while it has made gains on on costs, it's been less than the company wants to portray. On the direction front, Yahoo is still a drifting boat with no sense of what its customers really want and no thought to what it might do for them.

Yahoo did as any public company would: stressed the positive. And there is some good news: year-over-year income from operations in the second quarter was up 132 percent. However, that speaks to cost controls -- necessary to make money, but not something that will ultimately grow a company that has sat in the doldrums for years. Decades, if you calculate it in Internet time.

Revenue was up only 2 percent. That's probably not even the current rate of inflation, which shows you that, in real terms, Yahoo's income is falling behind. Display ads on Yahoo's own properties were up 19 percent, but clearly that's nowhere near enough to get it to catch up to a company like Google. In addition, Yahoo's results included $86 million in search operating cost reimbursement from Microsoft (MSFT). Without that chunk of change, Yahoo would actually have made less than last year and seen no big jump in income from operations. The turnaround has put Yahoo pretty much back where it already was, so even the result of cost cutting seems a zero-sum game.

All the "business highlights" that the company listed don't matter if management -- and that means CEO Carol Bartz -- can't find some way to move things beyond cost cutting. She's been in place 18 months, which should be long enough to have an impact. But Bartz has repeatedly demonstrated that she sees the business as something customers are supposed to benefit, rather than the other way around. Now there's a place where the company -- or any company, with a similar attitude -- could use a real turnaround.


Image: Flickr user Dawn Endico, CC 2.0.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.