The One-Year Report Card of Yahoo's Carol Bartz–Deal-Making: Incomplete
Sorry for the break in grading Yahoo’s Carol Bartz on her one-year anniversary as CEO.
But BoomTown was swanning around the Sundance Film Festival in Utah this weekend, went partying with those boozy Hollywood types and ended up in Provo with the crazy gals from “The Runaways”!
I wish! Actually, running away from issuing any grade for deal-making for Bartz is a pretty good way to put it.
Because today, after much thought, I have to give the Yahoo leader an incomplete for deal-making.
That’s because the only deal that truly counts–the search and online advertising partnership with Microsoft (MSFT) struck in July–has still not been approved by regulators.
More to the point, no one will really know what it means for Yahoo (YHOO) until the company finally embarks on the biggest bet of its recent history.
And that answer is many, many quarters away.
I began handing out marks to Bartz recently, 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 for Yahoo in 2009 into five categories: Management, financials, product innovation, deal-making and moxie.
I awarded Bartz an A- for management, a C+ for financials and a C- for product innovation so far.
And as much as I would like to give a definite grade for deal-making, she has made no other deals of major consequence on which to base a grade.
The deal to integrate Facebook Connect and Twitter? A catch-up long past due and not as impressive as similar ones by Google and Microsoft. The sale of Zimbra and other assets? Essentially, cleaning up. A few minor acquisitions? No needle-movers in the lot.
Thus, the only deal has been with Microsoft, which is indeed a very big deal.
And it is, as I said, incomplete, although not to everyone.
Some thought the deal, which Bartz said she should have made sooner, was the best that Yahoo could pull off after the disastrous attempt by Microsoft to buy Yahoo for upward of $40 billion collapsed and left egg on everyone’s face.
With Google (GOOG) and Microsoft gearing up for a costly search war and no chance of Yahoo ever regaining any kind of tech advantage, the argument in favor goes, Bartz opted to get some kind of leverage while she still had some.
On many levels, that makes a lot of sense. And if it works, the deal will surely help improve Yahoo’s bottom line, cutting expenses in the search technology arena drastically and, the company hopes, giving it the ability to compete better in the marketplace by combining Yahoo and Microsoft search against the Google behemoth.
Presumably, if Yahoo can innovate in search experience and add to share, all is not lost.
But a lot of people certainly don’t like the deal, citing a variety of problems, especially the fact that Yahoo has essentially turned over all search monetization to Microsoft and traded away a big part of its business with no financial guarantees.
In fact, Bartz said in an interview with me at the seventh D: All Things Digital conference–months before she struck it–that she would want “boatloads of money” in any deal with Microsoft (see that video below).
At the time, most people thought she meant a gigantic upfront guaranteed payment for handing over search to Microsoft, which she did not get in the final deal.
Wrote one Internet exec in a long email to me, expressing a typical sentiment I have heard time and again:
She would have been much better off to simply have sold the current Yahoo search biz to Microsoft along the lines of the deal Carl Icahn tried to broker the summer after the acquisition bid was pulled. The cut over could have happened much faster (just start running Bing results on Yahoo) and Microsoft would probably have given a revenue guarantee that would keep Yahoo whole on revenue per search for the traffic they generated. That would also have eliminated the sales overhead immediately, providing greater cost savings…She chose a middle-ground (classic Yahoo) and will end up with lower returns for the declining search business than she could otherwise have had.
Only reason she doesn’t get the F that [former Yahoo CEO and Co-founder] Jerry Yang obviously earned on this topic is that she did actually make a deal.
And, indeed, Bartz had to play the cards she was handed by her predecessors, and they were not good ones.
Still, Yahoo is now depending on Microsoft to innovate in search technology. If it does not or cannot, look out below in that category, even if Yahoo recovers in its stronger display advertising arena.
So, with Yahoo’s search share declining of late, even as that of Microsoft’s Bing grows, it is right to start worrying and be nervous.
Nonetheless, as much as I like to dole out grades and as much as Bartz’s detractors would like to say it is over, it’s probably fairer to wait and see what happens.
One thing is certain: Bartz has shown either amazing guts or an astonishing lack of foresight here.
But let’s save that particular grade–moxie–for tomorrow, on the day Yahoo’s fourth-quarter earnings come out and Bartz is front and center in the earnings call.
Speaking of moxie–a.k.a. ch-ch-ch-ch-ch-ch-ch-ch-ch-cherry bomb!–here’s the trailer for “The Runaways,” which just opened at Sundance: