Yahoo Shareholder Pushes New Plan - The Next Four Points
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Eric Jackson seems to think Yahoo has lost its way, which is why the fourth point of Plan B calls for the company to make additional research and development investments in the Technology Group. Certainly, it can be argued that Yahoo’s competitors (particularly Google) have moved much more quickly to implement more interesting technologies. Indeed, some of Yahoo’s problems can be attributed to this slowness; for example, more than one observer has pointed out the irony that Google’s AdWords and AdSense were “inspired” by Yahoo’s search engine advertising (an expertise Yahoo gained from purchasing Overture) to the point of Yahoo filing a lawsuit…and that Yahoo’s Panama is now very much like Google’s search advertising. The increased investment in research and development is supposed to come in part from closing the Yahoo Media Group and campus.
The fifth point of Plan B is a call for efficiency. Yahoo has never properly streamlined many of its purchases, nor rolled them together as would be expected. Jackson gives several examples: Flickr is still distinct from the homegrown Yahoo MyPhotos, and del.icio.us is still separate from MyWeb. Jackson believes that it makes sense to roll these similar groups together, and that it should have been done a long time ago. This would increase the company’s profitability by saving some money. Jackson would also like to see some clarification as to who has “distinct ownership and accountability” for these key services. The now-famous Peanut Butter Manifesto made it clear that this kind of restructuring is sorely needed at the search company.
The idea behind the sixth point of Plan B seems to be emphasizing accountability going forward. It calls for a pay-for-performance plan for all of Yahoo’s management. “Bonuses should be tied to preset goals for increases in revenues, cash flow, and EPS.”
The seventh point is concerned more directly with the company’s stock price. Jackson wants to see Yahoo step up the pace of the $3 billion stock repurchase plan that the company announced in October 2006. Interestingly, the company’s stock price bottomed out on the same day that Yahoo unveiled its plan to repurchase that much stock over the next five years. According to Jackson, the stock’s price has been rising steadily since he went public with his work on Plan B on January 7, 2007. If the stock price continues to increase, it will decrease the number of shares that Yahoo would need to repurchase. So Jackson and his cohorts “strongly wish to see evidence that the board of directors is accelerating the share repurchase now, rather than when the stock increases in value substantially further months down the road.” One wonders if it isn’t just a little presumptuous to think that Yahoo’s rise in stock price is due to Plan B.
Next: The Last Two Points >>
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