You've heard that old saying about insanity, right? You know, when you keep doing the same thing and expect different results? It's far from a real definition of insanity, but in a business context it will do.
Not that Yahoo's strategy is clinically insane, but from the business view, it's gone beyond head scratching and into the realm of head banging -- on a brick wall. The company's 2015 earnings announcement showed what has been true for what seems like forever. Little revenue growth for a software/Internet company. They got hurt with much higher cost of revenue. Net earnings took a $4.4 billion hit because of a goodwill impairment:
We concluded that the carrying value of our U.S. & Canada, Europe, Latin America and Tumblr reporting units exceeded their respective estimated fair values. The goodwill impairment resulted from a combination of factors, including decreases in our market capitalization, projected operating results and estimated future cash flows.
Tumblr was probably a significant part of that -- Yahoo paid $1.1 billion back in 2013 for the blogging site that didn't have much in the way of revenue. But clearly to get to $4.4 billion, the rest of the company must have been outrageously overvalued, though not to the extent that management effectively did years ago when, under co-founder Jerry Yang's guidance, it turned down Microsoft's acquisition offer of nearly $45 billion because, of course, the company was worth more.
When a company keeps doing business as it has for years, especially having too high an opinion of itself, all while CEOs have come and gone and the value keeps dropping and nothing really changes, there are three things you might call it: insane, stupid, or a recognition of hopelessness.
Current CEO Marissa Mayer has released some details of her new turnaround plan: improve product quality, make more money, cut expenses, lay off 15 percent of the employees, and "explore non-strategic asset divestures" that could generate $1 billion in cash.
To translate that to real world speak, it means do what Mayer, and others before her, said they would do, only adding on a big layoff and selling off parts of the company. But it won't really change anything.
Yahoo has been a motley collection of online properties for pretty much its entire existence. Ask what Yahoo is and company representatives are unlikely to offer a description that would be considered accurate and comprehensive. Yahoo has become an online strip mall with some properties that still bring in traffic, but that don't impress much of anyone, and the strip mall itself only has value to the extent that people value being part of it.
Make no mistake, no matter how much Yahoo wants to talk about a turnaround, all it can really expect is to take the money for its properties, turn around, and walk off with something that might offer some value to the shareholders. But you can't say that if you're a company official because it would panic shareholders. Except, ironically, they may understand even better than management and the board how hopeless the company seems. Maybe they're hanging on for the final fire sale. But at this point, expecting the company to catch fire in any other sense seems like wishful thinking -- or maybe a real dose of insanity.