March 8, 2001 5:40 AM PST
Like the blizzard of '01, Yahoo's news anticlimactic
Yahoo's profit warning and the news that CEO Tim Koogle will be stepping aside was about as anticlimactic as the fictional 5 feet of snow the northeast was supposed to see this week.
Instead of "Operation SnowWatch" and local New York talking heads droning on and on about the storm of the century (which is all of three months old), we get "Operation YahooWatch" and, as you may have guessed, endless talking heads droning on about the anticipated announcement of the century.
Instead of tons of snow, we got inches. Instead of a Yahoo buyout, we got news that Koogle was going to step down (widely anticipated) and a profit warning (also widely anticipated).
Instead of a bunch of PO'ed travelers getting stuck because states shut down in fear of the snowstorm that never was, we have a bunch of PO'ed investors wondering why the Nasdaq halted shares of trading in Yahoo over a Henry Blodget research note, and why Yahoo never said a thing until after market close, when shares were already halted.
You get the idea. There's enough stench to go around.
Now, we're not going to downplay Yahoo's profit warning. The Web's leading portal said revenue for the first quarter will be revised to $170 million to $180 million. The company also said its pro forma net income will break even for the quarter. That's well below the $232.6 million in revenue and per-share profit of 5 cents that Wall Street analysts expected, according to First Call.
It's also well below Yahoo's year-ago figures.
After you heard Yahoo execs talk about how advertising imploded quickly, you suddenly got a case of deja vu. Koogle said the company couldn't forecast much more than its first-quarter results, which aren't pretty. "Visibility for the back half of 2001 is extremely limited," Koogle said.
Sound familiar? It should. Every other tech CEO on the planet has said the same thing. Big companies aren't spending. Little companies aren't spending. No one is spending because no one is confident about his or her business prospects.
As for Koogle, he's bumping himself upstairs at just the right time. He built the company, gave it adult supervision and turned Yahoo into a media darling. When the going gets tough, original Net CEOs often get going. Koogle may realize that the next version of Yahoo will need a different type of leader: one who has more traditional media experience; one who knows about seasonality; and one who knows how to massage advertisers a little better.
Koogle will stick around until a replacement is found. The man is dedicated to the cause, but has to be itching to be chairman. For all we know, Koogle & Co. may have had a new CEO picked, but a deal could have unraveled as Yahoo lost credibility points for all those hours it stayed silent while Wall Street guessed.
And why were we left guessing?
Reading between the lines
Here's a between-the-lines reading of what transpired yesterday with Yahoo's warning and the Koogle announcement.
Step one: Yahoo cancels appearance at Merrill Lynch's Internet Conference. Yes, the same conference that was put off last year because all those dot-com investors were too depressed.
Step two: Merrill Lynch analyst Blodget loses a headliner for his conference. Since Yahoo has never bailed on an investment conference, Blodget, the poor guy who has taken a major beating in the press lately, had to feel slighted.
Step three: Blodget puts out a research note, which covers all the usual reasons companies opt out of investment conferences. Blodget said he wouldn't be surprised by a profit warning, management change or restructuring. However, Blodget also floats a few theories that Yahoo could either announce an acquisition or be taken over by a major media player.
Step four: The Nasdaq wigs out. Halt the stock! There's speculation on Wall Street. (No, really?) Nasdaq spokesman Andy MacMillan said the exchange put a halt on the stock after it "had heard a number of rumors in the marketplace early on in the trading day." Gee, we hope MacMillan has headphones on tomorrow--maybe he'll halt every stock. We certainly hope the Nasdaq stays away from those rumormongering message boards. Speaking of message boards, everyone from Saddam Hussein to AOL is allegedly buying Yahoo.
Step five: Yahoo, which operates on Pacific time, gets up groggy and stupefied that the Nasdaq halted trading and Blodget started this firestorm. Crisis management 101: Say something, dammit. Yahoo doesn't initially, but then says it'll hold a conference call after the market close. Now that's really silly, considering trading had been closed for Yahoo shares since 9:45 a.m. EST. Credibility declines rapidly. Don't worry, though--Yahoo later tosses in a token share buyback to ease the pain.
So now what? All those analysts--including Blodget--will do their after-the-fall analysis. They'll be shocked--shocked!--by the magnitude of the Yahoo shortfall. Shares will fall as investors lower their expectations again. Some shareholders will scream over Yahoo's recent "shareholder rights plan," which would prevent a hostile takeover.
And perhaps the only folks keeping any perspective will be Yahoo management. Koogle said he's stepping down because he wants to set up Yahoo for its next growth phase: "We're looking over the horizon to when the economy improves and asking ourselves what we need to have in place."
We're looking, too.