Sold at $28.51
From late November through January, I had slowly been building a position in Yahoo!, starting in the mid-20s all the way down to the high teens. And I was looking forward to continuing buying up shares as it dipped into the mid-teens. Why?
Here is what I like about the business:
1) Great consumer web services: Yahoo! is the market leader here. Between its homepage, email, news, finance, sports, maps, messenger, flickr, delicious, go/mobile, etc., Yahoo! has a lot of great properties and still draws the largest audience. Integration hasn’t been great and they haven’t monetized the properties through advertising as well as you’d hope…but they are still very valuable assets.
2) Great international assets: I didn’t think the market was properly valuing Yahoo! considering its stakes in Yahoo! Japan and Alibaba.
3) Great recent acquisitions: I love the Right Media (online ad exchange), BlueLithium (behavioral targeting ad network) and Zimbra (email) acquisitions. The first two help solve the core challenge of monetization of its assets through advertising—and Zimbra is another great service, provides some interesting opportunities for integration with Yahoo! Mail, and provides an entry point into the enterprise (and a subscription-based revenue stream to diversify and hedge against the risk of an ad downturn).
However, as a stand-alone business there still needs to be some major restructurings to ultimately realize the full long-term value. First, cut the fat (much more than the hundreds laid-off in early January) by eliminating non-revenue generating businesses (opposed to broad, blind layoffs across the entire company). Second, re-create an engineer/developer culture. Third, once the non-revenue generating products are cut, focus on integration across core products with an emphasis on user experience. Four, leverage the recent acquisitions and work on accelerating the ad revenue growth across Yahoo! properties, in addition to the publishing partners’ properties.
That said, the announcement by Microsoft provided me a 30% return in less than two months. As much as I like some of the long-term potential in the business…30% in two months? Sold at $28.51.
