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Yahoo (YHOO)
Hope for Yahoo?
Since being hired by Yahoo, CEO Carol Bartz has wasted no time in changing around the internet search giant the way she sees fit. Ms. Bartz has only been at the company for a little under two months, but already overhauled the management team. Most recently, it was announced that CFO Blake Jorgensen would be leaving the company, though no reason has been given as to why. Otherwise, responsibilities have been consolidated and new positions are popping up left and right. All of her recent moves indicate that the company is establishing itself for better times ahead, however long that may be. That said, does this mean the company is now on the right tracks?
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Maybe, but it would be more accurate to say it is still laying the foundation. Declaring who does what only creates opportunities for change, and there are still many things in need of repair. For example, Ms. Bartz still has the corporate vision to focus on, the shareholders to report to, and ultimately the consumers to convince. Though new consumer-targeted ad products are being introduced, the business strategies are somewhat unclear. However, she is off to a good start. By creating a sense of urgency, she is making herself the catalyst for change -- just what Yahoo needs.
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On the other hand, the tech giant has gone through more than half a dozen restructurings in the last two years. None of them have been sufficient in recapturing market share from Google (GOOG: Charts, News, Offers) and other online search engines. However, just this month it was reported by comScore (SCOR: Charts, News, Offers) that Yahoo's market share for online search grew from 20.5 to 21 percent. Their number one rival, on the other hand, saw a decline of 0.5 percent. The other rival, Microsoft (MSFT: Charts, News, Offers), saw their share climb from 8.3 to 8.5 percent. It would be nice to say that things are looking better for Yahoo, but one month of positive numbers is not enough to declare that the company has completely turned around. Furthermore, many believe Google's search is more powerful and retrieves better results than Yahoo's. They will need to overcome this obstacle if they truly want to improve.
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If they can increase their market share, they would be more valuable to Microsoft. Steve Ballmer, CEO of the largest tech company in the world in terms of assets, has stated that he is not interested in merging with the Sunnyvale-based tech company. So does that mean a deal is out of the question? Not necessarily. Microsoft is forecasting difficult times amid the economic slump. Though they dominate many of the industries that they have a hand in, one place where improvements could create explosive growth is the online search division. Furthermore, a new CEO is in town at Yahoo. Maybe she would be warmer to some kind of deal. After all, Mr. Jorgensen stated at the recent Goldman Sachs (GS: Charts, News, Offers) Technology and Internet Conference "We're not opposed to doing a deal that would maximize the business one way or the other, be it a partnership or a sale."
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But maybe Microsoft needs Yahoo more than the other way around. Mr. Ballmer stated they could try to grow the search business, but an alliance would speed things up because of their smaller team. Depending on the terms of the deal, its effects on Yahoo are foggy. Instead of worrying about what others are trying to do, Ms. Bartz is doing the right thing by working on the internal structure of the company. By focusing on management, she can recreate a stronger team (something she did at Autodesk (ADSK: Charts, News, Offers) before coming to Yahoo) that can respond to changes rapidly. That efficiency will trickle to other employees and possibly restore morale. If successful, the company can shift their focus to what is most important to their survival: the business itself. They may emerge as a stronger contender poised to take on Google. For the near future though, a lot of work still needs to be done and their rival is still sitting comfortably on its throne in the online search world.
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