The good news for Yahoo! investors is that Carol Bartz is gone. The bad news is why she’s gone.
For Wall Street her unceremonious firing — delivered over the phone by Chairman Roy Bostock on Tuesday — must mean one thing: Yahoo! is having another crummy quarter.
In July, Yahoo! revealed that its advertising business had fallen off a cliff in the second quarter, which dragged down results. But the bleeding didn’t stop there, sources said.
“You don’t fire a CEO in the middle of a good quarter,” said one source.
Most troubling, Yahoo!’s bread-and-butter display-ad business has been under pressure from nimbler rivals. Facebook is on track to overtake Yahoo! as the display-ad leader this year.
Yahoo!’s second-quarter ad revenue fell 23 percent year-over-year to $1.22 billion. The decline was blamed on Bartz’s bloodletting of the sales team as part of her relentless cost-cutting drive, a source said.
Wall Street is bracing for another letdown in October when Yahoo! is expected to report results for the quarter ending Sept. 30.
Indeed, the initial euphoria over Bartz’s departure was short-lived yesterday as the reality of the situation set in for investors. The stock rose 5.4 percent to close at $13.61 after jumping more than 8 percent in early trading.
Investors — not to mention Yahoo! employees — were also less than pleased that Bartz was walking away with a golden parachute estimated at $10.4 million.
Bartz was eligible for the severance because she was technically fired with “no cause,” the company said.
At an all-hands meeting yesterday, Yahoo! co-founder Jerry Yang tried to rally troops by saying the company was not for sale.
But that just reminded investors of his stubborn refusal of Microsoft’s $45 billion offer for the company in 2008.
Today, Yahoo is worth a third of that price.
A source close to Yahoo! said that while the board is not actively pursuing a sale, it would meet its “fiduciary” obligations should the right offer come along.
The top priority of interim CEO Tim Morse and a newly formed advisory committee was to find a permanent chief, the source said.
Morse and the panel’s mission is twofold: reinvigorate Yahoo!’s core Internet business and maximize the value of its Asian investments in Alibaba Group and Yahoo! Japan, sources said.
Yahoo! is reportedly ready to hire an investment bank to explore options for its business, which could include strategic partnerships or acquisitions.
Yahoo! could also sell all or part of its investment in the Chinese e-commerce giant Alibaba Group in order to demonstrate to shareholders how much that presumably valuable asset is worth, analysts said.
Still, it could be some time before Yahoo! investors see any changes.
“It will be a while for any kind of serious strategic review to get conducted and completed,” one source said.
