As a general rule, I don’t like to publicly ask for the resignation or dismissal of the CEO and Chairman of the world wide web’s largest media Empire. It’s not exactly good business when you are trying yourself to create a mini global web empire of your own. Notice the small e in our empire, and big E in Yahoo!’s.
The Empire Has Yet to Strike Back
But, when you’re also a writer of a website that questions what Wikipedia should be worth as a for-profit, if Google can overtake MSFT in market cap, whether Google overpaid for News Corp.’s search business or if it’s the 21st century version of Standard Oil or Microsoft, you can’t help but ask the question:
When competitors Google, InterActive Corp. and company are all starting to either build on their lead on Yahoo! or catch up Yahoo!, is it time for a change at the top?
Of course, over time, it will be clear that Google and Yahoo! are not competitors per se. But Yahoo! has not really surpassed many direct or indirect competitors this year, has it? In fact, Yahoo! now has a swarm of new competitors, i.e. News Corp.
When you are that big, that happens. Microsoft has grown revenue and profits and yet its stock price has languished. As the cliche goes, every incremental yard to the goal line becomes harder to secure the closer you get to the end zone. We’ve all seen the flick.
Put Stock in People
But I am also a shareholder, and while I can put up with Yahoo!’s stock falling from the mid-40s price range all the way down to $23 (I am, after all, a long term believer in the web and Yahoo!’s place atop of it, so I will hold on to those shares probably forever), there is one thing I cannot really put up with.
When a company’s own people stop believing in the firm’s Mojo. That’s when I know maybe the stock should not be a perennial holding. After all, even Warren Buffett has changed his perennial holdings, hasn’t he?
Mr. Semel pulled off a masterful turnover in 2003. He got Yahoo! out of a funk: the sub-$10 stock price rose along with revenues and profits, culminating with the Q1 2004 earnings report, after which the stock rose another 15% on the next day. He called for a stock split, and since then, Yahoo! has done very little to get me excited.
But when you look at how much Yahoo! is losing top talent, you start to ask questions. Yes, it is normal in the giddy environment we are in now to see top and mid-level managers leave, as Paid Content is reporting. But when there is a list of others who might be bolting, you start to ask questions. But if what others are reporting that Semel was booed by his own staff, then the problem runs deeper (of course, take everything from ValleyWag with a grain of salt). Of course, these rumors need not be true, the mere fact that they exist suggests a major problem.
No one boos (within MSFT, loudly) Steve Ballmer or Bill Gates, even if they sometimes they might deserve it.
No one boos Larry Page, Sergey Brin, or Eric Schmidt.
Yet when the rumor comes out that Yahoo!-staff booed Semel, they are not quickly dismissed. We almost expect it to be true, or want it to be true. There is a major problem there.
I have worked alongside a boss who had lost the respect of his team. When that happened, I knew it was time to leave. I left for various reasons, mind you… but it made no sense to stay in that environment. It turns out I was not alone, a lot of others left too. We did not all leave to start new companies, we left cause after a while we realized there was no point in staying and going against the grain with someone who had too much power and too little tact.
This is an important consideration: are people leaving Yahoo! because they seek greener pastures and want to join new ventures, or is it because they no longer respect Semel’s vision? Is there a vision other than the status-quo?
In fact, the same Valleywag post adds something that made me cringe: “To which [Semel] responded by challenging critics to leave the company if they didn’t like its direction.”
Of course, VW’s own boss Nick Denton was quick to add that the rumors were unfounded: “hmm, first email returns not very encouraging: ‘he wasn’t booed, and it wasn’t a ’special internal meeting’. it was the regular quarterly all-hands and his message was pretty well received, i think.”
Ok, good. I’m glad we put that to rest, I think. What’s up with the “I think” at the end though?
Could it be that maybe all is not too well in Yahoo!’s HQ? After all, a lot of my colleagues also used to say “all is well,” but when the dust settled, only 33% of the initial team remained, the remaining 67% of the original crew bolted: VPs, editors, sales guys, tech guys. Of course, my old company had 1% of Yahoo!’s headcount, but organizational behavior is organizational behavior; so is bad management.
Of course, no one is accusing Mr. Semel of bad management, or mismanagement. The problem might be in today’s mood: we’re back in the gunslinging mode where we want major, “gamebreaking” deals with an immediate impact. News buys Myspace and becomes a major online player… boom! Google buys YouTube and becomes #1 video player… kapow!
Running with the boom, kapow Batman analogy, another problem is that Semel might not have a Robin to weave through the current threats and opportunities of the Web.
Rumors and innuendo aside, what’s the answer: should Terry stay or should Terry go?
I think that in today’s climate, we are starting see stability trade at a discount. Managers (and investors) are once again putting a premium on risk taking and the almighty high-flying stock. No matter what Mr. Semel does, or does not do, financial results will increasingly play second fiddle to the stock price.
As a coach, you can have a wonderful game plan and do 9 out of 10 things right in a game, but if your win-loss record is abysmal, you’ll be fired. Mr. Semel has proven to be a magician many times over, but after his massive 2003 payday, maybe he is not the best man for the job at Yahoo!
In other words, even though he might not be to blame per se, and Yahoo!’s financial performance is otherwise pretty stellar, at some point the fact that many of his lieutenants and soldiers’ stock holdings are in the red and their options out of the money will cost his job no matter what.
Remember one thing: before Semel, there was another respected executive who had done wonders with Yahoo! whose time had passed: what was his name again? Oh right, Tim Koogle. Mr. Koogle, it could be argued, was a victim of a systematic, market problem: the dot com meltdown. His successor, Mr. Semel is a victim of a unique, unsystematic ailment. Doesn’t that say anything?
The Institutional Imperative?
A large chunk of Yahoo! stock is held by institutional investors, co-founder David Filo remains a large shareholder, the other co-founder Jerry Yang remains a charismatic leader who could himself pull a Steve Jobs and come back to the helm. I know it might be easier for Yang to recruit top talent than for Semel to retain at this point.
Of course, maybe I am being impatient by bringing this up. Just this past week, Web 2.0 was decreed dead and Web 3.0 was ushered in by none other than the New York Times (so of course, it must be true). Maybe we will lose our obsession with flash (pun intended) and return to valuing substance, at which point Mr. Semel will return to being hailed a master for not acting impatient and sticking to his guns.
Manage the Clock
Time will tell for Yahoo! It’s a just a question of whether there is enough time on the clock with Terry Semel running the offense.
Disclosure: I own shares in Yahoo! but that does not mean that you should too…
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