Last October, Yahoo! (YHOO) fell to $23 on concerns that Q4 advertising would be weak. It was. The last time Yahoo! traded below $20 was late 2003, but at the end of last year, it got close.

But, the shares could go there again, and fairly soon.

Yahoo!’s management seems to move further toward chaos almost every week. The company’s CTO left. That was followed by the CEO. The new CEO has never run a large company, and the head of North American sales is gone.

Panama, the companies new tool to target advertisements to search results has been nowhere near the success that the company hoped. Research firm Reprise reported recently: “In many ways Panama falls short of Google in terms of ease of use, degree of flexibility and reporting options." If the new platform were a huge success, it is hard to see why Terry Semel would have left the company.

Yahoo! now sees its earnings for the second quarter not hitting the higher end of its range. Since the earnings forecast was not all that rosy to start with, Yahoo!’s growth rate is continuing to drop off fairly fast.

Google’s (GOOG) share of the US search market is now over 56% and Yahoo!’s is under 22%. Yahoo! says that its soft advertising forecast is due mainly to a drop in the growth in display advertising, but it cannot make this up with search text ads if its share continues to be so small.

Yahoo!’s final major problem is that it has not found a buyer for the company. In April, its shares jumped to $32 on rumors of a buy-out from Microsoft (MSFT). Nothing happened. And it would appear that even a deal to merge News Corp’s (NWS) MySpace into Yahoo! is a very long shot.

It would only take one quarter in the next two to fall well below expectations for the stock to fall sharply. And the likelihood of that seems to be improving.

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

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