Sometimes people just do not know how to concede that a win is a win. The truth is that winners know when they won, while losers often fail to concede that they lost or only offer excuses why the victory should have been theirs. We still routinely hear the media and certain investors pound on Yahoo! Inc. (NASDAQ: YHOO) about the turnaround not being the right path under Marissa Mayer. We also hear routinely about how the world has migrated to Google Inc. (NASDAQ: GOOG), Facebook Inc. (NASDAQ: FB) and other new Web 2.0 (or is it 4.0 yet) and mobile trends, only to leave Yahoo! in the dust. If you simply factor out the hype and look at the real money, the answer should be more than clear. Mayer’s moves may have been questionable at each step, but to call Yahoo! a questionable turnaround at this point is simply an admission of not knowing math and not knowing history.
Were Yahoo! earnings impressive? Not to most, even though some growth measures were seen again. Does the share price reaction just scream “Buy Me!” for Yahoo! this week? No. Either way, it is baffling why anyone would still bother questioning Mayer’s role at Yahoo! at this point. Remember, winners know when they have won. It may still seem obvious to say that some of Mayer’s acquisitions still have questionable payoffs down the road. What cannot be questioned at all is that Mayer delivered on the Alibaba valuation after all prior efforts failed and large amounts of stock has been repurchased.
Now let’s think about the simple stock price, even if the post-earnings gains slid the day after earnings. Shares were around $33.41, for a three-cent gain in late-morning trade, only to slide 1% shortly after noon at the time. Go ahead and pretend that the stock slides down to $32 for argument’s sake. This is still a Mayer victory. To say it is not is simply to deny the memories going back to February of 2008 when Microsoft Corp. (NASDAQ: MSFT) offered to acquire Yahoo! for $31.00 per share in cash and stock, and all the Yahoo! missteps for years after that.
What you as an investor have to consider here is simply the stock price. When the market does not want to reward an effort or when a company does poorly, it is generally reflected in a poor share price. When things are great and expectations are high, it generally is reflected in the stock price. So doubters need to concede that they missed out on the Marissa Mayer boat.
If you want the proof in the pudding about why the Yahoo! doubters over the past year are the losers, just ask about the directionless days of Jerry Yang. Then ask about the Microsoft Corp. (NASDAQ: MSFT) buyout price. Do you remember that, after Carol Bartz was brought in after the Yang coup, she said she would take the $31 per share offer in a heartbeat if it ever came back? Do you remember the activist fight that tried mightily and handily to get Yahoo! to buckle?
Microsoft had tried to buy Yahoo! perhaps as early as 2005, if memory serves correctly. In 2008 the formal bid failed, then that nasty thing called the recession came and Yang’s title of Chief Yahoo! changed to Chief (Insert Explicative) for Yahoo! shareholders. If anyone asks for Yang’s advice for anything about what to do with Yahoo! now, it is merely so that they can do the exact opposite of what he would do.
And what about the Scott Thompson debacle? Mayer did not fudge her pedigree on prior resumes. When that Mayer appointment as CEO announcement hit in July of 2012, Yahoo! shares were trading around $15.70. Mayer was one of the top brass at Google Inc. (NASDAQ: GOOG), and she supposedly left with a “good luck” nod from Sergey and Larry. Other CEOs likely would have bashed Mayer for leaving to a competitor as being treasonous. The Google kids did not.
Maybe Google’s Larry and Sergey knew that Google’s search dominance and smartphone dominance were not going to be targeted by Mayer at Yahoo! Fresh data from comScore shows that total U.S. search still had a 66.9% share for Google sites as of September 2013, versus 11.3% for Yahoo! and 18.0% at Microsoft. Go back a year ago to September 2012 and the search results were 66.7% share for Google sites, 15.9% for Microsoft sites and 12.2% for Yahoo! sites.
Mayer obviously decided to focus elsewhere in content rather than search. We would point out that comScore’s July 2013 data revealed that more people visited Yahoo! sites in the United States, again versus the Google websites, for the first time in about two years. A caveat is that mobile was not counted at that time. Mayer’s working-from-home policies have not been popular and may be counterintuitive to trends of the past 10 to 15 years from other businesses.
The Yahoo! share price stayed in a no-man’s land after the Mayer appointment until mid-October of 2012, but on the first trading day of 2013, Yahoo! was a $20 stock again. It was a $24 stock by April of 2013, and a $27 stock by May of 2013. Yahoo! shares may have floundered until September of 2013, but Yahoo! shares were back at $30 by September 12, 2013, and were up to $33.00 by September 26, 2013.
Many new efforts are being made to make Yahoo! a technology and content destination. Mayer is continuing to make progress to unlock even more value in the Alibaba stake. Mayer even allocated almost $1.7 billion to repurchase 59 million common shares of Yahoo! stock in the last quarter while still spending $163 million for acquisitions.
What will be interesting to see is what happens with the Microsoft-Yahoo! search pact in the years ahead. Microsoft seems to have gotten the better part of that deal, and we are not prepared to make any predictions under a Mayer regime, and likely a new Microsoft CEO without the dominance of Bill Gates and Steve Ballmer in the day-to-day operations.
Do we need to bring up the Facebook Inc. (NASDAQ: FB) dominance of the Internet today? Mark Zuckerberg has come of age and monetized what was previously not being monetized, and its shares have doubled too. The difference between Facebook and Yahoo! is that Facebook did not have a decade-long business cratering before its latest share price double.
So, are you convinced yet about Mayer’s strategy? Maybe you do not have to be. The Microsoft buyout price before the recession was $31 per share. Even after Yahoo! shares slid 1% since this morning, Yahoo! shares have doubled in price under Mayer. We also would point out that the $31 per share offer from Microsoft in 2008 was a 62% premium to where the stock was before the deal came out. Mayer has now made Yahoo! shares worth far more than Yang did in his last leadership role at Yahoo!, worth more than any CEO since, and now made the stock worth more than Ballmer and Gates were willing to pay in great times.
The doubters may get to be proven right down the road, or they may not. For now all we can say simply is that winners know when they won.