Yahoo!’s (YHOO) Failures Now Drive Its Value
May 2, 2008 by Douglas A. McIntyreTrying to make sense of all the rumors about Microsoft (MSFT) buying Yahoo! (YHOO) and Yahoo! making a search deal with Google (GOOG) is senseless.. Only three or four people are actually playing the cards and they are all lying to one another. Steve Ballmer may be the biggest liar of all but he controls the most chips.
The only thing for certain is that, once this is all over, Yahoo!’s shareholders will be better off. Either it cuts a deal to outsource search to Google and that get approved by the government, or Microsoft puts Yahoo!’s long-time shareholders out of their suffering and buys the portal company for $31 or something in that neighborhood.
Yahoo! has a chip in the game because it was so poorly run. Ironic, but true. If it had pushed its search business harder five years ago, it might not have been overtaken by Google. If it had not gone through three CEOs over that period, it would be a sign that it had some long-term plan which was working.
Yahoo!’s value now is in its failures The have pushed its market cap down to $30 billion on most days. That would put it in the same league with CostCo (COST).
But, CostCo does not get anyone 20% of the US search market. For Yahoo! that figure could have been 40%, but, because it is not, Microsoft or Google may get lucky.
Douglas A. McIntyre
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