In the cult classic Groundhog Day, Bill Murray’s character Phil keeps reliving the same day over and over until he gets it right. Yesterday, Yahoo CEO Marissa Mayer announced yet another lousy quarter and I think her third strategic plan. Yesterday was Groundhog Day. Coincidence?
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On its face, it’s hard to imagine how a movie with such a mind-numbingly repetitive theme could have held anyone’s interest, but Harold Ramis’s brilliant screenplay and directing made it work. Too bad he wasn’t around to script yet another horrendous Yahoo earnings call.
Don’t get me wrong. For the past three and a half years, Mayer has shown herself to be every bit as stubborn and resilient as Phil was in the movie. Getting knocked down quarter after quarter and bouncing right back each time to do it all over again. But it is getting old. Apparently, it’s getting old for Yahoo’s board, too.
We’ll get to Mayer’s plan in a minute, but the highlight of the call was the announcement that Yahoo would consider strategic options, aka, selling the company. Finally, the board, minus Charles Schwab who resigned yesterday, had the good sense to pull out all the stops and put an end to the madness. Now that’s something to Yahoo! about.
The new strategic plan refocuses on three global platforms (search, mail and Tumblr), four verticals (news, sports, finance and lifestyle) in key geographies, and revenue growth via Mayer’s mavens (mobile, video, native and social). Never mind that the strategy is about as clear as mud, or that mavens growth appears to be slowing. Details, details.
The good news, at least for activist investor Starboard Value and potential suitors, is that Yahoo is dressing up its bottom line and balance sheet for sale: cutting non-strategic businesses, selling non-core assets, reducing spending on legacy operations, and laying off 15% of its global workforce.
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The big shocker was a massive $4.5 billion write-off, apparently against the dozens of lousy acquisitions Mayer made while trying to get things right. Never mind that this is what she should have been doing all along: focusing the business, cutting spending and generating cash. That’s the ticket. Too bad she was sort of forced into it.
Some things remain fuzzy, though.
ICYMI, Yahoo has long struggled to determine the best way to unlock shareholder value by separating its stake in Alibaba from its core business. After wasting last year trying to pull off a tax-free spinoff of the Alibaba assets, it finally decided that was too risky, reversed course, and is now planning a reverse spin of its core business.
But on the call, Yahoo CFO Ken Goldman said the reverse spin would likely be taxable after all. Maybe I missed something, but how is that different from executing the original spinoff and letting the IRS decide if it’s tax-free or not? The new plan will take yet another 9 to 12 months to complete.
And one analyst on the call wondered how management would find the bandwidth to pursue three strategic plans at once, namely the restructuring plan, the reverse spin and exploring strategic proposals. Mayer’s response was that the company would focus on executing the restructuring plan, since that creates shareholder value for all the options.
Brilliant, right? Well get this: Nearly a decade ago, Yahoo SVP Brad Garlinghouse penned an internal memo attempting to convince his fellow Yahoos that the company lacked cohesive vision and was spreading itself too thin, like peanut butter on bread. That came to be known as the Peanut Butter Manifesto.
That was five or six CEOs ago; I’ve sort of lost count. And now, after countless acquisitions, product launches, site redesigns, and strategies to unlock shareholder value, Mayer has finally decided to quit throwing spaghetti at Yahoo’s purple walls to see what sticks and come up with a focused strategy that makes some sort of sense.
The irony is, this was the right turnaround strategy all along. But the path to get here was so convoluted and tedious, I think everyone’s too sick and tired to stick around and see how the movie ends. That’s probably why the board is finally open to selling the core business. Enough is enough. It’s time to end the movie.