Today's Best Read

...is Paul Graham on What Happened to Yahoo.  For itself, and as a remarkable exercise in how a good investment analyst goes about analyzing a prospect.  Wasn't it Peter Drucker who said that one of the toughest thing in business is to know what business it is that we are in?

Well, I Told You Not to Take Advice from Me...

Here's me, folks:

I know what's going to happen to Yahoo (Microsoft will win).

Underbelly, April 23 (link).

On the other hand, you might say they won by losing:

Yahoo! is not worth $44 billion. Period. You could buy General Motors lock, stock, and barrel for $14 billion, name all the cars "Google Sucks," and get more bang for the buck.

John Dvorak (link).

HT, the author of what must be the weirdest insight of the day (link) and no, it's not the one about the razor.

Not Enough

Stolen from Kedrosky:


So, good, but not good enough. I was going to say "jut like Hillary." But no: I know what's going to happen to Yahoo (Microsoft will win). Right now, I haven't any idea what will happen to the Democrats. Clinton and Obama do, indeed, look more and more like two aging plug-uglies who can bloody each other up but can't land a knockout punch.

They say John McCain is smiling and well he may. But if he has anything to smile about, it is not so much that they are bloodying each other up as it is that by lengthening the primary they are shortening the fall campaign. I've long thought that the biggest for of my age-mate McCain is fatigue--guys like us like to go to bed at 9 o'clock. When we don't get plenty of rest, we get cranky and say stupid things. McCain missed that round before because of the weirdly discontinuous Republican primary story. But it may happen yet.

Fn.: Friend of a friend says that McCain is stuck in 1968. Ha! Yes, that too.

What is Yahoo For?

I'm in holiday mode today, but I'll pause briefly to call attention to the NYT piece on Susan L. Decker (link), newly ordained President of Yahoo. It begins with a ringing endorsement from Warren Buffett, followed by an admiring and only occasionally gushy account of her career.
But you have to keep your eyes open to realize that some people with reason to know think she is not so much part of the solution as part of the problem. So:

Now, some analysts question whether Mr. [Jerry] Yang [Co-founder and newly minted CEO] and Ms. Decker, both of whom are generally well liked and respected inside Yahoo, are the right team to lead the company. Neither has extensive operational experience, and both are intimately linked to the strategy that has landed Yahoo in its current malaise. Yet both have said recently that Yahoo does not need a new strategy, but rather, must do a better job of executing its existing plan. Many people on Wall Street and in Silicon Valley, as well as some inside the company, doubt that better execution alone will be enough. The suggestions for more dramatic changes range from a merger or sale, to Yahoo’s exit of the search business.

“If I were them, I would be considering everything, because more of the same seems unlikely to produce encouraging results,” said Derek Brown, an analyst at Cantor Fitzgerald.

Much later:

But analysts say Ms. Decker is also intimately tied to many of Yahoo’s recent shortcomings. They include not only the delays in Panama, but also a series of mistakes in communicating with Wall Street about those delays, which have hurt Yahoo’s shares. And they include the failure not only to acquire Facebook, but also to secure lucrative deals to sell advertising on Facebook and MySpace, which were won by Microsoft and Google, respectively.

“Yahoo was nowhere to be found,” said Scott Kessler, an analyst at Standard & Poor’s.

Even the recently announced acquisition of Right Media, which Yahoo considers a success, could have gone better. Yahoo paid less than $45 million for a 20 percent stake in Right Media last October. By the time Yahoo decided to buy the rest of the company in April, Right Media’s value had soared, forcing Yahoo to pay an additional $680 million for the remaining 80 percent.

“That, again, is an indication of a lack of decisiveness,” Mr. Kessler said. “At the end of the day, Sue had some role to play in a lot of those decisions and a lot of the mistakes made.”

Ms. Quarles of Thomas Weisel fears that Yahoo’s recent troubles in display advertising may be a sign that history is about to repeat itself. As Yahoo stood still in search advertising, Google innovated at a furious pace to become the runaway leader in that business, she said. Then, when Yahoo finally turned its attention to search, with Project Panama, it stopped innovating in display advertising, just as Google began aiming at that market.

With its planned acquisition of DoubleClick, an online ad firm, Google could encroach further into the one big business where Yahoo still leads.

“It’s going to be challenging,” Ms. Quarles said.

Sounds right to me. As an outsider and casual dabbler, it's been hard for a long time for me to figure out just what Yahoo is there for.

Ranks of the Undead: Yahoo

I really haven't followed closely enough to justify an opinion--and I am a congenital pessimist--but I admit I am one of those who has long believed that Yahoo stands among the ranks of the undead--no reason for being, and just waiting to fall over.

But Barron's points out:

[Yahoo] is maintaining its projections for a key measure of revenues--$4.95 billion to $5.45 billion, up as much as 20% from last year. And cash flow is expected to be 30% to 40% higher by the end of the year.]

As Homer would say: mmm, cash! Disclaimer: anyone who takes investment advice from me is a flaming, self-destructive lunatic.

Microsoft Deathwatch (Updated)

Paul Graham (who?) says that Microsoft is dead. He doesn't really mean it: he explains that by "dead" he means "increasingly irrelevant," which is to say--well, not dead.

But Graham's piece is still interesting, even to non-geeks as an exercise in business strategizing. Takeaway shot: "Yahoo [was] warped from the start by their fear of Microsoft. That was why they'd positioned themselves as a 'media company' instead of a technology company."

Reminds me of the yarn about how Western Union turned down the rights to the telephone because they didn't realize their business was communications. And Peter Drucker saying that the toughest part of business is figuring out what business you are in. Or something like that. H/T Kottke.

PS: Who is undead? Hint, begins with "G."

This Just In: The director of business development at Microsoft does not agree.