Yahoo!’s New Boss, Same as the Old Boss

For a company that operates on internet time, Yahoo! seems to move at a glacial pace. The stock's swoon has taken it back to levels seen last fall, when big Boston fund complexes decided they had seen enough, and left elephant sized footprints in the chart.

Although Jerry Yang co-founded Yahoo! and helped kick start the industry, he has embarked on a 100-day strategic review to poke around under the hood. But time is a wastin', as Sue Decker so eloquently recently suggested:

Yahoo President Susan Decker highlighted several recent errors, including the failure to more swiftly revamp the company's method for matching ads with search results—a lucrative talent perfected by Google. Decker also lamented Yahoo's reluctance to shake up its staff. "We have been at times risk-averse in making personnel decisions," said Decker. BusinessWeek

With the online advertising market expected to grow 28% this year to nearly $22 billion, the opportunities should be plentiful. But analysts are busy slashing earnings estimates. William Blair's Troy Mastin beat up on the stock back in March via a downgrade, and like the rest of the Street slashed his estimates significantly after the recent conference call:

The midpoint of 2007 net revenue guidance was reduced by 3%, the midpoint of operating income by 25%, and operating cash flow by 10%. With the company only at the beginning of its turnaround efforts and continued softness in a number of key areas, we are lowering our estimates significantly. EPS for 2007 is reduced from 51 cents to 44 cents and 2008 from 67 cents to 52 cents. William Blair Research Note

The revisions were certainly a little deeper than most people expected, but industry trends will keep the wind at Yahoo!’s back. Video ad sales offer a huge opportunity. The nascent medium should clock in under a billion dollars in revenue this year, but should hit the $3 billion mark by 2010.  The migration from from television should supercharge the growth from there, as the $40+ billion television ad market comes up for grabs and migrates online.

A quick fix is at Yahoo! is not in the works. And in 6 hours Google’s conference call could raise Yahoo!’s threat level to Defcon four. Investor’s expecting a little spirited counter punching out of Sunnyvale post-Semel have been disappointed.

Because they are getting a bad version of the rope-a-dope.  But this time the tactic won’t work, given that the retread management team is far from the greatest.

Yahoo and Intel: Tech Sector Outcasts
Business Week
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The content contained represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No position in securities mentioned

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