Yahoo! (Nasdaq: YHOO) is scrambling for stability after a number of high-profile executive departures. The Big Bad Wolf needs only cough to bring the present house of cards down; stronger structural support is much needed.
What's wrong?
Renowned technology news portal TechCrunch has reported that Big Y is on the very brink of another major reorganization, but fresher sources say that the company is simply plugging holes in the dam, one by one. But if Yahoo! wants to have a fighting chance from here on out, it should follow where TechCrunch is pointing: A veritable tsunami of outflowing talent is forcing Yahoo!'s hand, and too many top executives are leaving to make the current structure stable in the long run.
Bring in the Bartz!
CEO Carol Bartz was brought in from software powerhouse AutoDesk with the mission to breathe new life into a sagging operation. At AutoDesk, Bartz was credited with turning around a dying brand; Yahoo! was in dire need of that special sauce. The proposed merger with Microsoft (Nasdaq: MSFT) had recently evaporated into a missed opportunity, turning a potential lifesaver into a kiss of death. AOL (NYSE: AOL) was still struggling to free itself from the culture mismatch with parent Time Warner, leaving the portal market ripe for a resurgent Yahoo! to assert itself. A hard-charging operations expert seemed to be just what the doctor ordered.
Not even two years later, Bartz's efforts appear to have been for naught. Like her predecessors, Bartz can't even explain what it is that Yahoo! does for a living, which points to a fatal lack of vision at a time when a clear view of the future seems crucial. A promised return to Portals 101 hasn't produced any tangible results. She has seen many of her top supporters and handpicked specialists leave the company entirely.
Who's next?
Many observers now wonder if AOL CEO Tim Armstrong could do a better job of managing Yahoo! after a quick reverse-merge move. Fellow Fool Tim Beyers doubts it, and I agree with him. As much as I admire Armstrong, his fading company won't add any value to Yahoo!'s business.
Here's a better idea: Armstrong's former employer, Google (Nasdaq: GOOG), is among the finest performers in the e-business space. Moreover, Google seems to be the tech talent incubator of choice -- if hirings by Facebook and Twitter are anything to go by. Why not put in a few cold calls to high-level Google execs and invite them to talk turkey over lunch? The two headquarters are less than 15 minutes apart, so it should be easy to arrange a couple of clandestine meet-ups.
A refurbished Yahoo! with a clearly defined corporate mission, working under clear-eyed leadership by a top-notch Google leader like Android champion Andy Rubin or user experience expert Marissa Mayer would be an operation worth investing in. These people are used to winning and have tons of experience that's relevant to Yahoo!'s core business.
The current problems? Not so much of a buy-in opportunity. It would take some serious cajoling, but Mayer or Rubin would be worth whatever they might ask for.
Plan B
But then, neither Mayer nor Rubin might want to risk their careers on this cross-town move. Google would still be a fine place to look for character actors to fill out the lower ranks of Yahoo!'s corporate structure.
Lower-level Googlers have already shown a willingness to move elsewhere if the price or the perks look good; Yahoo! has a bankroll of $2.7 billion to finance its offer letters and still generates over $330 million of free cash flow per year that can keep the paychecks coming. To put this into perspective, Mark Hurd accepted the very respectable title of co-president at Oracle for about $11 million a year in salary and bonuses. That's an ultrahigh-profile hire, and Hurd was reportedly good friends with Oracle CEO Larry Ellison before he looked for a job -- two factors that would inflate any paycheck. Yahoo! could pick up a lot of much-needed talent by spending $100 million or so.
Good luck, Yahoo!
The company needs to pull off a turnaround the likes of which we haven't seen since IBM remade itself in the 1990s. If Yahoo! plugs its management holes in just the right way and then gives the new hires the tools and the power required to make a difference, it can be done. I'm asking Yahoo! to become more like Google, and not just in where the hires should come from; an open management structure with a very clearly defined set of goals would be an excellent place to start -- and Google has that in spades.
Add Yahoo! to My Watchlist to keep an eye on how this story unfolds.
