Raise the Yangtanic, Again!

OK, let’s say we give Jerry Yang a break today on the inevitable layoffs at Yahoo, as he announces fourth-quarter earnings that will surely be scrutinized like the entrails of sacrificial cows.

Did I say cows? Oops.

I know, I know.

I should be the very last one to use that particular metaphor.

That’s because I shamelessly conducted a 100-day vigil, after Yang perhaps unadvisedly declared last summer at his first public outing as newly named CEO that he would undertake a 100-day basement-to-attic look at the company. Even worse, he added that there were “no sacred cows” at Yahoo.

That’s all I needed, of course, and when little was done by the very last day of Yang’s self-inflicted schedule, I wrote:

So far though, in terms of truly dramatic change, it’s Cows: 99, Yang: 0.

“No massive cuts, no major management upheavals, no drastic shift in business, no game-changing purchases and no being acquired either.

“Then again, there’s still one more day to go!”

Well, it looks like a bit of that day has come for some at Yahoo, with the possibility of significant employee layoffs being greeted with hand-rubbing glee by some analysts (good reporting here by Henry Blodget at Silicon Alley Insider).

But, while layoffs probably should have come much, much sooner, the focus on them misses the real point, which is how much Yahoo will be cutting more drastically whole units where it has lagged or cannot win in, such as consumer search and search monetization.

Here, for example, Yahoo’s ceaseless efforts are still not enough, and it finds itself caught in the muddy middle between hard-charging Google and ready-to-spend-anything Microsoft.

It cannot win in this arena and needs to acknowledge that publicly, even as its top managers did privately at an exec retreat in December, where “maintain share” was the uninspiring motto.

That lack of traction and not porky headcount is what has been depressing the stock, which remains in danger of slipping below $20 a share.

From there, things could quickly get out of control for Yahoo and perhaps spin it right into the hands of private equity wolves or others.

So, if I were doing the divining, I would not focus on sheer numbers of layoffs, but where and how Yahoo consolidates, since cutting for cutting’s sake seems like a road to ruin.

In addition, rather than bid up the layoff story, looking more closely at traffic, page views and where the all-important 500 million user metric is headed are all critical to piece together a more accurate prediction of what is to come at Yahoo.

For now, in any case, from all accounts I have heard from sources, the quarter is going to be solid, and the look forward also sunnier. While the comparisons from last year are much easier, Yahoo’s strong graphical ad sales force has been working it to garner just such results.

Good for them, given the headwind Yahoo troops have been facing of late.

But will it really matter?

Because no one, not even the can-do-no-wrong Google (oh, it can and does), will escape the impact in six months time if the recession meets even the less drastic predictions and the ad sector tanks.

In other words, it will be that and not a too-fat staff that could be the thing that really sends Yahoo down to the bottom of the ocean. But let’s be clear, in that regard, it won’t be the only one hitting an iceberg.

(If you want to read more on Internet stocks and the recession, see the most excellent second item in the Ahead of the Tape column by The Wall Street Journal’s Kevin Delaney.)

Please see this disclosure related to me and Google.