The One-Year Report Card of Yahoo’s Carol Bartz–Financials: C+
Yesterday, BoomTown began grading the performance of Yahoo CEO Carol Bartz, after she gave herself a B- for overall performance for the year since she took over the troubled Internet giant.
But I decided to be more specific, splitting the grades into five categories: Management, financials, product innovation, deal-making and moxie.
For management, I gave Bartz an A-, because she has been a definite improvement on previous leadership in terms of decision-making, speed and essentially grabbing the mantle of control firmly from the start.
Some thought I was too generous and others thought the grade should have been an A+. Which means it was just about right!
Today, let’s look at financials–by which I mean Yahoo’s fiscal performance and its stock price.
In this regard, Bartz only gets a C++ (it’s a techie joke, get it?).
I could have given her a B- here, I guess, but–to me–C+ simply means financials have remained in a holding zone under Bartz, so she does not deserve to be completely decried, or applauded either.
Why? Well, let’s start with the stock.
While Yahoo (YHOO) shares are up about 38 percent for the year, which is a good thing, they still lag those of other Internet companies, as well as the market.
In the same period, the Nasdaq was up about 44 percent, Google’s stock has doubled and Microsoft (MSFT) shares are also up a lot more.
In an interview with Bloomberg recently, Bartz claimed that Yahoo was in the “penalty box” with investors–a hangover from former management, presumably–and this is the reason for its weaker stock gain.
Whatever. But Bartz has been the CEO for a year and Wall Street is still holding out. Thus, she has to fully take the blame instead of pointing at the previous administration.
In other words, former CEO and co-founder Jerry Yang and the Yangtanic are ancient history. So, all is forgiven, Jerry (call me!).
Bartz also blamed the recession for Yahoo’s continued revenue decline in 2009, about 12 percent overall in the most recent quarter.
She told Bloomberg, “We came out of one of the worst climates ever. And if you look at growth of Fortune 500 companies, only being down 12 or 15 percent is damn good. I’m not going to apologize for our growth.”
Again, whatever. But she runs a company in a high-growth industry and is not selling hams or socks, so perhaps bragging that being down 12 to 15 percent is “damn good” is a bit of a stretch.
(Microsoft certainly did not crow over its 14 percent decline in revenue in the most recent quarter even though it beat expectations, and its fiscal results rely a lot on something that does get profoundly affected–namely, sales of PCs–in a recession.)
Specifically, in the third quarter, Yahoo’s search advertising revenue was off 19 percent, and display was off eight percent at “Owned and Operated” sites on Yahoo.
Google, in contrast, reported a seven percent rise in its third-quarter results, and its execs projected a mood of smooth sailing ahead and no more econalypse. Financial performance at Amazon (AMZN) was also way up, as it was at Netflix (NFLX) and Apple (AAPL).
Still, Yahoo’s fiscal performance relies a lot on premium branded advertising, so it has remained weaker and will do so until the economy really comes back.
Many analysts are predicting exactly that, with double-digit sales growth in this area ahead.
And Yahoo’s bottom line is likely to get a boost when its costs are off-loaded to Microsoft, as part of the search and advertising partnership Bartz struck with the software giant earlier this year. The deal awaits regulatory approval, which is likely, and will then start to kick in later in the year.
Still, a dark cloud hangs ominously over the persistent search share declines Yahoo has suffered, which Bartz and others attribute to loss of toolbar and other distribution deals that Google (GOOG) and Microsoft picked up.
But query growth rates are also down and that’s a red flag, especially since Microsoft and Google are up a lot.
Nonetheless, depending on how these various parts of Yahoo revenue sort themselves out, along with Bartz’s cost-cutting, Yahoo’s bottom line is most likely to look better in the quarters ahead, so the stock could certainly go up quickly.
And so could her financial grade. Bartz is well known for being great at managing the bottom line and Wall Street expectations, so I suspect it is top of mind for her.
That said, once that registers, everyone will then be looking for not just a return to normal, but for actual growth.
And that can only come from product innovation–the name of the game in Silicon Valley–which is what will be on the grading block Monday.