Friday, November 17, 2006

An Open Letter to Jerry Yang and David Filo


Dear Jerry and David:

I am writing this letter to you as a loyal Yahoo! user since 1996. Who could have imagined that, what started out as an experiment in the Stanford computer lab in 1994, would grow to become what is today a media titan? Who would have imagined that, 12 years later, you would be working in a megalopolis in Sunnyvale, rubbing elbows with heads of state, and -- most importantly -- positively influencing the lives of millions of Yahoo! users?

I knew Yahoo! was a special company when, about 10 years ago, I was writing my doctoral dissertation at Columbia Business School on the effects of officers' and directors' backgrounds on their firms' IPO and post-IPO performance. With the help of a couple of Columbia College undergrads, I was coding the IPO prospectuses for all the software and restaurant/hotel chain IPOs between 1994 and 1996. Yahoo! was a different kind of company the moment I saw the two of you listed as Chief Yahoos! on the management team. Since then, you've only gone on to prove to everyone what a special organization is Yahoo!

Although the historians might quibble, there have really been two phases in Yahoo’s development as a company: (1) under Tim Koogle's leadership and (2) under Terry Semel's leadership. You both had a hand in selecting these CEOs and both were right for their time.

Terry Semel was appointed CEO in 2001 and he has had a number of big accomplishments over his tenure. These include:

  1. Stability. After the deflation post-bubble, Terry brought a sense of calm and order. He righted the ship when it was needed. Numerous Yahoo! executives complimented how he instituted a number of policies and procedures which helped give a greater sense of stability to the organization.
  2. SBC. The first of its kind, Terry played a role in doing the deal with SBC that married Yahoo!'s rich content with broadband. It's proved to be a dynamite deal for Yahoo! in the years since.
  3. Media expansion. Terry's brought 24 years of Hollywood contacts and know-how and helped build on Yahoo!'s initial foray into new media and accelerate it. Today, richer content is available on Yahoo! in more breadth and depth that any other site. Although companies like Brightcove and Joost get ink for what their plans are in internet and TV, Yahoo! is leading the way. 'The Nine' is a model of what's to come, as we continue to move forward.
  4. Overture. As the WSJ reported, Yahoo! snapped up Overture where MSFT feared to tread. In retrospect, this was a huge blunder for them and win for you.
  5. del.icio.us & Flickr. Need we say more? Huge accelerators for Yahoo!, showing how a large platform can take a great idea and move it to the next level.
  6. Jack Ma. Alibaba.com's investment was a stroke of genius for Yahoo! from 2 respects. It gave you a foothold into a market leader in China (just as the early Yahoo! Japan-Softbank deal did back in the day) and it gave you (indirectly through Alibaba) a great leader in Jack Ma -- someone who will play a key role as Yahoo! moves ahead in the coming years.
  7. Engineering Excellence. Yahoo! has always coveted this trait. It's what made you what you are and is what will see you through the next 20 years.

Why it’s time for Terry Semel to go:

Despite these great successes, there came a time for TK to move on and now is the time for TS to pass the baton. Here's why:

  1. He’s going to be 64 in February 2007. Neither you both nor Terry expected that this job would last 10 years. Five years has been suitable to make the changes he and you both wanted him to make. He has certainly left Yahoo! a better place than how he found it. Now is the perfect time to enjoy retirement, moving back full-time to Bel Air and making a significant contribution to a number of important boards across the country.
  2. He’s lost the support of Wall Street. Following last quarter's disappointing results vis-a-vis Google and with Panama's delay, there is pressure from Wall Street to demonstrate that he's in control of this ship. The continued excuses given, and the reports of discontent from within the organization (see below), have exacerbated this problem within the last few weeks.
  3. He’s lost the support of the Yahoo!s. Everything published in Valleywag needs to be taken with a grain of salt. Yet, reports of booing within internal company meetings are not helpful. A few weeks ago, we published a post on what steps Terry could take to turn things around within Yahoo! It was surprising to read the number of strong comments that came back from current or past Yahoo!s which displayed such strong emotion against Terry. It's clear the organization would respond well to a fresh approach. The "Peanut Butter Manifesto" is not a direct indictment of Terry, but it is symptomatic of a general malaise existing within the ranks showing that change is necessary -- and now.

What Should be Yahoo!'s Phase Three?

Let me clear. If a change is not made now, I think there is substantial risk that the organization will be taken out as a stand-alone firm. Microsoft, Comcast, Disney, Google, Viacom, and even News Corp. would love to add this jewel to their collection. I don't believe Yahoo! users, employees, and shareholders would be best served by this. What's more, the hedge funds are starting to circle. There will inevitably be suggestions of their own for what actions to take. You need to get ahead of this train.

It's easy to point out problems, but what are some solutions? What is needed now at Yahoo!, beyond just a new CEO for the sake of one, to take it into its third phase of growth for the next 5 - 10 years?

  1. Dan Rosensweig will have to go too. Dan has also failed to be embraced by the Yahoo!s. There is a distance which appears to exist. No leader can drive an organization forward when this trait is present and it's a difficult thing for the leader himself to flip the switch on and change. Quite simply, the Yahoo!s will not follow Dan as their leader. He is also seen as too close to Terry. This will be difficult. It was difficult to say goodbye to Jeff Mallett, but it was for the best of the organization.
  2. Internal CEO over External. All the academic studies agree that an internal CEO is a less risky proposition than an external one. However, an external CEO is needed when the organization needs a dramatic shift. You both were more than justified to make that shift 5 years ago when you brought in Terry. The environment is different today. A respected internal leader would be embraced and rallied around by the Yahoo!s. You have the perfect candidate within your midst.
  3. Don't appoint a COO. Recent evidence exists that appointing a COO is linked to negative firm performance. Apparently, CEOs who appoint COOs are out of touch with some of the important operational aspects of the business.
  4. Your continued product leadership will be critical. Most organizations don't have the benefit of the two sage founders continuing to play an active and helpful role. You have made a huge difference to Yahoo! in the last 5 years and you will continue to be strongly needed as we move into the company's phase three, especially on the product side.
  5. Elevate more internal talent like Jack Ma, Bradley Horowitz and Brad Garlinghouse. Jack has been a great addition you've picked up through acquisitions and investments (through the investment in Alibaba.com). Bradley is playing an important role with your "talent brickhouse." Reward their hard work and show the rest of the Yahoo!s that success gets rewarded. Don't shoot the messenger with Brad. Thank him for his passionate memo by rewarding him. Demonstrate to the entire organization that Yahoo! welcomes this passion; it doesn't try to snuff it out.
  6. Indefinite Moratorium on Celebrity Appearances at Yahoo! The stars of this company are its employees. This isn't Hollywood. This is a business. Celebrities don't bring up team morale; great leadership does. Tom Cruise has left the building and let's keep him and other A-listers away.
  7. Articulate the Vision. The new CEO must articulate a definitive vision for Yahoo! As I said above, you have a vast array of assets. You can truly define how we will all interact with the Web and rich content moving forward. Yet, the company's leadership has failed to. Into this vacuum, the Skype guys have wrestled this opportunity away from you and are seen - currently - as the 'thought leaders' with Joost. It's not too late. Take back the mantle by having Yahoo! blare its vision from the hilltops and then achieve it!
  8. Streamline, Streamline, Streamline. Kudos to Brad for identifying this in his manifesto. Yahoo! has become bloated and -- consequently -- inefficient. Let me quote him: "• YME vs. Musicmatch • Flickr vs. Photos • YMG video vs. Search video • Deli.cio.us vs. myweb • Messenger and plug-ins vs. Sidebar and widgets • Social media vs. 360 and Groups • Front page vs. YMG • Global strategy from BU'vs. Global strategy from Int'l". Inefficiency = opportunity. Just streamlining these areas alone should go a long way towards the cutting headcount by 15 - 20% that he suggests.
  9. Build a Culture of Personal Accountability. This starts from the top, but through effective performance management, challenging assumptions, pushing for change, rewarding success, and learning from (as opposed to burying or chastising) failure, you will ensure that no one at Yahoo! will ever say "that's not my job." Everyone has to have a vested and maniacal interest in seeing this organization achieve its vision.
  10. Reconnect with the "!". As companies grow, they must build in process and policies. They cannot operate like a 10 person, 'cowboy culture' start-up. But the best companies remember their roots. Yahoo! has incredible roots. To me, it all goes back to the "!". Somewhere in the last 5 years, Yahoo lost its "!". It's still there and the Yahoo!s need to be reminded of it. When they are, I'm sure they'll rise to the challenge like they never have before.

You both control 9% of this organization. You are the co-founders. You have a responsibility to make the tough calls that will ultimately take this company to its next level of development. I applaud your continued passion and the courage you've demonstrated through the last 12 years. We will support you and we will support Yahoo!.... Leadership starts at the top.

Sincere regards,

Eric Jackson

Update: 6/20/07: In January, we launched a "Plan B" Community to gather Yahoo! shareholders who want to propose a new way forward for Yahoo! which will greatly increase shareholder value compared to the past 2 years. Go here to sign-up to the community: http://www.youchoose.net/pledge/yahoo_shareholders_unite_for_plan_b.

You can also read our finalized "Plan B" here: http://breakoutperformance.blogspot.com/2007/02/finalized-plan-b-sent-to-yahoo-today.html.

This is the first time shareholder activism has utilized the web, blogs, and wikis. We have a wiki version of the current iteration of our "Plan B" here: http://yahoo.wikia.com .

We wish Jerry, Sue, and David the best of luck in this exciting new stage for the company.

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55 comments:

Noel McKinney said...

Very thorough analysis Eric, I enjoyed reading this. The link to the article on COO appointments gave a session cookie error because it assumes you are already logged in... could you give the title of that article so I can find it? I wondered if these findings regarding COO appointments varied by industry. Thanks!

Eric Jackson said...

Hi Noel:

Thanks.

Here is a link from Knowledge@WPCarey: http://knowledge.wpcarey.asu.edu/index.cfm?fa=viewfeature&id=1043

A link to one of the co-author's homepage: http://www.personal.psu.edu/faculty/d/c/dch14/abstract.html

A link to the Strategic Management Journal (where the article appeared in 2004): http://www3.interscience.wiley.com/cgi-bin/jhome/2144

The title is "CEOs who have COOs: contingency analysis of an unexplored structural form." You can also try Google Scholar.

Cheers,

Eric

Anonymous said...

David and Jerry would take this more seriously if you got more of the names right: it Dan Rosensweig (not "Jonathan"), Caterina Fake (not "Catherine Flake" and Jack Ma runs an different company called Alibaba that Yahoo! has invested in. He is not a Yahoo! Inc., employee.

Eric Jackson said...

You're correct. Thanks,

Eric

Anonymous said...

semel was appointed in 2001, not 1996.

Anonymous said...

agreed --- yahoo needs to lose the whole celebrities thing (and people like llyod braun who crave the media attention). think about the lost productivity of y employees --- 2,000 employees show up for roughly 1.5 hrs. listening to tom cruise talk about nothing relevant or important to yahoo products or business.

Anonymous said...

as an eleven year yahoo vet, i am always curious to see outsiders write about the firm. this is actually not bad, most of your comments are right on.

i am not too sure about dan not having the support of yahooers. to be honest, the c-level executives are just pictures on a website to most yahoos. i don't think they could persausively argue for or against his management or decisions. i have spoken with him casually and he seems smart and focused, but he is not technical and it is not surprising that google's technical lead has caught him and the others off gaurd.

the same i would suggest for decker, who likewise is almost unknown to the rank and file save an appearance at an all-hands. she is likewise not technical and will not be able to match google.

you may argue that being technical is not important, but it has to be a component of a leader of such a company. yahoo may appear to be just branding, partnerships and promotion, but its all held together with code. most of yahoo's capital investment is made in code, engineers and hardware. a leader of yahoo has to grasp this if they are to deal effectively with google. and yes, google is the thing. nothing else really matters. no one at yahoo worries about microsoft or aol, they are completely and totally obsessed with google, which they should be, as google's $150 billion market cap could have been yahoo's.

there are exceptions to the technical competency rule such as lou gerstner, but he was immersed in and surrounded by technical leadership...yahoo's c-level execs are all technically illiterate save the cto, who frankly outsources his own technical leadership to his immediate underlings who get search etc.

in the end i am not sure i would cite terry's tenue as a success. he made the obvious calls and penned the obvious deals that more or less signed themselves. these are tiny issues compared to missing google. i mean, these guys watch google go from a rowboat to an aircraft carrier and didn't act decisively until google's lead was undeniable and insurmountable.

one minor nitpick - terry semel strikes me as the sort of person who thinks a computer is something you pay your secretary to use. you CANNOT be this kind of person and lead yahoo.

Anonymous said...

Yahoo! was known as a technology company but has lots that some where down the road, I think it needs to be more serious in Innovating new products and not to delay important products.
I feel Yahoo! is showing signs of tiredness, they have to get back to gym and really work out a lot.
They also need to get investor confidence back.
Good luck to Yahoo!

I have been a Yahoo! user since 1997.

Eric Jackson said...

I'd like to thank both of the last two commenters.

To the last point, hear hear. This letter was written in the spirit of wanting to see this great organization assume its rightful leadership place in the tech landscape. It was not written to tear down the organization or its people.

To the first point, I really enjoyed reading this comment. If you have been there since 95, you must be a sub-100 employee. What a run it must have been for you to date. Congratulations.

Let me first say that I agree that Yahoo is a company with great technical talent (based on my knowledge, contacts, and first-hand experience). I'm not a technical guy; I'm a strategy/BD guy. However, over time, hanging out with technical folks. You certainly can't help but develop an appreciation for their skills, temperments, and contributions.

I have known some great CEOs/Presidents who came from a technical background and would hang out until 3 in the morning doing some coding in the back with the 'rank-and-file.' You better believe that they were popular with that stakeholder group. However, that's a nice-to-have, but not a must-have for a CEO.

Susan Decker is not technical. She comes from Wall Street and has credibility there. David Utter at WebProNews criticized me suggesting Susan Decker as Yahoo's next CEO because she said earlier this year that Yahoo! would be content being 2nd in search: http://www.webpronews.com/topnews/topnews/wpn-60-20061120YahooJammedByPeanutButterMemo.html. While I agree that this was a gaffe (and, if I worked on the search team at Yahoo, I'd be miffed too), and I agree that she would ideally have more of a technical background, I think she's the best choice for Yahoo now. One thing I've learned in my consulting business when aiding our clients select the next CEO or senior executive is that all the stakeholders always want (and hope for) a 'silver bullet' candidate -- someone that walks on water and will lead them to the promised land. They never appear. There are always weaknesses that every candidate on the short-list possesses and there are always trade-offs. The discussion quickly turns to: what are there weaknesses and how do we cover them off? You'd have to say that Susan's biggest weakness as a CEO candidate (for Yahoo) is her lack of a technical background. But, I would argue, Jerry and David can help out enormously here (along with other Yahoo execs). Meg Whitman had no real tech background before assuming the reins at eBay (although I'm not sure she's a great example today, as eBay is having some drift problems similar to Yahoo). Eric Schmidt is more technical than Meg or the c-level execs at Yahoo you touched on, but I don't believe he's in there coding at 2am. Yet, Google is a company that clearly covets technical talent and they have many senior leaders in place to ensure this culture continues. Yahoo does need to emulate this.

You make a final excellent point about Google as a competitor to Yahoo. In my letter, I didn't want to be overly critical of Terry and mistakes made at Yahoo during his tenure. What's the point? It's water under the bridge now and the company must make the right call today for moving it forward. However, one day, some keen MBA students at Harvard will work up a case study where they track all the original search engines: Lycos, Excite, AltaVista, Yahoo!, and Google. How well Yahoo! has done against them all, except for this incredible explosion in growth that has occurred at Google in the last 3 years.

Lastly, I'm with you on your nitpick. Not good!

Thanks a lot,

Eric

Mark said...

Eric,
Excellent analysis. I've added a link to my Yahoo-newspaper post today.

Mark Evans

Eric Jackson said...

Thanks, Mark. Appreciate it.

Love your work. Have been a fan since pre-bubble. :)

Best,

Eric

Anonymous said...

eric, this is the earlier anonymous poster here, just with a follow up. i agree with you that given the current crop of available talent, decker may be the best available choice. one point in her favor is that she does have experience with the company. yahoo is so complex at this point that an external candidate will not be able to digest its functions in time to effectively manage.

now to follow up my point about the technical competency of a c-level exec for yahoo - yes, i clearly understand that these people will not be involved with the operational aspects of technical operations. i don't think eric and the crew at google are working at this level anymore either, nor should they.

my general point is that these businesses in the long term are driven by technology. if the technology is good, the deals, promotions, branding and revenues will follow (i hold they will more or less self-enable like google's adsense network). a great example is steve jobs. he is a leader who is not entirely technical but he certainly understands the value of design, product innovation, and an understanding of where the technology is going next. bill gates and andy grove are also good examples, indeed they likely go far past steve jobs with regards to technical competency.

i would hold that the job of ceo at yahoo should be viewed as being as technically intense as that of intel and microsoft.

Eric Jackson said...

Hi Anonymous:

You're right. Yahoo! is just as technically demanding an organization as Intel and Microsoft. Ideally, the CEO and all the senior leaders would an acute technical mind, supplemented with business and financial skills. That should be the target and part of how a CEO should be measured is how well they can meld together a team to reach that ideal.

I always strongly favor an internal leader over external, if the talent funnel is strong enough to warrant it. There are special circumstances where an external hire is justified and can work, but my belief is that now is not the time for Yahoo to do this.

Thanks again for the comments,

Eric

Anonymous said...

Yahoo is going down, no doubt about it ;)

Anonymous said...

Good analysis, but rather disappointing that you seem to think that technical background = coding.
Thats like saying financial background = knows excel.

Having a technical background is important because it enables the leader to grasp where the industry is headed and have the confidence to make big bets on specific future trends. Without that self-belief, the leader hears competing viewpoints and not knowing which one to pick, spreads the peanut butter thin.

Eric Jackson said...

Can't argue with that. Technical background is helpful and important -- especially in a technology company (and, yes, it's more than getting dirty with code).

I still hold that Decker is the right person now to take-over. She can succeed. It's important for her (just as for any other leader) to know what she doesn't know and surround herself with qualified people in those areas.

Thanks,

Eric

Anonymous said...

Hi, I was a senior executive at Yahoo! for several years and must say kudos on your analysis. I will say, however, that I STRONGLY disagree with your assessment on Sue Decker being the next CEO, as would most people who have worked closely with her. She is certainly pleasant and has solid credibility with the street, BUT she is one of the main sources of the problem at Yahoo, not a potential candidate for the solution. She is OVERLY focused on analysis and personifies the term "analysis paralysis" -> as anyone senior over there would surely attest to (but is likely afraid to). Anytime somebody wants to make a bold move -- BANG -- crippling requests for reams and reams of analysis -- 99% of which passes the threshold of diminishing returns. She is simply put, a solid research analyst, nothing more.

I humbly submit that Yahoo needs their next CEO to be someone who can be decisive, clearly articulate an actionable strategy, and lead with passion. Sue Decker is none of these now. Not even close.

For Yahoo's sake and that of its users (me being one of them), I sure hope they hire the right person for the job. Change is definitely needed, though. That's for sure.

Eric Jackson said...

Hi Anonymous:

Thanks for your comment. It's always interesting to hear the perspective of a former senior Yahoo!

I'm curious as to how you would handicap the other senior executives on the team. Is there CEO material in the group or do you think Yahoo! needs to go external?

Thanks,

Eric

David Utter said...

Hi Eric,

Decker's a good candidate, and I can envision a scenario where she would get Semel's old office.

Yahoo's problems now go beyond Decker's ill-advised "settle for second in search" Bloomberg highlight quote. If Google is aggressively pushing an initiative that hits Yahoo's strength in display ads, a spat over search importance will be much lower on the priority chart.

If a display ad war for the hearts and minds of brand advertisers has begun, is Decker the best choice for that fight?

Eric Jackson said...

Hi David:

Thanks for the comment and for your mention a week ago (http://www.webpronews.com/insiderreports/searchinsider/wpn-49-20061120YahooJammedByPeanutButterMemo.html).

I think if they don't go with Decker, then they'll have to go external and that's anyone's guess.

By the way, I think Marissa Mayer needs a little more seasoning before you hand her the keys to the corner office.

Here's another name for speculation: Joanne K. Bradford of MSN.

I enjoy your stuff.

Thanks again,

Eric

David Utter said...

I see someone from Yahoo has chimed in about Decker in the comments. Yahoo is a big organization and at least transitionally I think they need an old-guard leader who is willing to play the Chainsaw Al role if that is truly needed.

The question is, can she take on that role if necessary? I'll guess yes.

If Marissa Mayer keeps a strong supporting cast, especially on the financial side, that could cover for whatever deficiencies she might bring to the corner office.

Joanne Bradford's ascension has been as intriguing as it is notable. How about this scenario: Google, Yahoo, and Microsoft, all helmed by women before FY '08?

Eric Jackson said...

And don't forget Meg at eBay...

G. Chai said...

For a longtime Yahoo! user, Eric, your analysis is right on. If I were an employee, I wouldn't like Terry Semel to go alone...the team he brought in should be shown the door as well. I am sure you wouldn't have recommended Ms. Decker for CEO if, let's say, she was on the other side of 60...like Mr. Semel. Even if she did better than what she has. She's no Meg Whitman.

I have no idea what Jerry and David are waiting for.

Eric Jackson said...

Thanks, G., for the comment.

I think anyone new coming in has to do an analysis of all the talent on the team. It's not as simple as, get rid of "Terry's people" and keep the old guard. The best talent should stay. The rest should go.

It's been 2 weeks since Garlinghouse's memo. It's odd that there has been no dramatic action since then....

Thanks,

Eric

Ismet said...

hi Eric, looks like your points are heard. http://biz.yahoo.com/rb/061205/yahoo_reorganization.html?.v=3

Eric Jackson said...

Hi Ismet:

Thanks. Yes. Interesting developments.

Best,

Eric

Anonymous said...

The incompetent CTO Fazad Nazem will have to go too. The engineering department has huge problems, mostly because of Zod's lack of leadership and lack of any action for that matter. I am an engineer at Yahoo! for many years. And throughout those years, Zod has not done anything and there has never been any vision or any direction in engineering. The reason why Yahoo! was doing so well early on was largely because Yahoo! engineers were very good. And he really had nothing to do with it. The engineering quality has declined very much because of the blind hiring spree last year, and this drove out a lot of engineers that are actually good. And let me tell you this. Yahoo! is now rotten from the inside out.

Here's my take of how to fix Yahoo!'s engineering:

1) Fire Terry, and fire Zod.

2) Revamp the platform group. The reason why Yahoo! is duplicating so many things is because we have a very weak platform group that is lazy and arrogant and only knows how to support "yinst".

3) The platform group needs to study the architecture of all Yahoo! software and figure out what components are duplicates and build teams that develop real platforms (possibly taking parts of existing components) to replace those duplicates and mandate everyone to migrate to the new platform.

4) Slowly port all Yahoo! software to linux and phase out FreeBSD. Start supporting and encouraging multi-threading programming. I bet Google is laughing their asses off at us because we are still stuck with FreeBSD, gcc-2.95 and single process model.

5) Slowly get rid of all Yahoo-specialized open source software. Why do we have "YApache" (based on Apache 1.3), and why do we have the dreaded yut/ycore++ libraries when we can use STL and boost? And why do we have YPAN when we can just use CPAN??? The platform group is doing the wrong job supporting this dead-end infrastructure.

Eric Jackson said...

Thanks for the comment. Good to hear from a current Yahoo! engineer. You guys are the heart and soul of the company.

Keep on keepin' on!

Anonymous said...

Bah, I worked at Yahoo! for over two years, generating over 5 million in revenue. I'll never forget having to write a "why I need to work at Yahoo! and what do I do all day" report in order to save my job, which ended up in layoffs anyway when Semel came on board. I loved the company, but getting fired three weeks before Christmas, and having Filo cash in on 34 million in options the next day was too much. I've tried to see the good in the company, but over the years, seeing Yahoo! friends have projects taken away --only to see them resurrected later after money was wasted.. is just indicative of the company in general.

Anonymous said...

Here's another name for speculation: Joanne K. Bradford of MSN.


Ughhh. You got to be joking right? I use to work with her at BW and a little while at Microsoft. If you thought Bradford is tech-savy than you clearly have not met Bradford. She is one of the most incompetent person I have ever met. She can barely speak and is utterly not-savy about the internet as well. You want proof? Just go and find any speaking panel that she has done with Wenda Millard (head of Yahoo sales) and Tim Armstrong (head of google sales). They completly tore her apart.

Dumb as a doorknob.

Eric Jackson said...

All comments are welcomed. Thanks.

Eric Jackson said...

By the way, we have incorporated the criticisms of Yahoo!'s technical leadership into our revised "Plan B" for Yahoo! See the wiki at http://yahoo.wikia.com and more recent posts on this blog for details. Thanks, Eric

Anonymous said...

and what about europe.. seems that the problems in europe are even bigger then in US...

Eric Jackson said...

Thanks for the comment, Anon. I'm not intimately familiar with the issues there. If you are, please let us know. Thanks, Eric

Stephen said...

Eric, i enjoy reading your blog

Eric Jackson said...

Thanks, Stephen.

Shahid said...

To Eric Jackson (with the hope that he pays more attention then Yahoo's Management)

Eric,

As a Yahoo shareholder you are aware that I am frustrated and angered. I agree that there is a lot of work to do and that Yahoo needs to change its focus. However, I cannot believe that everything is conducted on such a reactive basis. Why is it that suddenly Yahoo’s management (Jerry Yang) is now talking about looking ahead? Shouldn’t they have done this all along? Why should we believe that he will do anything valuable? The truth is that over the past 3 years this company had more potential than any single company out there. All that potential has evaporated and it’s simply starting to fall apart. Quarter after quarter we continue to hear the same story. First, Terry Semel flat out lied. Secondly, everyone else in management was “excited.” For what? For losing billions and billions of dollars. From becoming a global leader instead of company that is continuing to see smaller and smaller margins. I can go on and on. Yahoo reminds me of Ford. A poor company, with a poor focus that at one point could have dominated the auto industry. Because of poor management and poor engineering, Ford has fallen apart. Yahoo = Ford. Yang’s focus should be on generating value. Mr. Yang should focus on generating revenues. Here is a simple answer, if he can’t promise shareholders, and I truly mean promise, increased value in the company through better earnings over the next 12 months, Yahoo needs to be sold. It’s simple, you (management) have had 3 years to do this and you have flat out failed. It’s actually amazing that given where Yahoo was positioned just a few years ago where it is today. It’s actually probably about the same progress that would have transpired had a monkey ran the company. It’s really quite sad that management will not look at themselves and recognize who is to blame. This group has failed and will not prove me wrong. My true belief is that this company either put itself up for sale or watch it fall apart and they’ll destroy the future of thousands of employees. Jerry needs totake a minute and read the negative aspects of Yahoo. Read what analysts and the industry have to say. It’s relatively simple. He is not doing a good job and has not for quite some time. Like I have said before, unless he can actually promise shared holders greater value (significantly given the underperformance over the past few years) he should put the company up for sale. It doesn’t matter if (like it or not) they are in direct competition with Google. Guess what, they are better and continue to deliver. They are the equivalent to Toyota vs. Ford. We are now at the point where you should recognize that the value locked in this company can be better extracted from other companies with intelligent management. They should let the creative group and the engineers know they haven’t created anything worth looking at. Just face it, the best products from the last few years have been developed by other groups. I am really curious, what exactly does the engineering, sales and marketing group do all day? Apparently not too much. Somehow management got together with others and decided that they wanted to through more weight into the sinking ship by adding more employees. Why not just hire good employees who can actually do their job? Throwing more people at it doesn’t fix the problem. I can go on and on. The bottom line is the company should put it up for sale. We need some activist shareholders to come in. We need someone to push management and the board of directors around. They have screwed over the shareholders and they need to pay up.

Shahid said...

Eric,

Looks like you have given up. I think you are now more focused on MOT and have given up on Yahoo. I was sad to see the way you folded under Semel's pressure. If you want to be an "activist," you should really act like one.

Eric Jackson said...

Shahid:

I am focused on MOT but I still own my 96 shares of YHOO and will continue to share my views/push management. I'm not sure what you mean about folding to Semel's pressure. I confronted him at the annual meeting in santa clara on june 12th. He resigned 6 days later. I believe Jerry and Sue are a good team for Yahoo! Therefore, I've been supportive of them and the company since Terry left. I've been in touch with Jerry, Sue, and David at or after the meeting. I plan on continuing to communicate with them privately. If they start moving YHOO in a direction at odds with shareholders, I'll be the first to scream. I think they're doing the right things for all at the moment.

Shahid said...

Eric,

You own 96 shares. Doesn't sound like you are in-line with everyone else. At the end of the day you have nothing to lose. You seem to have taken on the traits of Yahoo's management. If Yahoo is $22 tomorrow, how does that impact you? A few hundred dollars. Additionally, you folded to Mr. Semel when you indicated that you thought he and others should apologize to shareholders. Finally, you indicated that they are starting to move in the right direction, I would like to know that direction. Apparently, Mr. Yang, who has been there since the it all started needs 100 more days to figure things out. Doesn't that seem rediculous? Basically they have been screwing over shareholders for over several years, what's another 100 days? Sue Decker has been in the middle of it all, does she need 100 more days as well? Tell me, what are those right things? I hope you don't believe that you are responsible for the resignation for Mr. Semel. Yahoo has been falling apart and without any new strategies they will continue. Yahoo needs to put itself up for an acquistion in order to best deliver value to its shareholders. Yahoo's management has had years and a million opportunities, but they have failed. The fundamental aspect of Yahoo's management that you should have learned by now is that they are liars and sweet talkers. They have lied about a number of business factors and they have used language that has given Yahoo investors unfair hope. I am also suprised to hear that you are having frequent discussions with management. It seems that 2 aspects of your case have emerged, 1) You have clearly jumped at a new opportunity despite not completing your original task 2)You are clearly satisfied with little action.

Shahid said...

Eric,

By the way, I am not sure if you are aware but shareholders have only one way of measuring how a company is performing, it is called the share price. If that is going down (as it has been for some time), then you should recognize that they are not moving in the right direction.

Eric Jackson said...

Shahid:

Let me congratulate you: you have an incredible talent for stating the obvious. Yes, as a shareholder, it's a good thing when the stock price goes up. You should also consider buying low and selling high too.

What's your full name? What do you do for a living and how many YHOO shares do you own? Are you a member of our "plan b" group. If not, you should consider it.

I've been up-front from day 1 about who I am and how many shares I owned. I've pushed for a 9 point plan at yhoo. They followed point 1. There are still many more changes I would like to see. However, you have to recognize they've made a big first step.

I've spoken to the key folks in mgmt. I think they're aware of the issues and I believe that they are sincerely working hard to address them. Would I like them to move as fast as they can? Of course. Who wouldn't? Would you be happier if Terry Semel were still there?

Your plan for yhoo appears to be "put the company up for sale". I simply don't agree. If it happens great, but this company needs to control its own destiny - and I believe it can.

I know what my role was at yhoo. I'm happy with it. I'm not trying to make any more or less of it than what it was.

I can walk and chew gum and also monitor two (and even more) companies. I'm watching MOT and YHOO. I haven't backed away from anything. I've lost money on my yhoo investment - just like many other shareholders. I will be doing everything I can to change that. The other parts of our yhoo "plan b" are still public for all - including yhoo mgmt and board - to see. Nothing has changed. We still want all those points implemented.

What have you done for yhoo shareholders in the last 7 months?

Shahid said...

If you are not afraid to chat over the phone, I'll give you that opportunity and we can go from there.

Shahid said...

ERIC (my response)

ERIC: Let me congratulate you: you have an incredible talent for stating the obvious. Yes, as a shareholder, it's a good thing when the stock price goes up. You should also consider buying low and selling high too.
ME: Thanks for the positive feedback. You have an incredible talent for believing that you actually care about shareholders interest. A whole 96 shares, you really have a vested interest in seeing Yahoo appreciate. I think it’s funny that most people don’t realize this is all to promote your business and at the end of the day you’ll try and take credit for anything that is happening. This is all just a bad stunt to get your name out there and plan “B” is not even well thought out. First of all, you can tell that you have no background in reviewing companies. Secondly, you have no experience in being an activist investor. Don’t pretend to be something you are not.

What's your full name? What do you do for a living and how many YHOO shares do you own? Are you a member of our "plan b" group. If not, you should consider it.
ME: What does it matter what my full name is? I own a lot more shares of YHOO than you. As far as what I do, it has more relevancy than what you do to finance. I’m not a “plan b” member because why would I commit myself to plan where the person who proposes it has no vested interest. Would you invest in a company where key management has no vested interest? I think people should be more aware of this fundamental approach. People shouldn’t invest unless the people behind the plan demonstrate their commitment.

I've been up-front from day 1 about who I am and how many shares I owned. I've pushed for a 9 point plan at yhoo. They followed point 1. There are still many more changes I would like to see. However, you have to recognize they've made a big first step.

ME: You’ve been up front about owning a whole 96 shares, impressive. Your 9 point plan is actually an 8 point plan. You had nothing to do with Semel’s departure. Cramer could take more credit than you. I think people (including yourself) would have to be complete fools if they thought that it was your “plan” that forced out Semel. So, thus far you are 0/8. Congrats, huge results. Your 8 point plan really has no substance and is not clearly thought out.

I've spoken to the key folks in mgmt. I think they're aware of the issues and I believe that they are sincerely working hard to address them. Would I like them to move as fast as they can? Of course. Who wouldn't? Would you be happier if Terry Semel were still there?

ME: I’m glad Semel has left, I think he should have never been CEO of Yahoo. Being aware of issues should have occurred about 3 years ago. You can’t keep providing management with slack. They continue to lose market share to MSFT and GOOG. They have not demonstrated any improvements to the company over the past 3 years and they are seeing declines in one of their largest sources of revenue, display ads. I think if you are a proper activist, you should say that I am pushing them to move faster and not hoping they will move faster. Giving Yang 100 days shows that management really has no clue what they are doing. They should have been proactive all along. Why should it take someone so key to the company 100 days to figure things out? What has he been doing why Semel was CEO? That’s what I don’t understand, what in the hell are they doing at Yahoo? They are aware of all the problems but they have not implemented a single plan that will lead to generating higher revenues and maximize their assets.

Your plan for yhoo appears to be "put the company up for sale". I simply don't agree. If it happens great, but this company needs to control its own destiny - and I believe it can.
ME: My plan is to what is best for shareholders. Everyone who is in your “plan B” would agree with me. If Yang cannot promise that within 6 to 12 months that Yahoo’s share price will not exceed that if it were sold, then the company should be up for sale. We have given management far too long to work out the improvements. Shareholders deserve the return. So again, Eric – understand this – if Yang cannot PROMISE to deliver that kind of performance, the company should look to be acquired for a high premium.

I know what my role was at yhoo. I'm happy with it. I'm not trying to make any more or less of it than what it was.
ME: Your role is limited and you are not truly committed. Example 1: 96 shares. Example 2: Your pursuit of MOT. I’ll give it to ya, you are getting your name out there. I’m sure that is helping your core business. Don’t pretend to be something you are not.

I can walk and chew gum and also monitor two (and even more) companies. I'm watching MOT and YHOO. I haven't backed away from anything. I've lost money on my yhoo investment - just like many other shareholders. I will be doing everything I can to change that. The other parts of our yhoo "plan b" are still public for all - including yhoo mgmt and board - to see. Nothing has changed. We still want all those points implemented.

ME: You can chew gum and walk at the same time, your mom must be proud. I’m glad that you are watching MOT and YHOO, I’m sure by watching it we’ll see sudden improvements. I’ll try that for a day. You’ve lost money on your YHOO investment, wow, how much?

What have you done for yhoo shareholders in the last 7 months?

ME: Since you are not responsible for Semel’s departure, I’ve actually done just as much as you have. You are 0/8, congrats.

Shahid said...

By the way, today's call volume supports my "Plan C."

Shahid said...

By the way...if you want to start taking credit, look at the market value. The company has been losing around $300 to $400 million a day in market value. You should take credit for that in "Plan B." Maybe when you call and talk to Yang you should mention that the company is losing billions in value. As far as the "Semel Catalyst," it's really helped out a lot.

Shahid said...

Good job Eric, way to respond. You really proved me wrong and made a great case for "plan b."

Eric Jackson said...

Shahid: I previously reponded to you. You didn't answer my questions of you. My plan is there for all to see and judge how the company has responded to it.

Shahid said...

That's right and all 96 shares you own.... you are truly a person that stand behind his messages.

Shahid said...

Eric,

Where is part of your plan that the company should fall to $23, maybe you should take credit for that as well.

hank said...
This comment has been removed by the author.
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