Yahoo CEO Carol Bartz and company board members addressed investors Thursday at the company’s annual shareholder meeting. Despite majority support for Bartz and other board members, a certain level of discontent was palpable among investors, and one particular shareholder called for an end to Bartz’s tenure.
A degree of discontent among some Yahoo stake holders has sprouted from underperformance and an inability to keep up with competitors.
“We’re looking at a company that has not seized upon opportunities in numerous contexts as some might have expected,” Scott Kessler, equity analyst at Standard and Poor’s, told the E-Commerce Times.
Botched alliances with Google and Facebook, rebuffed offers from Microsoft and failures in the search industry are oft-cited examples of investor frustration. Most recently, mismanagement of Yahoo’s Asian assets Alibaba Group and Alipay have caused the stock to drastically drop.
“A lot of people get frustrated because on one hand it seems like you listen at the meeting and you get an impression that they’re not only holding their own, they’re doing well, so it seems like there is a pretty significant disconnect,” said Kessler.
To kick off the presentation Thursday, Yahoo introduced itself as “The Premier Digital Media Company.” It’s a significant deviation from the search engine giant much of the tech world thought it would be a decade ago.
“That is kind of how they’re trying to brand themselves to attract users and advertisers, but at the end of the day, they have to sell ads. And in that, they’re losing market share to the Googles and the Facebooks of the world,” Yun Kim, senior analyst at Gleacher & Company, told the E-Commerce Times.
The purchase of Asian assets and a move into channels of communication such as video technology and display advertising has been part of a kind of reconstruction for Yahoo. Those acquisitions were crucial for invigorating the company but haven’t been as stimulating as some had hoped.
“For a short period soon after Carol Bartz came on, there was a new kind of energy and enthusiasm. They wanted someone who was going to streamline the company and take decisive actions, and that just has not taken shape as quickly as some might have expected, and there’s growing impatience over that,” Kessler said.
While growth has been positive for the company, it hasn’t been at pace with the rest of the industry.
“Yahoo is probably losing market share. I’m kind of scared that they’re congratulating themselves on 18 percent growth in the display business. They need to show better than that; the other guys are putting up growth of way over 20 percent,” said Kim.
What Can Yahoo Do?
Whether Yahoo can bring business back to expectations is an open-ended question. However, there may be steps the company can take to quell investor frustrations. First is to repair the relationship with Alibaba, in which Yahoo has a 43 percent stake.
“Obviously they were not communicating well with each other in the past — it is a mood issue at this point, and they’ll figure out a way to resolve that. The concern is the rebuilding and how they’re going to restructure this new relationship,” said Kim.
Investors also want to see a more aggressive approach to new technologies, acquisitions and up-and-coming markets.
“This is a company that has a pretty strong balance sheet with a lot of flexibility and possibility. They could push a lot more for social media, mobile or video markets,” said Kessler.
Voting back Bartz with 80 percent of the vote and the rest of the shareholders at 90 percent seems to be an indication that investors feel Yahoo can implement some of these ideas into a business strategy resulting in faster growth. Still, it may not prove to be an easy climb.
“Now that Bartz has a core group of management team at Yahoo, they need to focus on something new and not wait until things get worse. She needs to show some kind of significant rebound in the second-half window of the year, or even the patient shareholders will be asking for change,” said Kim.