Yahoo: On a Better Path
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It might be a little premature, but the stock that was once a laggard in the technology sector is starting to show signs of improvement -- and that’s making a good case that a recent management change was a smart start.
After a revolving door of executives at Yahoo! (NASDAQ: YHOO), the current management team led by newly-hired CEO Marissa Mayer, seems to have stuck their feet in that swing door by staunching losses and seizing opportunities.
Since Mayer took the reigns in July 2012, the stock has risen more than 20 percent. It’s now closing in on $20 a share, not exactly stratospheric, but the $20 range is uncharted territory for the past few years at Yahoo.
In the company’s last quarterly earnings call, the company revealed some other promising signs. Revenue is up 2 percent compared to 2011. Their search revenue is also growing in the double digits. The operating income in the third quarter of 2012 saw a $177 million increase compared to 2011
From Media Company to Tech Company
Even though Mayer said that Yahoo! is showing some signs of life as a restored media company, industry insiders say that she’s preparing to move the company from a media company to a more tech-oriented company.
Mobile apps and services are going to play a key role in this maneuver.
To do that she’s going to need to do a few things:
- Personalize. Yahoo! dominated the web at one time because of its ability to personalize content. Can the company take that specialization and leverage it in the new world of mobile phone apps and products.
- Pioneer New Products. Yahoo! can’t follow the leaders now. It must start innovating its own line of products.
- Find New Talent. Yahoo’s employees are demoralized. Constant executive turnover and shifting strategies do not create environments conducive to innovation and growth. Yahoo! will need new leadership and a strong vision to change this.
Yahoo Versus Goliaths
Mayer spent 13 years at Google, as one of the earliest employees and the first female engineer.
Most analysts agree that Mayer can’t do this alone. And, apparently, she knows that, too.
Mayer has gone on a talent search and scored some major finds. Rumors are she’s also beating Silicon Valley and elsewhere for acquisitions that can help her jump start the move to a contender in the tech sector.
Even though Yahoo! seems determined to duke it out with the best in the tech field, Mayer has a few rocks in the slingshot.
First, Mayer knows something about product development and branding. As much as you and I both hate the word, “iconic,” Mayer was one of the key members of the Google team that created the company’s iconic search page. Take this mixture of branding and product development with Yahoo’s power of personalization and that can create a potent adversary to the Google and Facebook giants.
As far as talent goes, Mayer was a hands-on talent manager at Google. We’ll expect the same at Yahoo.
Mayer was also involved in many of Google’s biggest and most successful product launches, from the search page to Google Maps to Gmail. Chances are Yahoo! will improve in the product development area.
There are still critics.
Even if Yahoo! wants to acquire new businesses, services and products, many believe they don’t have the financial wherewithal to actually buy the companies. However, the company’s Chief Financial Officer Ken Goldman says the company has about $4.5 billion to invest in acquisitions. That’s not exactly the war chest that Google and Facebook has, but it could pack a punch if it’s invested correctly.
Yahoo! still needs more than a few positive months. They need to show their fundamentals are jibing with their vision. They haven’t exactly wowed or wooed investors, but at least they're not getting booed any more.
mlswayne has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and Google and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!