Yahoo! in Trouble|Business Strategy|Case Study|Case Studies

Yahoo! in Trouble

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Case Details:

Case Code : BSTR025
Case Length : 9 Pages
Period : 1994 - 2001
Organization : Yahoo
Pub Date : 2002
Teaching Note : Available
Countries : Japan
Industry : IT

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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What Went Wrong?

Yahoo blamed the weak advertising market and low spending on marketing by dotcom companies due to the US economic slowdown, for its poor first quarter results in 2001. However, analysts feel that the real problem had started way back in January 2000, when Yahoo's major competitor America Online announced plans to buy media giant Time Warner.

The deal ultimately went through for $ 85 billion in stock. Soon there were rumors in the market that Yahoo with the help of its huge market capitalization was also planning to acquire a traditional media company. Yahoo's board comprising Koogle, President Jeffrey Mallett and Yang discussed the acquisition issue. However, they reached a consensus that Yahoo would not follow AOL's footsteps. Media reports however revealed that though Koogle was interested in acquisitions, Mallet had opposed the move and convinced Yang as well. The incident led to widespread rumors of infighting within the top management of the portal. According to a source in the company, Mallett who was in charge of running daily operations fancied the CEO position...

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The Future

The Yahoo board had agreed not to make Mallett the CEO as he was 'generally viewed as not being ready for the job.' On April 6, 2001, Yahoo's board voted unanimously to offer the job of CEO and Chairman to former Warner Brothers' Chairman and co-CEO Terry Semel.

Semel agreed to take the job with the condition that Koogle should leave the Chairman post. Semel joined Yahoo on May 1, 2001, bringing with him an experience of over 24 years at Warner Brothers (Refer Exhibit II). Analysts seemed to be divided on Semel's selection as Yahoo's CEO. Though he was very successful in running Warner's movie business, he failed to deliver when his duties were expanded to include music and amusement park businesses. He was unable to turn Warner's websites into moneymakers and had little experience with advertising. According to an analyst Scott Reamer of SG Cowen Securities Corp, "Semel's not a turnaround expert. And he doesn't know how to sell to large advertisers. He has extensive experience running a media company and that's what matters..."


Exhibit I: Yahoo's Consolidated Statements Of Operations
Exhibit II: Terry .S. Semel career highlights

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