When it comes to researching stocks, I spend the bulk of my time trying to value companies. I use a variety of methods, from discounted cash flows to comparables to throwing a baseball at a calculator and using whatever numbers it hit. All methods have worked at one time or another. But one thing I have not done is to try and value a person... financially. Yahoo! (Nasdaq: YHOO ) recently offered a five-year, $100 million package to its new CEO. Could it have gotten a good deal, or did it fall into a value trap?
Mirror, mirror on the wall...
...how much is Marissa Mayer worth to us all?
Well, let's find out. So, after stock options and hitting performance targets, Mayer will be paid around $20 million a year. Let's use the comps model to kick things off. Apple (Nasdaq: AAPL ) CEO Tim Cook was paid $376,180,000 in 2011. Now, it is necessary to note that Cook received around $900,000 in salary, and had a "one-time" stock-based compensation of about $375,000,000. But, for the sake of fun, let's just go with it.
In Tim Cook's first year, revenues went from $6.523 billion to $10.824 billion. That's around a 66% gain. Nice. Using some pseudo-math, Cook was paid around $5,699,697 per 1% gain in revenues.
Now, with Mayer making $20 million, give or take, she would be worth her weight in Cook-dollars if the company were to gain about 3.5% in revenues for her first year. Well, that sounds quite doable.
Obviously, Tim Cook's pay was absurd. So let's go to 2011's second-highest-paid tech CEO, Larry Ellison of Oracle (Nasdaq: ORCL ) . In 2011, Ellison made $77.5 million. Doing the same math, we come to the conclusion that Ellison was paid $18,452,381 per 1% gain in revenues. That would mean that Mayer would be expected to raise Yahoo! revenues by a little over a point. Looks like Ellison might be overvalued, but what about Mayer?
As you may have heard by now, Marissa Mayer comes from the now debatably labeled "tech" company Google (Nasdaq: GOOG ) . At Google, Mayer was in charge of Local, Maps, and Location Services. For this part of the valuation, I am going to use baseless opinions.
My feelings on Google Maps are mixed. In a way, it is an awesome service. While driving at 80 mph down the interstate, I can simply look down at my phone for a few minutes and find a Five Guys for some quality roadside dining. It's amazing.
On the other hand, if you are in any kind of densely populated area, or moving faster than the speed of smell, Google's location services tend to place you about two streets over from where you actually are. What kind of idea was that?
I like that I can type "goldfish enthusiasts club" in the search bar, and Google finds me all of the goldfish enthusiast clubs within a 10-mile radius. Those are otherwise difficult places to come across.
All in all, I would give Mayer a solid "B" as the leader of the Local, Maps, and Location Services division of Google. And compare that to Steve Ballmer, whom I have given a "G" in all categories.
The Mayer of Yahoo!
Marissa Mayer may be just what the activist investor ordered for Yahoo!. She is getting nearly twice what Carol Bartz was given for the gig, but Bartz also was a disappointment. What I like about Mayer is that she has a strong product background and worked in a company -- and specifically a division within that company -- that was able to monetize the search game quite successfully.
Yahoo! fell behind a few years ago -- it lost its edge. Many investors, and more important, users, have turned their backs on the service. With the company in such dire circumstances, the timing is perfect for a savior. Mayer has the opportunity to walk into a dinosaur of a company and turn it into an IBM. This is a leader's dream.
Say what you will about the company as it exists today, but I am excited for the future. And the future, as we have modeled, hasn't come at too high a price.
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