Yahoo – Restoring the Growth

This is a repost of our strategy piece for Yahoo in late 2011, Someone needs to send it to Ms. Mayer before it is too late.

Yahoo! has been the subject of many rumors since the firing of CEO Carol Bartz. It has been a possible acquisition candidate for Microsoft, Google and various Private Equity firms. Alibaba.com, who Yahoo owns approximately 42% of, was also mentioned.

The latest rumors involve Yahoo selling a minority stake, 20-30%, to a third party PE firm or maybe even Microsoft. Through out all of this Yahoo has yet to find a new CEO.

None of the discussed solutions would return Yahoo to its former glory as an Internet growth stock. Growth at Yahoo has been flat for a number of years and all attempts to reinvigorate the business have failed. Yahoo needs to take the money it has made on its Yahoo Japan and Alibaba.com investments and implement a three pronged attack to re-invent the firm and find the next big thing AGAIN. My suggestions are:

The ability to grow revenue is necessary for all firms looking to generate above average returns for their investors. Yahoo has had revenue growth issues, as everyone knows, for many quarters. My analysis, along with conversations with people I know in the valley, has convinced me the current Yahoo business portfolio will not and cannot provide suitable revenue growth. Changing the CEO will not fix this nor will updating the platform. Yahoo needs a change in strategy, it has a great brand name and is still profitable, but it needs make one or more acquisitions to restore the growth investors are demanding.

Yahoo should be commended for its astute investments in Yahoo Japan and Alibaba Group, now is the time to use those investment as the foundation of their next wave of growth.  The Yahoo Japan stake would generate approximately $6 billion in cash. The Alibaba Group stake might take longer to unwind. Once the stake is monetized, Yahoo should have another $5-$6 billion, depending on taxes, plus of cash, as the stake in alibaba.com alone is worth approximately $12 billion. The total cash influx of $12-$18 billion, depending on taxes, should be used to;

  • Make a suitable acquisition(s), Hulu came to mind, before it was pulled, to grow revenue in the short term
  • Create a $500-750 million internal VC fund to incubate the next big business for the longer term
  • Buy back stock or Dividend

The plan I have outlined would generate short term revenue growth via acquisition to restore investor confidence while the longer term incubation fund will growth the next big thing for Yahoo. The share buyback will help EPS and stock price in the shorter term while the plan is being implemented.

Yahoo is a firm that had the vision to make investments for the future and now is the time to use those investments to move Yahoo into its second wave of growth.

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BytesfromBits Is look for a great mobile app developer

We have a few mobile app ideas that we want to pursue here at Bytes from Bits. To make these apps come to life, we need to find a lead mobile app developer/manager, experienced in both iOS and Android, to lead the development process and write some code. This will be a separately funded venture from the blog . Please contact us for more information at jim.csv@gmail.com

We are Seeking Person to Lead Mobile Expansion

We have a few mobile app ideas that we want to pursue here at Bytes from Bits. To make these apps come to life, we need to find a lead mobile app developer/manager, experienced in both iOS and Android, to lead the development process and write some code. This will be a separately funded venture from the blog . Please contact us for more information at jim.csv@gmail.com

Mobile App Developer Wanted

We have a few mobile app ideas that we want to pursue here at Bytes from Bits. To make these apps come to life, we need to find a lead mobile app programmer/CTO, experienced in both iOS and Android, to run the development process. This will be a separately funded venture from the blog. Please contact us at jim.csv@gmail.com

Pew Research on Paywalls

Paywalls have be the holy grail for newspapers and magazines looking to generate revenue via online content. We have never been a fan of paywalls, but do understand firms desire for additional revenue. The only media firm successful at it has been the Wall Street Journal, all others have over time put up, taken down, put up again and taken down again their paywalls. The latest report from Pew might change some minds on the issue – Radar

Global IT Spending Predicted to be $3.7 Trillion in 2013

Gartner Group  has released its projections for Global IT spending in 2013 and shows 3.9% YoY growth. $3.7 Trillion will be spent on IT, but “Uncertainties surrounding prospects for an upturn in global economic growth are the major retardants to IT growth,” said Richard Gordon, managing vice president at Gartner. Enterprise software has the highest projected growth, 6.4%, in IT spending for 2013, according to Gartner, with spending of $296 billion. – TechCrunch

Research Corner – Tablets and More Tablets

A couple of research reports have been issued today. First IDC is raising its projections for 2012 and 2013 tablet shipments, 2012 is up about five million and 2013 is up about seven million. The bigger news is that Windows tablets are projected to have rapid growth over the next four years, capturing 10.3% of the market by 2013! IDC

Second Neilsen has released data indicating 20% of homes own a tablet, less than the 30% that own a smartphone. Nielsen says that 85 percent of mobile owners use their tablet or smartphone while watching TV at least once per month, and 40 percent do so daily. Surprisingly the group with the highest tablet usage is? 55-64 yr. TechCrunch