Yahoo (YHOO) defanged the Carl Icahn threat. So, what’s next?
First, a mediocre quarter: Q2 results in line with previous guidance (probably middle of range) and an OK but uninspiring outlook. How will Yahoo report such results when display-ad driven Internet companies are blowing up all around it? Because it has had the good fortune of having set the bar so low that it can fall over it. To be sure, there’s still time for the company to blow Q3 or Q4, if the ad market continues to deteriorate, but we suspect the Q2 numbers will be OK.
Second, a statement of support for bloodied leader Jerry Yang (or, alternately, a face-saving resignation). Jerry has rallied of late, showing some fight and guiding the company through the Icahn storm. Given the rampant speculation about the need for his resignation or ouster, however, Yahoo’s board needs to either:
- Throw him under the bus, or
- Double down and reiterate its full support.
Based on what we’ve heard, we expect the Board to reiterate its full support for Jerry. Not during the earnings call, but soon thereafter (the sooner the better).
The Board’s logic? Jerry’s been in command for about a year. The first few months were spent putting together a strategic plan (“Start page”). The next six were spent dealing with one of the most high profile unsolicited takeover offers in history, followed by a proxy fight. Translation: We think he deserves a chance to show he can execute.
We don’t think that message will sit well with Yahoo shareholders still pissed off about the blown Microsoft deal, but far better to have clarity than a rumour a week for the rest of the year about Jerry’s impending ouster. The mob is fickle, and if Jerry can show strong, decisive leadership in the next few months (and good numbers), this crisis will blow over like a storm moving out to sea.
Third, a Robert DeNiro-style motivational speech about commitment and loyalty–followed by the defenestration of every Yahoo senior executive who isn’t committed to a 2-3 year turnaround. The talent bleed has to stop. The only way to make it stop, in our opinion, is to go executive by executive and show the wishy-washy ones the door. (How to do this? Offer an attractive severance for all who leave now, and zilch for anyone who quits in next two years). If Jerry can’t or won’t do this, he himself should be shown the door.
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