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    © All Rights Reserved
    Download as PDF or read online from Scribd
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    38 views7 pages

    Yahoo

    Uploaded by

    Vincent Akormedie
    Yahoo case study question

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 7
    Yahoo! Inc. — 2009 Hamid Kazeroony William Penn University YHOO www.yahoo.com In January 2009, Carol Bartz replaced Jerry Yang as Yahoo!'s CEO. Yahoo! has resumed discussions with Microsoft about search and advertising partnerships as both firms strug- gle to compete with Google. Yahoo! in 2008 had rejected Microsoft's unsolicited $44.6 billion offer and then rejected that firm’s attempt to acquire just Yahoo!'s Internet-search business, which is second behind Google in market share. Headquartered in Sunnyvale, California, Yahoo! has offices in more than 25 coun- tries, provinces, or territories. Yahoo!'s revenves from 2007 to 2008 increased by 3.4 per- cent to $7.2 billion. However, net income decreased by 35.7 percent to $424 million, ‘Yahoo! is the second leading global Intemet brand and one of the most trafficked Internet destinations worldwide. Together with its owned and operated online properties and ser- vices, it also provides its advertising offerings and access to Intemet users beyond Yahoo! through its distribution network of third-party entities, who have integrated its advertising offerings into their Web sites. Yahoo! generates revenues by providing marketing services to advertisers across hundreds of Web sites. Although many of the services Yahoo! provides to users are free, it does charge fees fora range of premium services. ‘The core of Yahoo!'s strategy and operations is to become the starting point for Internet users; to provide must-buy marketing solutions for the world’s largest adverts- crs; and to deliver industry-leading open platforms that attract developers and publishers, ‘Yahoo! posted a 78 percent first quarter 2009 profit decline and reacted by eliminat- ing another 675 jobs, or 5 percent ofits workforce on top of 2,500 jobs cut in 2008. For that quarter, Yahoo!'s revenues dropped 13 percent to $1.58 billion. Yahoo!”s online adve tising business is also deteriorating rapidly as the firm's overall revenue fell 13 percent in the second quarter of 2009 compared to the prior year. For that second quarter, aggressive cost cutting allowed Yahoo! to posta 7 percent increase in profitup to $141.4 million, but the firm laid off another 700 employees to end with 13,000 employees. In July 2009, Yahoo! closed its third video property, Maven Networks, based in Cambridge, Massachusetts. Yahoo! plans to close twenty video services, including its social network site Yahoo! 360 and its Web hosting service GeoC ities. The company needs an excel- lent strategie plan to negotiate a deal with Microsoft or to continue alone. History Yahoo! began as a student hobby and evolved into global brand that has changed the way people communicate with each other, find and access information, and purchase things. The two founders of Yahoo!, David Filo and Jeery Yang, were PhD candidates in clectrical engineering at Stanford University when they started this company in a campus trailer in 1994 as away to keep track oftheir personal interests on the Internet. Soon these two men were spending more time on their home-brewed lists of favorite Tinks than on their doctoral dissertations. Eventually, Jerry and David's lists became too long and unwieldy, and they broke them out into categories. When the categories became too full, they developed subcategories and the core concept behind Yahoo! was born, ‘The Web site started out as “Jerry and David's Guide to the World Wide Web" but eventually received a new moniker with the help of a dictionary. The name Yahoo! is an acronym for “Yet Another Hierarchical Officious Oracle,” but Filo and Yang insist they selected the name because they liked the general definition of a yahoo: “rude, unsophist cated, uncouth.” Yahoo! itself first resided on Yang’s student workstation, “Akebono,” while the software was lodged on Filo's computer, “Konishiki”—both named after legendary sumo wrestlers, ‘Yahoo! was incorporated in 1995 in Delaware and launched a highly successful initial public offering IPO in April 1996 with a total of 49 employees. Its stock rose to the high of $120 in 2000 but for most of 2009 has been trading under $14. Yahoo! Segments ‘Yahoo! offerings include Yahoo! Groups, Yahoo! Answers, and Flickr and are generally provided to users free of charge. Revenue in Communities’ offerings is primarily gener- ‘ated through display advertising. Yahoo! search offerings include Yahoo! Search, Yahoo! Local, Yahoo! Yellow Pages and Yahoo! Maps and are availabe free to users and are often the starting point for users navigating the Internet and searching for information, Yahoo! generates revenues through its Search offerings from search and display advertising. ‘The Yahoo! Communications segment include Yahoo! Mail, Zimbra Mail, and ‘Yahoo! Messenger and provides a wide range of communication services to users. Yahoo! generates display advertising revenues from these offerings, Yahoo!'s vision and/or mission statement is “Yahoo! powers and delights our communities of users, advertisers, and publishers—all of us united in creating indispens- able experiences, and fueled by trust.” Yahoo!’s code of ethics is embedded in its six val- ues: Excellence, Innovation, Customer Fixation, Teamwork, Community, and Fun, ‘Yahoo! lost 1 percent in rich media revenue, | percent in sponsorship, and 2 percent in classified ads in 2008 as compared to 2007. Although the revenue from search increased bby 3 percent in 2008 compared to 2007, the increase was due to growth in the entire Intemet business rather than a shift to Yahoo! External Issues According to technology research firm IDC, there were 1.1 billion Intemet users around the world and 211 million in the United States as of the end of 2006 (latest data available). ‘To offer some perspective, the size of the worldwide population of Internet users is comps- rable to the population of India (estimated at 1.1 billion as of mid-2008, according to the US. Central Intelligence Agency), and the size of the U.S. population of Internet users is, ‘comparable to the population of Brazil (191 million). Economic growth in the United States and around the world has slowed amid crisis in the housing and credit markets. The prices of consumables, from fuel to food commodities, are near all-time highs, yet the values of personal asset, like homes and property, have fallen ‘dramatically, Add rising unemployment and problematic geopolitics to the mix, and we have a difficult economic backdrop, to say the least. Although Internet-related businesses have perhaps held up better than their non digital counterparts, they have still suffered from ‘macroeconomic malaise. In 2009, a number of Internet content and advertising companies (including Bankrate Ine., Knot Inc., ValueClick Inc., WebMD Health Corp.,and Yahoo! Ine.) reported disappointing financial results and lowered their forward financial outlooks. Even Google Inc. expressed economic-related caution in conjunction with its second quarter results, and Internet media and market research firm comScore Inc, expressed concerns about deceleration in online spending growth, Internet advertising revenues in the United States remain strong, topping $23 billion, ‘according (0 the 2008 Internet Advertising Revenue Repor, released by the Interactive Advertising Bureau and PricewaterhouseCoopers LLP (PwC). Despite a difficult U.S. ‘economy, as illustrated in Exhibit 1 to 5, Internet advertising continues to grow, albeit at a slower pace. This trend confirms marketers” increased recognition that consumers spend more and more of their time online. EXHIBIT 1 Consolidated Statements of Income Years Ended December 31 2006, 2007, 2008 {in thousands, except per share amounts) Revenues $6,425,679 $6,969,274 $7,208,502 Cost of revenues, 2,675,723 2,838,758, 3,023,362 Gross profit 3,749,956 4,130,516 4,185,140 Operating expenses: Sales and marketing 322,259 1,610,357 1,963,313, Product development 147 1,084,238 1,221,787 General and administrative 528,798, 633.431 705,136 Amortization of intangibles 124,786 107.077 87,550 Restructuring charges, net = = 106.854 Goodwill impairment change = = 487,537 ‘Total operating expenses 2,808,990 3,435,103 4,172,177 Income from operations 940,966 695,413 12,963 Other income, net 157,084 154011 82,838 Income before provision for income taxes, ‘earnings in equity interests, and minority interests 1,098,000 849,424 95,801 Provision for income taxes (458,011) (337,263) 262,717) Barings in equity interests 112,114 150,689 596,979 Minority interests in operations of ‘consolidated subsidiaries «2 (5.765) Net income $751,391 $424,298 [Net income per share-basic $s 054 S031 [Net income per share-

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