When Marissa Mayer was hired as CEO to save Yahoo more than three years ago, she was greeted as a conquering hero despite what many considered a next-to-impossible task.
Today, she faces more pressure than ever to turn the Internet icon around.
As Yahoo’s board mulls the sale of the company’s Internet business, according to news reports, Mayer and Yahoo face a litany of problems.
Its take of global digital ad sales is shrinking. Yahoo’s slice of the search market hasn’t budged. The stock (YHOO) has slid 29% this year, even with intermittent breaks such as Wednesday’s rally.
Yahoo declined to comment on whether the board was holding a series of meetings on the potential sale of its Internet business, which was reported by The Wall Street Journal on Tuesday. Selling is one of several options the board has considered as the company continues to struggle, a source close to Yahoo told USA Today. The source asked not to be named because he or she is not authorized to speak on behalf of the company.
What had become an increasingly untenable situation worsened after influential activist investor Starboard Value demanded Yahoo keep its more than $30 billion stake in Alibaba Group Holding and sell off parts of its core Web business. In a letter to Mayer and other executives, delivered in November, Starboard pointedly asked for a “change in culture,” though it didn’t go into details on what the change would be.
Starboard did not return a phone message.
The spin-off is likely to be completed in January.
Investors are not only growing restless, but Yahoo employees are souring on Mayer, Yahoo’s sixth CEO since 2007. Since she took over in July 2012, the company’s annual revenue has declined 7%. And profitability has plunged despite $7 billion in spending on mergers-and-acquisitions and research and development amid an executive exodus.
Meanwhile, an annual employee survey found that a significant number of Yahoo’s employees disapprove of Mayer’s job performance, according to a source close to the company who requested anonymity.
Yahoo declined to comment on this report, and Mayer was not made available for comment.
With the market now valuing Yahoo-minus-Alibaba at less than the value of its other equity interests, what is there to sell to move the stock higher?
The answer, technology investors are saying, is “nothing.”
A look at Yahoo’s strategic position shows why.
Yahoo is a distant third in the search advertising market behind the much-larger Google and Microsoft. Its search advertising revenue came in below expectations in the third quarter, as Yahoo search ad pricing fell 2%.
Meanwhile, in the market for mobile advertising, Yahoo isn’t No. 1, No. 2 or No. 3. Those spots belong to Google, Facebook and Twitter, respectively, which is why the stock market doesn’t make much of Yahoo’s position in that fastest-growing business.
Likewise for all of Yahoo’s high-profile investments in media content, whose incremental revenue contribution may be short-lived. Yahoo sales are seen rising 11% this year to $4.9 billion, then falling 2% in 2016, according to analysts polled by Thomson Financial.