May 26, 2016
Will Warren #Buffett's 'Midas' touch work on Yahoo?
Do you Yahoo? That probably not as awkward as 'I Yahooed the web and found this'. To find anything, people google it, never yahoo it. Yahoo has never able to turn itself into a verb, despite numerous campaign, it does sound awkward.
Yahoo was in trouble and perhaps managed to keep itself being in trouble by having Marissa Mayer as the CEO. Her actions in Yahoo were exactly what Carly Fiorina did with HP until she got fired by HP BOD. Yahoo BOD should have been able to 'smell' issues as Marissa was once demoted by Eric Schmidt when she was still in Google.
Looking at Yahoo's performance, it has a gross margin of more than 50% all the way from 2006 to date, and it even went over 70% in 2013 & 2014. It drops below 60% in 2015 and this year. Their per share income was the minus in 2015 and this year so far. 2015 onwards are definitely not a good year for Yahoo. Other than experiencing declining traffic on its search site, Yahoo is also facing the falling revenues of their full of security issues advertisements.
Known as 'The Man' at Berkshire-Hathaway, Warren Buffett was known to turning struggling organizations downside up. Other than over $200k working stock at the Berkshire-Hathaway, he did the same with Media General, Nevada Energy, and Kraft Heinz.
Buffett is helping to invest in Yahoo venture by offering Dan Gilbert to be a potential partner. Even though verified on CNBC, no one is sure if Buffett will be watching and consulting as needed. One would easily perceive that he has no operating designs on the company. No one is sure if he is doing the right thing with technology related companies. Would he still be the hands behind the door having significant says in Yahoo? How should Google be viewing this, or should Google be worried?
The 'Midas' has not always succeeded in his ventures. IBM for example, faced major losses within 5 years after Warren Buffet started to buy tons of their shares. Would this indicate that he has no understanding in IBM businesses? Would that intricate Yahoo in the same way? Not to mention, AMEX, Walmart and Wells Fargo (and of course IBM) shares lose billion of dollars in 2015. Does Yahoo fit into his value model to be exact? Is Buffett losing his 'Midas' touch perhaps?
There are other parties also interested in acquiring Yahoo. Perhaps Microsoft is no longer interested after it got rejected in 2008. Despite being huge and having a large client base, no one can get a good design of growth for Yahoo. Buffett would perhaps look into a change of management in order to revive Yahoo to survive.
Perhaps by focusing on niche products like Mail service, News and venturing into the stock market and especially e-Commerce through joint-venture with logistics companies like DHL, Yahoo would be able to redeem themselves out of their current situation, and most importantly, to enable people to exactly define 'What is Yahoo', easily.
On another note, acquisition of Tumblr was definitely a big mistake and should be reversed!