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Yahoo! Businesses The Almighty Buck

Hedge Fund Manager Criticizes Yahoo for Wasting $3 Billion On Poor Acquisitions (businessinsider.com) 159

mrspoonsi writes: On Monday morning, Eric Jackson, manager of hedge fund SpringOwl, sent a brutal 99-page presentation to Yahoo's board, outlining his case for why the company should drop Marissa Mayer as CEO and find new management. Jackson points out that Yahoo has burned through $3 billion on M&A in the past three years since Mayer took the reins, which contributes to $10 billion in what Jackson calls Yahoo's misallocated capital. The value of all of those startups Yahoo has acquired, Jackson says, is worth nothing at Yahoo's current stock price. Jackson also points out that Yahoo has a history of buying up startups run by former Google APM members. While at Google, Mayer started the company's elite associate product-manager program. Of the 49 acquisitions Yahoo has made under Mayer's leadership, six were startups founded by ex-Googlers. The total cost of these six acquisitions is $319 million, according to Jackson's slide deck. Yahoo bought Polyvore in July for $230 million. Polyvore, a social commerce site that lets users make artistic collages of clothes and accessories...But Jackson does not mince words when it comes to Yahoo's decision to spend shareholder money acquiring Polyvore and companies like it. "It's not acceptable to pay $230M for zombie companies run by former APM members," he says, pointing out that Polyvore had raised $22 million in VC funding, was 8 years old, and had gone through multiple pivots. For all intents and purposes, it looked like a goner until Yahoo bought it.
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Hedge Fund Manager Criticizes Yahoo for Wasting $3 Billion On Poor Acquisitions

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  • by Spy Handler ( 822350 ) on Monday December 14, 2015 @07:38PM (#51118369) Homepage Journal

    she bought those zombie companies for the coming apocalypse!

    Either that or she was just doing a solid by her old Google buddies

    • Re: (Score:1, Offtopic)

      by rtb61 ( 674572 )

      Hundreds of millions of dollars are not a solid, they are however a pretty profound hint of corruption and purchasing commissions. Offshore tax havens wreak havoc upon governments and even more upon corporations. You could imagine the chaos if those countries that funded offshore tax havens at enormous cost to those countries, demanded full details or threatened to cut off the tax havens by zeroing their currency, youch, a lot of very surprising people would end up in crowbar hotels and not friendly ones f

      • That is not how currency exchange rates are set.

        Please learn what arbitrage means and think about how it would leave anybody trying to 'zero a currency' bleeding from all orifices.

        • by rtb61 ( 674572 )

          Tax havens a net importers, hugely net importers, zero their currency and they starve to death, straight up. They can not buy anything, if their currency has to recognised value in the countries they wish to import from. You zero a currency by making it illegal to trade in it.

    • by Daemonik ( 171801 ) on Monday December 14, 2015 @08:26PM (#51118683) Homepage

      Either that or she was just doing a solid by her old Google buddies

      That's what CEO's do. When Yahoo eventually drops her, her buddies will ensure she gets another position at the top of another company without any shareholder input into it, or a nice fat golden parachute on her way out. It's how Léo Apotheker got hold of HP, and how he walked away with $25 Million when they had to boot him.

      It's time we destroy the cult of the CEO, they're nothing but corporate leaches feeding the masses (shareholders) free bread (short term gains) while the company crumbles around them.

      • by lgw ( 121541 ) on Monday December 14, 2015 @10:54PM (#51119343) Journal

        her buddies will ensure she gets another position at the top of another company without any shareholder input into it,

        What nonsense. Shareholders vote on the board, and the board selects the CEO. You can bet the holders of the majority of shares are content with a CEO selection. Yes, it's one vote per share, not per shareholder, but even so "minority shareholder lawsuit" is a common enough occurrence if the board ignores its fiduciary responsibility.

        • Theoretically, yes. In practice, boards are independent commissions, which maintain themselves and run the company.

          Ever seen a ballot for a shareholders' meeting? It is likely to have several questions on it, each with a recommendation by the board. I'd assume that the big institutional holders (mutual funds, retirement funds, etc.) vote the way the board recommends, rather than pay attention to details. The individual shareholders will typically either toss the ballot or vote the board's recommendat

  • by Anonymous Coward
    Did they spend that much on the letters M and A? That's the only thing I can gather from this summary.
  • Quid quo (Score:1, Insightful)

    So you're at the top of a sinking ship. Your choices are to save every possible person and go down with it standing at attention at the bow or... start feeding passengers to the magic sharks. Okay bad analogy.

    If I were in charge of Yahoo at that point I could best ensure my own survive not by trying to mutate the company into something viable but by spreading the wealth and getting into as many crony networks as possible. I buy your gold plated turd for $250 million today, you buy mine tomorrow. That's how
  • by CastrTroy ( 595695 ) on Monday December 14, 2015 @07:42PM (#51118393)

    In case anybody is wondering M&A stands for Mergers and Acquisitions.

    • Thank you so much.
    • by Darinbob ( 1142669 ) on Monday December 14, 2015 @09:09PM (#51118919)

      I was at a company once where every time it was announced we were considering a merger, the stock price went up. When the merger when through, the stock price went up again. The VP of Acquisitions eventually became the CEO. The stock got up to unreasonable levels, at which point they announced considering an acquisition and an analyst said "hmm, I wonder if that's a good idea" and the stock plummed by half over the next two days. It was an industry leader though, it went through the dotcom boom and bust six months before of other companies.

      But anyway, Mergers and Acquisitions has often been seen as a way to make money. And Yahoo did make money this way. They did almost too well with Alibaba which is worth more than Yahoo now (which raises tricky legal concerns about who owns who). The problem is falling into the trap of thinking mergers by itself is a good idea. Just because Google can buy useless companies by paying 100 times their estimated value does not mean everyone should follow suit.

      • by DarkOx ( 621550 )

        Yahoo now (which raises tricky legal concerns about who owns who).

        Really how? in what way? Yahoo has a minority position in Alibaba. I don't see how its complicated at all. Yahoo I am sure has some voting rights or something where Alibaba is concerned, but I don't know I have never directly held stock in a Chinese company before so common vs preferred etc might work a little different.

        • I would hope Yahoo owns Alibaba on the NYSE.

          It's still a shaky thing. But better than owning anything on the Shanghai exchange these days.

          You can get arrested in China for pointing out that the AVERAGE PE ratio on Shanghai was over 100 at the height of the insanity and is still north of 70.

  • by Crashmarik ( 635988 ) on Monday December 14, 2015 @07:46PM (#51118417)

    As the inspiration for most Dilbert strips.

  • by kaiser423 ( 828989 ) on Monday December 14, 2015 @07:52PM (#51118445)
    Pretty much all companies totally suck at M&A's. I don't know if he has much of a leg to stand on here given large company track records of small single digit successes in M&A.
  • Carly 2016 (Score:3, Funny)

    by Anonymous Coward on Monday December 14, 2015 @07:53PM (#51118455)

    She sounds like she has a bright future as Carly Fiorina's running mate!

  • I remember back around Y2K they were burning through capital and had zero profits to show.

    • by ShanghaiBill ( 739463 ) on Monday December 14, 2015 @08:17PM (#51118621)

      I remember back around Y2K they were burning through capital and had zero profits to show.

      Yahoo was an early investor in Alibaba. They have made billions and billions off of that investment. Other than that, they have not done much.

  • by rsilvergun ( 571051 ) on Monday December 14, 2015 @07:57PM (#51118495)
    the one that made it worthwhile? Sure, most if not all of these were post Alibaba, but after a payout like that who can blame them for trying again. The funny part is that their illustrious CEO sold off 7 billion of Alibaba before it went crazy and they still made 30 billion after the little 'Oops'. Funny to watch the shareholders circling them like sharks though.
  • by istartedi ( 132515 ) on Monday December 14, 2015 @07:57PM (#51118499) Journal

    I don't know when they bought Flickr, but it was under her tenure that they imposed infinite scrolling on us, and made Pro a nearly valueless product for many people. I hope they can spin out Flickr somehow, and make it for all the users again, not just a lame attempt to play to tablet people. Nothing against tablet people, but the world is more than quick-flipping through pictures and memes with text on the picture. For some of us, the prose under our pictures is just as important as the picture itself and when you make viewers hunt for the prose they won't do it. They'll just go "this picture isn't very sensational" and move on. So sad. End rant.

    p.s., A wikipedia style non-profit for Flickr might not be a bad idea.

  • by interval1066 ( 668936 ) on Monday December 14, 2015 @07:58PM (#51118505) Journal
    ...I was talking to an ex Yahoo insider JUST TODAY. I was in Mt. View CA for a meeting. 7 Years from 2000 to 2007 he worked on search. His wrords: "Google killed us.", his opinions on Meyer's efforts: "DOA." Seriously, time to dump that Yahoo position if you have one.
    • Re:Just TODAY (Score:5, Interesting)

      by tnk1 ( 899206 ) on Monday December 14, 2015 @10:14PM (#51119193)

      I'm not sure who in their right mind would have held Yahoo, even before Mayer crashed and burned. Yahoo is a search engine that isn't Google with no entrepreneurial energy left to even sort of try to make a fight of it. They're basically a holding company for Alibaba stock. They need to resurrect Zombie Steve Jobs from the grave to save them. Marissa Mayer never had a chance. I'd almost feel sorry for her, except that she's making bank off this job. I just hope she didn't want to work as a CEO ever again of a company not bankrolled by herself.

      • by KGIII ( 973947 )

        I may not be in my right mind but I noticed Yahoo! coming up, again and again, in often unrelated topics here on this site and a few others. So, I looked. Their stock was cheap and I figured that I'd buy some and maybe lose a little so I bought a lot as it would be unlikely that I'd lose a little. It wasn't long after that the stock started going up. It climbed quite a bit. I held it for a little while over a year and sold last November (mid-months as I recall). I don't know exactly what the values were but

        • by tnk1 ( 899206 )

          I did think about a scenario like your situation when I wrote my comment, and you certainly can make money on an upswing from news like hiring a hyped CEO like Mayer. I think I tend to think about longer term investment when talking about holding stock and that isn't the whole story.

          However, there is a difference between buying up a fundamentally sound company like VW that just happens to be on a downswing, and a company like Yahoo who has shitty fundamentals and is teetering on the brink. People who buy

          • Hey, but every since Marissa joined as the CEO the companies share price nearly doubled. I don't know how much of the price rise is attributed to Alibaba's price rise. But I think Marissa is not the only person who should take the brunt in the Yahoo story. I think the screw up began right from when Terry Semel was the CEO. Semel was one clueless CEO who made the most out of Yahoo, he was a freeloader. Carol Bartz lacked vision too but at least she knew how to streamline operations and turn Yahoo back into p

      • by sootman ( 158191 )

        > I just hope she didn't want to work as a CEO ever
        > again of a company not bankrolled by herself.

        Eh, she could always run for president.

    • by hagrin ( 896731 )

      his opinions on Meyer's efforts: "DOA.".

      YHOO was mostly "DOA" indeed when Mayer took over. However, with her initial efforts in being overly meticulous with the redesigning of the logo (the 30 days of logos), the bombardment of press releases concerning their Weather app and her Flickr changes, there was proof she was overly (too much?) involved in new projects. But then there was YHOO's Daily Fantasy product being released and that's when you knew Mayer had checked out and YHOO was dead under her leadership. In an industry that's raising 100s

  • Corporate America rewards their CEOs for failure.

  • Maybe Marissa is getting the hint that Yahoo is going in, so the best thing to do is to try to steer the remaining cash to her cronies (and herself) while it lasts?

    Nah...couldn't be!

    • "Improving Shareholder Value" is the new pyramid scheme.

      Example: IBM is "too small" to turn things around... so they need to merge with another company, strip off the business, and let go of a bunch of employees (funny that the execs always seem to do great in those deals and the top-heavy organization always remains top heavy with execs and upper management). They'll see an uptick in the stock price. When things fall again, rinse, lather, repeat....until you can no longer reverse the trend, then bail out w

  • by iamacat ( 583406 ) on Monday December 14, 2015 @08:36PM (#51118727)

    I will let employees and shareholders judge Marissa, but Yahoo is going through like one CEO per year. Would you expect any employee to be great before at least 3 years on a job? Why is it different for presumably the most difficult job in the organization?

    Plus, some time is needed to turn around a large, bureaucratic company in any given direction. With Marissa, it has been killing of smaller projects and focusing on mobile apps. I give her some credit for at least getting people to talk about the company and putting it in front of customers with Firefox deal.

    Now maybe there are other successful directions, like extreme cost cutting and collecting profits as long as they can possibly last. Oracle seems to be doing good job milking RDBMS which was dying longer than Yahoo was around.

    But if you never allow a CEO to truly learn how to manage the company and spend time implementing a consistent vision, you are doomed to die as you throw away previous spending to chase the latest wishful thinking.

    • by Lumpy ( 12016 )

      "Would you expect any employee to be great before at least 3 years on a job? "
      for her pay level? she's got 90 days or she is thrown out the door.

      These people claim they are superstars that require obscene pay. They had better be able to shit dollar bills in 90 days.

    • by KGIII ( 973947 )

      Marissa has been CEO of Yahoo! since sometime in 2012, July(ish) as I recall.

      While your post is interesting, it is neither informative nor based on factual data. My memory is faulty but I was interested and researched the company a couple of years ago. They've been around since like 1991 and have had something like 7 CEOs during that time.

      Feel free to double check my work. A number or two might be off but that won't matter. Marissa's hire date should be at about that time and the overall number of CEOs is l

    • Oracle seems to be doing good job milking RDBMS which was dying longer than Yahoo was around.

      What the hell are you talking about? RDBMS Still run the world. Do you think your bank uses noSql? or hotel reservation systems, or the IRS, or well hell you know everybody everywhere. Just because there are some cases where nosql is useful does not mean relational systems are dying.

  • Seems bizarre that a company in Yahoo's situation would be doing M&As with companies that are not clearly wildly profitable. Trying to pick winners in startup space is something VCs should be doing; I'd not be impressed if I was a Yahoo shareholder.

    All their acquisitions should be being done because it's more effective for them to invest shareholder money in the acquisition than it is to developed the equivalent product/revenue stream/service internally.

    It's not really clear if the acquisitions of start

    • You must be new to business. You keep applying logic and reason. This is actually typical behavior.
      • by KGIII ( 973947 )

        This is true... I apply Slashdot logic and reasoning to (some) of my investing. I've been at it for nearly six years now. I don't drink now but I came up with the idea when I was drunk and, lo and behold, it actually, kind of, works. I should note that I quit drinking about three years ago, a bit over - actually. With that note comes this; I did absolutely horrific, losing great sums of cash, for the first year and a half. Coincidence? Probably.

    • Comment removed based on user account deletion
    • by tnk1 ( 899206 )

      Wildly profitable companies aren't sold for peanuts. Or they aren't sold at all. It's not quite that easy.

      M&As do sometimes turn out okay, but you need to know how to pick them. Berkshire Hathaway is one company that is well known for making M&As work very, very well.

  • Not just Yahoo (Score:5, Interesting)

    by MountainLogic ( 92466 ) on Monday December 14, 2015 @09:02PM (#51118879) Homepage
    Google paid $3.2B for a thermostat company [cnet.com] founded by a former PM from the iPod team. At least they are selling a few units and in a decade or two they will grow enough to be a footnote for Google's annual report.
  • by Greyfox ( 87712 ) on Monday December 14, 2015 @09:06PM (#51118905) Homepage Journal
    She must be doing something right, seeing as how I keep hearing about them, despite the fact that Yahoo has been largely irrelevant ever since Lycos had the brilliant idea of making a "search engine" for "the Internet."
    • by tnk1 ( 899206 )

      If her job was get get PR for Yahoo, she'd be a big success. Unfortunately, since she's CEO, bad PR is not the PR she needs to make.

  • by vinn ( 4370 ) on Monday December 14, 2015 @09:07PM (#51118909) Homepage Journal
    Anyone who's invested in YHOO in the past decade deserves to lose money for believing the company has any relevance left. I understand being hopeful about a CEO, but when it involves changing the underlying business model you should run away from the stock as fast as you can. There is no gamechanger here for this stock. The fact that it's still valued at $32 per share is reason enough to sell this stock and get the hell away from it.
    • by KGIII ( 973947 )

      Higher up this thread, I posted a different result than what you're expecting. I'm not going to repeat it but you're free to expand the thread or view my post history for one made a while before this one. I did quite well with a good chunk of Yahoo! stock. It was, shall we say, lucrative but I'm a gambling man yet, at the same time, not horribly greedy. I divested a little over a year ago.

  • She sucked at her last 2 CEO jobs as well. Why did anyone expect anything different?

    • She sucked at her last 2 CEO jobs as well. Why did anyone expect anything different?

      She's only been the CEO of one company, and that's Yahoo.

  • Apparently their Mergers and Acquisitions team was looking for candidate companies by using a crappy hierarchical search technique rather than one using page ranking.

  • by david_bonn ( 259998 ) <davidbonn@macAAA.com minus threevowels> on Monday December 14, 2015 @10:31PM (#51119269) Homepage Journal

    ... in Silicon Valley is that there is an axis amongst venture capitalists and M&A people. A surprising number of senior M&A people are also investors or even partners of VC firms. So when a company turns out to be a dog the VC people have a way to get their money back, the founders get themselves a new job at the acquiring company, and everyone else gets screwed.

    To me it is shocking that a hedge fund guy is just figuring it out. It probably has been going on in one form or another for over forty years. And no, as far as I know it isn't even illegal.

    • A bigger dirty little secret: Some CEOs are brought into failing companies not for rebuilding, but to make the declines manageable. A failing company diversifies via M&A's with what little money it has, then sells parts on a yearly basis to prop up the P&L while shrinking the company. This is often the real plan but the CEOs can't really divulge it or it'd go bust. It helps the shareholders because their stocks don't become worthless overnight. It helps the employees because the layoffs are mor

    • by DarkOx ( 621550 )

      I know it isn't even illegal.

      Impossible to prove therefore impossible to prosecute certainly.

      However if the M&A people are knowingly buying up dogs to bail out their VC and entrepreneur buddies they are not meeting their fiduciary responsibilities to the share holders. The SEC would have something to say about that.

      The problem of course is all they have to say is "no I really believed with the rights synergies we could increase the value of that business..." and how can we ever prove otherwise. Unless they misrepresented or co

  • I criticize hedge fund manager for investing in Yahoo.
  • Y! was eating itself from the inside out BEFORE the .com crash.

    in 1999 they were Google, Ebay, Match, Facebook and Steam. All rolled into one.

    Whoever sacrificed the dominant position on the entire Internet to form an acquisitions firm for worthless tech companies is a fool. But that decision was made while Google was run from a garage and Ms Meyer was still at college.
  • Eric Jackson has been peeing on Yahoo for 7 years.

    He advises people on How to be an activist investor, and it mostly comes down to making a lot of noise, even when you only own about 0.2% of the stock -- which is what his fund owns of Yahoo.

    http://www.wsj.com/articles/ho... [wsj.com]
    http://recode.net/2014/08/12/a... [recode.net]
    http://greenbackd.com/tag/dr-e... [greenbackd.com]

    His dream (now all but kaput, thanks to the financial crisis in China) was to have Alibaba flush with cash, spending it on acquiring Yahoo.

  • Another case where you need to RTFA. The synopsis is shit but everyone is eating it up and parroting the talking points. Hence, sheep. If anyone was paying attention, there's a battle between investors about what to do with Yahoo's core business. You have a group of investors who want Yahoo to SELL off their core business and a group of investors who don't.

    "In Jackson's view, Yahoo's core business is undervalued after being poorly managed by Mayer. Selling today would mean selling it at a low point.
  • she has succeeded in changing the image of the society. It was hopelessly dying. Now, it is still not very healthy, but the reputation has improved a lot. Such a success in a society where shareholders are such dicks, I think she is really strong. If the stupid shareholders fire Marissa Meyer, I close my yahoo email account and I remove my bookmarks on yahoo.
  • Death by PowerPoint. A presentation that takes 99 slides to make its point its clearly pointless.

  • Come on... Almost all acquisitions are crap. Take the Apple take over of Beats. Did Apple need the branding kudos? Of course not. Did they need the expertise to make a music streaming service or a pair of headphones? Of course not. 99% of acquisitions are complete nonsense.

Keep up the good work! But please don't ask me to help.

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