Anyone Can Run Yahoo! (YHOO)

With Jerry Yang as the new CEO of Yahoo! (YHOO), one of two things is very likely to happen.

First, if investors believe the CNBC crowd, Yahoo! will be broken up or merged. Microsoft (MSFT) will buy it. It may be merged with AOL. Rupert Murdoch may buy it and merge the operation into MySpace. Maybe he will merge Yahoo! Finance with Dow Jones (DJ).

Or, the Yahoo! board’s statement will turn out to be true. No selling the company. Make it work better. Get the share price up.

Neither is likely to happen. Yahoo! has actually done very well over the last five years. The shares are up about 275%. What does Wall St. compare that to? Amazon (AMZN) is only up slightly more. Ebay (EBAY) is up much less. So is Microsoft (MSFT).

At this juncture, anyone can run Yahoo!. If the company is going to be sold, it does not need a great leader. It needs Goldman Sachs or some other solid investment bank to get shareholders the best break-up value or acquisition price.

If the company is going to be operated as is, intact, then the critical strategic decision that the company had to make in the last three or four years is already behind it. Yahoo! did not make the moves it needed to make to become the leader in search. Blaming Semel is easy. But, AOL made the same choice. So did Microsoft. Yahoo! went the route of becoming a portal, and, for a long time it worked.

Yahoo! said that the current quarter would be a little disappointing. Search advertising would be OK, so the new Panama platform must work fairly well, but it does not matter very much. Google’s lead is too great. No one is going to catch it now. And, when search advertising stops growing as quickly as it is now, Google will get kicked around by investors.

Yahoo! also said that in Q2 display advertising has been a little soft. But, overall internet display advertising is not longer growing 50% year-over-year. Go ask the people at MSN or The New York Times Digital.

Yahoo! took the wrong fork in the road. The history of business is filled up with stories about companies in industries from newspapers to automobiles to buggy whips. One day a company’s market starts to slip away. The train accelerates, and there is no catching it.

Yahoo! will do fine. It can cut costs. The famous "Peanut Butter" memo even gave management a road map for that. Revenue may grow at 15% per annum. That’s not terrible. It just isn’t what it used to be.

Yahoo! needs good management to keep costs down and do what it can with revenue.

But, a lot of people can do that.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.