Reviving Yahoo! - Strategies that Turned Around the Leading Internet Portal
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Case Details:
Case Code : BSTR064
Case Length : 13 Pages
Period : 2001 - 2003
Organization : Yahoo
Pub Date : 2003
Teaching Note :Not Available
Countries : Japan
Industry : Information Technology and Related Services
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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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"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." 1
- Scott Reamer, an analyst at SG Cowen Securities Corp, US.
Introduction
Yahoo! Incorporated (Yahoo), the world's leading Internet portal shocked the investor community by reporting dismal financial results in fiscal 2001.
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The company's revenues dipped by more than 35% from $1.11 billion in 2000 to $717.44 million in 2001. Yahoo reported losses of $92.79 million in 2001 compared to net profit of $70.78 million in 2000 (Refer Exhibit I). Soon after the announcement of the results, Yahoo's share price fell to $15, down by 94% from its all time high of $237.50 on January 3, 2000 (Refer Exhibit II). Industry experts, media and stock market analysts were quick to write off Yahoo and predict the end of Yahoo like many other dotcoms. BusinessWeek, May 2001 report asked, "Will Yahoo be the ultimate example of blown opportunities during the Web's glory days?" Analysts had doubts whether Terry S. Semel (Semel), the new Chairman and CEO, who joined Yahoo in May 2001, had the capabilities to solve the company's woes.
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Lanny Baker, Managing Director of Salomon Smith Barney, remarked, "Semel has little experience courting big-name, traditional advertisers - the very folks Yahoo desperately needs to rejuvenate its business.
The movie business is not the media business. The media business is all about
selling ads.
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The movie business is all about spending money."2 However, after two years on the top post at Yahoo, Semel had proved his critics wrong. By adopting a strictly formal culture and a 'buttoned down' management approach, Semel was able to carve out one of the most spectacular turnarounds in the corporate history. Semel solved several problems faced by Yahoo like infighting within the management, arrogant culture, and declining revenues and profitability. Yahoo reported improved results in the fiscal 2002 with the company generating a net income of $106.9 million on revenues of $953 million. Moreover, the company continued the profit momentum in the first two quarter results in 2003 (Refer Exhibit III). Yahoo's shares, after touching a low of $9 in September 2002, had bounced back to $30 by July 2003. |
Reviving Yahoo! - Strategies that Turned Around the Leading Internet Portal
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