Everyone seems to be an armchair consultant when it comes to Yahoo!
"What Yahoo Should Do" is the header on yesterday's blog entry on Mark Cuban's BlogMaverick.com site. The media mogul details his plan for Yahoo! to get over Microsoft
Cuban certainly has a history with the purple profit eater. He became an overnight billionaire when he sold Broadcast.com to Yahoo! before the dot-com bubble popped. He was also one of Carl Icahn's original choices earlier this year for a revamped Yahoo! board of directors.
Cuban is always worth listening to, even when he's wrong (as in when he bankrolled the smackdown on China Fire & Security
And when the subject turns to Yahoo!, he's seen the sawdust inside the sausage factory.
So tell me more about this Cuban flotilla
Microsoft CEO Steve Ballmer is toying with Yahoo!, according to Cuban. "Ballmer has become the master of talking in circles about what might happen with Yahoo," he writes. "He knows when and how to say enough about Yahoo that it totally confuses the Yahoo Board and Executive Team. ..."
Yahoo! finds itself rudderless, Cuban suggests. Instead of focusing on a strategy to maximize growth and profitability, Ballmer's playful nibbles leave the company juggling internal priorities with parachute ripcords.
Cuban isn't the first to suggest that Microsoft is just toying with Yahoo!'s emotions. I did just that two months ago. However, since Cuban is way wealthier, more street-savvy, and owns one more NBA franchise than I, I'll let him plant the flag.
Cuban is certainly right about the Mr. Softy distraction. Shareholder expectations have been heightened since Ballmer began spewing pickup lines 11 months ago. Absent the software giant's meddling, we probably wouldn't have even entertained the demise of outgoing CEO Jerry Yang.
Yes, Yahoo! will never be Google
Where Cuban is wrong
I don't necessarily agree with Cuban's assertion that Microsoft -- even though it has enough in net current assets to do so -- won't fork over $10 billion to $15 billion for Yahoo!'s search business, or possibly a bit more for all of Yahoo!. I also don't buy his assertion that Microsoft can't afford to invest in both Facebook and Yahoo!
Keep in mind that this is the same company that was willing to pay roughly three times that much for Yahoo! earlier this year. This is also the same Microsoft that announced a $40 billion share repurchase plan three months ago. Unless its model erodes quickly, Microsoft is a cash-flow-generating beast. The greenery on its balance sheet is quickly replenished.
Cuban suggests that Yahoo! should go on a buying spree of its own, using its stock as legal tender. If that strategy is good enough for Yahoo!, why can't it work for Microsoft?
Where Cuban is right
"Yahoo should be the most aggressive acquirer on the planet right now," Cuban writes. "If you look at it objectively, this economic crisis and Yahoo's incredibly strong balance sheet have put it in a position to become a much stronger company via acquisitions."
You won't find me disagreeing with Cuban there. In fact, I've been keeping that cheering section warm for some time now.
"If Yahoo! was smart, it would take that $3.3 billion in cash and marketable securities on its balance sheet and go shopping," I wrote two months ago. "Instead of buying display ad networks, it should concentrate on high-traffic sites that draw the audiences made for paid search advertising."
It's not as if Yahoo! hasn't been hitting the boutiques like Carrie Bradshaw. Unfortunately, it's buying all of the wrong Manolos. I'm not talking about photo-sharing site Flickr, or even social bookmarking site del.icio.us. That is the appropriate path for Yahoo! to take. My problem is that it has typically keyed on display-advertising swallows like Right Media and BlueLithium
Yahoo! should be hungry for sites that target desirable audiences where sponsors pay top dollar for paid search ads. That is where Google is creaming Yahoo!, so why not go after wedding-planning hub The Knot
Yahoo! has more than enough cash to gobble down all three of those companies, though it can always aim higher and use its stock as collateral (as Cuban suggests).
Ultimately, Cuban is right about Yahoo! having to save itself. It can't just tie itself to the tracks and hope that the damsel-in-distress routine will smoke out a hero. The hero has to come from the inside.