Ok – it was in interesting couple days. And very entertaining! I have read most of all the great and entertaining articles about how Carol Bartz got fired by Roy Bostock and then all the articles on how Carol fired back. Kudos to her for being authentic. I hope she finds another gig in the digital media landscape – we all need straight talking people like here that execute extremely well.
Anyway – I am not going to pile on to the arm chair quarterbacks about what Carol did or what she or the Yahoo board didn’t do. I am going to recommend what they should do. And they aren’t these options.
Lots of smart people, thought leaders analysts and pundits have all stated quite loudly about the pickle that they are in. And beleive you me, they are in a bad way. It is a wonderful brand and a great franchise but they need to get out of their own way to shape a strategy for the future and the future of display advertising. The industry needs them and needs them healthy – People there is still some $300+B that need to migrate from traditional media to digital. It can’t be done by small companies but with the help of big media assets on the upswing.
Here is my recommendation. Take it for free. If you are an investment banker pitching Yahoo, feel free to take the idea and pitch it to the Yahoo board. If you are a journalist, feel free to paraphrase and take the idea or build on it. If you are just a internet vet like me, share it if you believe it.
First – Sell the Asian Assets. They are great assets. They are very valuable. And most important they are STRATEGIC. That is why you need to sell them so you can 1) unlock options for growth in the US where the ad dollars are; 2) create a war chest; 3) unlock value for your shareholders. Experts have put the Asian Assets at a value of $10B to $16B. You should be happy w/ anything in that range. But when you sell – hold the cash!
Second – Acquire AOL. According to Y! Finance AOL Market Cap of $1.6b w/ $450M in Cash and $150M in Levered FCF. Looking at Y! Finance for Yahoo this would add 40% increase in revenue, 40% increase in cash and ~100% increase in Levered FCF. This looks mighty tempting to me. You have cash on the balance sheet to acquire AOL now.
Third – Put Tim Armstrong in charge of the whole thing. If you give him free reign, give him a war chest to grow, secure the leadership on both sides (AOL & Yahoo) to make it work. I think it would be interesting. And depending on how you structure the deal, you maybe able to get a sweetheart deal on AOL given the dividend payout in part 4. And I think Tim wants to get away from Arianna and Michael right now.
Forth – Pay out a one time dividend to your shareholders post AOL close that is 50% of the cash from selling the Asian Assets.
Fifth – Get out of the way. And I mean way out of the way. Roy Bostock and the rest of the outside directors should step down. Get the board to 5 seats – Jerry, Dave, Tim, One Independent and the largest outside shareholder (Daniel Loeb). Let the executives get the right strategy and execute on it. There are great employees, engineers and executives at both companies. Let them do their job.
Want more details on how to do the integration or strategy for the combined companies? Just call me!