The disorder at the top of Yahoo and its failure to launch groundbreaking
products make the company easy to dismiss as a basketcase. But about 700m
users visit Yahoo sites each month, according to ComScore. They visit, on
average, for more than two hours. And these numbers are stable.
This is why Yahoo’s revenue last year, at $4.2bn, was only slightly lower than
it was five years before. And the business generates good cash flow – about
$800m a year. This on top of $2.5bn in net cash already on the balance
sheet.
Run for cash?
Given how stable the business has been, its low valuation, the cash it holds
and its poor record of developing products, it is also easy to conclude that
the company should be run for cash. This would be a mistake.
It may make sense to return cash from the divestiture of the company’s Asian
assets to shareholders. But a half-decade of stable revenues does not mean
the rules of the consumer internet do not apply to Yahoo’s core business.
Risky
When the decline comes, it is likely to come fast (and in fact, one of the
company’s key products, Yahoo Mail, does seem to be in accelerating
decline).
The only reliable way to protect what Yahoo has is to add to it. The new CEO
is an ace engineer (and manager of engineers). The only reason to bring on
such a person is to turn Yahoo into a place where hotshots with ideas can
come and receive lots of funding for trying ideas on a huge audience - and
get lots of stock options in return. Risky? Expensive? Absolutely. Better
than the alternatives? Undoubtedly. Let ’er rip, Ms Mayer.
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