Yahoo! is growing up

The rough patch Yahoo! is experiencing brings back a couple of IR lessons I’ve encountered. In the spring of 1996, my colleagues and I were cooling our heels in the lobby of a big mutual fund, waiting to see a portfolio manager. Our European-based company laid claim to being the world’s largest chemical firm. Steeped in more than a century of history, measuring revenues in billions of Deutsche Marks and significance in tens of thousands of employees. My colleagues spent their work lives amid a huge complex of chemical and pharmaceutical plants with multistory reactors, environmental scrubbers, pipes everywhere. We were old economy.

Into the waiting room of that fund walked another crew of executives – much younger – and we introduced ourselves. Their company was called “Yahoo!” and the business had something to do with the Internet. This was 1996, so the picture was a bit fuzzy to guys who worried about plant utilization and return on capital employed. Eyeballs? Page clicks?

OK, we chuckled a little … “Yahoo!” seemed like an idea lacking material substance. Of course, this was before the Internet swallowed virtually the entire world’s flow of information and we all became addicted to search engines to sort through it. These were the earliest days of the dot-com bubble, before Alan Greenspan posited “irrational exuberance” could take investors on a wild ride. Yahoo! They were new economy.

The memory has surged back in the recent to-and-fro over whether Yahoo! should be sold to Microsoft, split up or something else. Yesterday, the company gave in partially to activist investor Carl Icahn and agreed to name him and two choices to the Yahoo! board.

For the record, Yahoo’s IPO on April 12, 1996, did fine. Investors loved the brand and the search engine’s potential. Yahoo!’s market cap briefly topped $1 billion that day. It has been a wild ride, as Greenspan predicted, but YHOO now tips the market scales at close to $30 billion.

Yahoo! is just over 12 years old as a public company, 14 total if you go back to two Stanford PhD candidates founding “Jerry and David’s Guide to the World Wide Web.” Nobody questions today that Yahoo! is a business, although shareholders now fret about slumping profits, slower revenue growth, competitors and the like – hence, the push for a quick-fix sale.

There is a certain coming of age in fighting off a takeover and then inviting onto your board someone whose presence the media labels an “uneasy truce.” Best wishes to staff and shareholders of this child of the Nineties growing up – and no doubt facing more changes – in the new millennium.

By the way, the company I worked for in ’96 went away more quickly than Yahoo! – selling or spinning off those chemical plants, going after higher returns in pharmaceuticals. It has merged and changed its name twice, and revamped its management team. Maturing revenue curves have made the Big Pharma world consolidation-prone.

Old economy and new are not as different as either of us thought.


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