] HipMojo.com » Jim Cramer’s Blasphemy: Yahoo!’s Terry Semel Must Go

Jim Cramer’s Blasphemy: Yahoo!’s Terry Semel Must Go

After the dot com bubble burst, many quality companies had to raise from the ashes, and like a phenix, Terry Semel helped pull Yahoo! out of the ashes.  The moment of validation, I think, came in Q1 2004 when investors pushed up the stock some 10-15% - and a stock split - after it announced a sharp rise in revenues and profits.

As much as Terry Semel deserved a lot of credit, at the time, I think a lot of people laid too much of the credit at the feet of Mr. Semel.  Similarly, some are now perhaps putting too much of the blame for Yahoo!’s woes on Semel.  The fact that this comes from none other than Mad Money’s Jim Cramer speaks volumes.  Cramer argues that the stock would pop from $24 to $28 if Semel were to announce his resignation.

Of course, there is no word that Semel is leaving to go anywhere anytime soon… but as a big fan of Yahoo! and a shareholder, I must say: something is wrong with Yahoo! 

Is it?

For short sighted stock speculators, it is worth mentioning indeed that the stock is now sitting at the bottom of its 52-week range, at $24, far off its $43.66 peak over the past 12 months (of by over 45%).

The odd thing is that while everyone is hyping up online advertising, it should be noted that Yahoo! is the best positioned company to benefit thereof: it can take advantage of all forms of online advertising (display/banners, video, search, etc) whereas most of its competitors cannot.

Oh, it’s also printing money: Yahoo! is doing quite well, in the first 6 months of 2006, Yahoo! generated over $300 million in profits on over $3 billion in revenue! 

Of course, it is not growing as fast as “you know who”, nor does it have as juicy margins, but the variance in growth and margin does not, if you ask me, justify Google being worth $120 billion to Yahoo!’s $30 billion. 

Is Google worth four times more than Yahoo!  That steep discount is why I am a Yahoo! shareholder.  I can confidently say that in 1, 3, 5, 10 years, Yahoo! will be worth more than it is today; while I suspect that so will Google, I am less confident about making that claim (though if they will be, I think they will be worth far, far more - hence the risk/return analysis at its best).

And as a shareholder, I must say that despite’s Mr. Semel’s status as a great executive, it is true that Yahoo! needs someone perhaps more agile, younger, with more energy, who lives and breathes the Web. 

Think about it: when Yahoo! needed to rise from the ashes, it brought in a turnaround artist: Warner Bros.’ Semel.  I certainly think that Mr. Semel should remain on as Chairman, maybe even CEO, but looking at the folks making up the company’s depth chart, I expect that they could benefit from someone who is willing to move at Web speed to make things happen.  This has nothing to do with matching and beating Google’s bid for YouTube, or closing Facebook; it’s about finding out early what the next hot trend is going to be and leveraging Yahoo!’s enormous size, or, as they did with Deli.cio.us and Flickr, acquiring a company early enough before it gets hot and a bidding war ensues.

Perhaps that is the problem: Yahoo! is a bit too much on cruise control, which is not a bad thing, until you look at its stock!

It is certainly not too late for Yahoo! to turn things around and finish off strongly in Q4. 

Disclaimer: I own shares in Yahoo! and will probably buy more after their presumedly lacklustre Quarterly report, but that does not mean that you should too…

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Posted By: Ashkan Karbasfrooshan | Oct 11th

2 Responses to “Jim Cramer’s Blasphemy: Yahoo!’s Terry Semel Must Go”

  1. HipMojo.com - IT, Video, Web, Technology, Gadgets » Take Yahoo! Private, Triple Your Money in Four Years? Says:
    October 30th, 2006 at 1:47 pm

    […] It’s been a rough week or two.  Money magician Jim “Can I Get a Booyah?” Cramer come out and suggests that Yahoo! would pop a few bucks (from $24 to $28) if Chairman and CEO Terry Semel gets canned.  Well, sir, since the stock is halfway there can Mr. Semel stick around?  I am all for bringing in someone who lives and breathes the Web but you might as well keep Terry Semel as Chairman and CEO… but who am I to argue with Mr. Cramer? […]

  2. HipMojo.com - IT, Video, Web, Technology, Gadgets » A Not-So Insider’s Inside Look at IGN/FIM Mark Jung Mgmt Shakeup Says:
    November 4th, 2006 at 8:27 pm

    […] But since he’s never run a publicly-held corporation (and News Corp. would never allow him to walk over to CNET), so there’s Yahoo! who might want a savvy #2 who is more online oriented than Chairman/CEO Terry Semel.  Read more on that here. […]

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