There will be plenty of digital ink spilled today on Carol Bartz taking over at Yahoo.  With no apologies we offer our own 2c.  We did spend some time at the company last year which makes us feel like we have some insight even though we are far from experts on the company.

Lots of damage has been done over at Yahoo over the last few years.  It’s well known that many of the best people have moved on.  In short, Yahoo is a mess.  But then again isn’t that what many investors want? 

That the stock wiggled down yesterday is hardly any credible indication of how good the potential fit will turn out to be.  Many cited the fact that Bartz has no "Web 2.0 or deal making" chops to help Yahoo succeed.  What Yahoo needs first of all is adult supervision and some common sense decision making at the top to begin to restore a sense of coherence and possibly hope after the Semel destruction.  Our guess about near-term stock weakness is that the appointment signals that the company won’t be sold in the very near term, a blow for speculators.

What’s required over the next 12-18 months is simple enough that Bartz will probably implement the changes and pull them off.  We’re talking about management 101 here.  Establish a framework, measure results, reward performance.  [Believe it or not none of this exists now in terms of decision making at Yahoo.]  That alone can have a dramatic positive effect on how the company operates and is viewed.

The other side of the coin is simply focusing investments and execution on where Yahoo can get returns and build advantage.  Some of these may be tough choices but many will be easy.  By divesting and focusing their efforts we’d expect Yahoo to improve their poor ROIC and margins over time.

In thinking about this in terms of "expectations investing" the risk/reward on Yahoo seems at least interesting.  We don’t know Carol Bartz personally.  If she is another Ellen Hancock (Exodus) or Meg Whitman then Yahoo is toast but if her basic management skills are real the stock could easily revisit the 20′s again.  Well short of the $33 Microsoft offer but not bad from current trading levels of $12.

We would expect Bartz and the team to be strongly tempted to take one last whack at lowering expectations since it’s their last penalty-free opportunity.  Having over $3B in cash gives Yahoo some power to shift things around and make acquisitions once they figure out what strategy elements to focus on. 

There are hardly any shares sold short (36M out of 1.4B shares) so if the shares appreciate short-sellers could tend to increase supply of the stock.  However the ability of Yahoo to make deals may keep short-sellers at bay.

If the company comes out with a strategy that is better than a 90 day "listening tour" we will take the time to run our intrinsic value analysis to further pin down the potential upside for the shares.

[At the time of this writing we have no stock position of any kind in YHOO.]

It’s a small point but it’s one in a large pattern for Yahoo.

We still used them for domain registration which is a fairly innocuous administrative function.  We knew we were overpaying a little at $9.95/year per domain but even with 100 domains it’s small change.  But when they increased the renewal price 30% to $12.95/year we decided to take a look around.  It turns out that there are services that are much more robust than Yahoo and the best news is that charge less than half the new Yahoo price. 

So we get vastly improved administration and control at half the cost of Yahoo (again.)  Now it’s true we will be paying some students to move everything over but it’s a wash the first year and we save money after that.  More importantly the functionality is improved and every new domain we register is only a third of the Yahoo price.

We know Yahoo can turn their existing traffic into more money using Google which is perhaps the best indicator of their failure.  They are lucky to be getting what they are being offered for their deteriorating online assets.

Basically their investment and innovation in building their online services has been been far below the market.  So their offerings have deteriorated relative to other firms.

– Kris Tuttle

Tags: yahoo, domains

Sometimes little things help us see the big picture. (I wish I had shorted Dell two years ago when I had the worst customer support experience ever after buying my last system from them.) Ah well… on to Yahoo.

We all know the broadside Google has made on Yahoo with their advertising products, Google Maps and so on. Google Finance may not be a huge hit yet but the response Yahoo has made has been very poor. As a frequent user of both it seems to me that the people behind Yahoo Finance don’t actually use it. The new advanced charting features basically toss you out of the fundamental menu that makes Yahoo better than Google. In trying to improve charts to look more like Google they have made their leading site less usable and made it that much easier for Google.

This brings me to my real reason for posting which is Picasa versus Flickr. (Again I’m a user of both.) Just recently Google poked me with the offer to use their new web album feature. What’s important about this is that since my Mac doesn’t have Picasa, Google nicely offers me a download that will allow me to integrate easily with my iPhoto content and start using Picasa right away. Why hasn’t Flickr done this in the last year?

Before hitting the comment button I do know that one can make all this work in Flickr. This is not my point. There are millions of iPhoto users out there who are great potential users of a service like Flickr. Why not make it easy for them and create a little software to make it happen?

This is the sort of thing that Yahoo is facing across the board. Google isn’t perfect but they keep executing in a way that makes sense and is consistent (much of the time) with Web 2.0 software tenants.

It bothers me when companies get big and stop being smart, eventually the point of being stupid. The Yahoo guys were super smart and way ahead of the curve ten years ago. Today the company seems hopelessly stuck in the muck. Google will continue to have fun at their expense. It seems natural for them to be acquired either by a similary struggling Microsoft or another large media company.