Learning From Apple Is Yahoo’s Only Hope

Yahoo is amazing. Every time you think they’re as screwed up as an organization can be, they find a way to do even worse. The latest fiasco involved the firing of CEO Scott Thompson for fudging a degree on his résumé. Thompson had been on the job for only four months and was the fifth CEO in five years. Amid all the turmoil, Yahoo’s business has flatlined: last year’s revenues were lower than in 2005, and the stock has been a dud since the dotcom bust.

What on earth could Yahoo do to save itself? For inspiration, its leaders might look to Apple, which, 15 years ago, was nearly dead. Today its market value is the highest in the world.What could Yahoo learn from Apple’s turnaround?

• Get a strong leader. Apple had Steve Jobs, a cofounder who returned after a decade in exile. Yahoo’s new boss is Ross Levinsohn, formerly the company’s executive vice president. His title is “interim CEO.” That won’t cut it. Yahoo needs a permanent CEO, and probably not Levinsohn, a lightweight in Silicon Valley.

• Know why you’re in business. The first thing Jobs did when he returned was to radically simplify Apple’s product line, killing off everything but two laptops and two desktops. So what exactly is Yahoo? An Internet portal? Media company? News organization? Tech company? Search engine? Nobody seems to know.

• Admit defeat and move on. Apple recognized that Microsoft had won the PC wars and that it was time to find the next big wave: mobile computing. Ten years later Apple introduced the iPhone. Yahoo needs to figure out where the world will be in 10 years and build for that. Obvious elements are mobile devices and cloud services. So far Yahoo has done almost nothing in either of those spaces.

• Be patient. Jobs took over in 1997, but revenues didn’t jump until 2005. Employees recall the first years of the turnaround as profoundly unhappy. Whatever Yahoo’s strategy, its directors and managers will need the courage to stay the course.

Alas, those running Yahoo are not likely to pursue the kind of long-term strategy that led to Apple’s rebirth. The real power now is Dan Loeb, the hedge-fund manager and activist investor who pushed to fire Thompson and bagged three seats on the board. Levinsohn may be CEO, but Loeb is boss.

It’s likely that Loeb wants to break Yahoo up, sell off some parts, and scoot out with a profit. Whatever is left will get acquired by Microsoft, say, or AOL. That’s sad. But a bargain-basement acquisition would at least end this painful soap opera.

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