Not Keeping Up With the Competition
Yahoo's performance is in stark contrast to competitors like Google , which posted a whopping 24% increase in sales to $6.82 billion in the quarter, and was still ahead when stripping out its partner sites, coming in at $5.94 billion with 7% year-over-year growth. Privately-held Facebook, meanwhile, boasts that some of its advertisers have increased their spend by 20-fold in the past two years, accomplishing that feat during the bulk of Bartz's tenure at Yahoo.
"In one-and-half years, she's made a lot of changes that have been good, some bad," said another person familiar with the board's thinking, adding "She needs to start showing results, but there's no timetable."
In its the last CEO go-round, Yahoo's top exec left by mutual agreement after 18 months. Embattled CEO and founder Jerry Yang saw his reputation pummeled by investors and Wall Street after Yahoo turned its nose up at a $31-a-share buyout offer from Microsoft, and then a $33-a-share bid in 2008, before Gates and Co. stepped back from the table.
Yang's appointment followed a six-year CEO stint by Hollywood studio king Terry Semel, whom investors nearly ran out of town after a rambunctious shareholder meeting.
Semel was ousted for failing to drive revenue growth, losing a massive market position to then-young upstart Google, and lacking the vision to make smart acquisitions, like YouTube. He resigned within a week of the contentious shareholders' meeting.
As a result of Semel's performance, Yahoo's board was afraid to go after another media executive after Yang stepped down, say people familiar with the board's thinking — hence, the search for a technologist.
"She's a Disaster"
At least one major Yahoo investor isn't happy with Bartz and doesn't see her as an improvement over Semel.
"I think she's a disaster, but they probably don't have another internal candidate they can slip," the investor said. "She has no vision, has executed poorly on growing the company and pi**ed away most of the Microsoft savings [from its search partnership]. I give the board even lower grades."
Bartz struck a search partnership agreement with Microsoft in February. Under the deal, Microsoft's technology runs Yahoo's searches in the background while Yahoo continues to sell display advertising on its collection of Web sites. Yahoo loses its paid search advertising revenues under the deal, but it is freed up from the cost of maintaining and further developing its own search engine.
Yahoo and Bartz declined to comment for this story.
Ken Smith, co-manager of the Munder Growth Opportunities Fund, appreciates Bartz's cost-cutting ways and is willing to forgive a lack of revenue growth for now.
"Operationally, I'm pretty happy with where they are. I wish the stock was higher, but, realistically, it takes time," he said.
"She has a new management team to assemble and is deciding which businesses to be in," said Smith, who estimates Bartz may need another six months to make that happen. "She got the company back to its roots. It's a media company and she is gearing all of it toward that," Smith said.
Nonetheless, Munder Growth Opportunities shed roughly 1.5% of its Yahoo holdings since the start of this year, bringing its ownership to roughly 1.2 million shares as of June 30, according to data available through Morningstar. Yahoo represented a 4.7% slice of the fund as of June 30.