The morale problem is a symptom of bad leadership. It's not going to be fixed with more bad leadership.
It's not clear to me that Yahoo's business has poor fundamental economics because I don't quite know what business it's in.
Buying, say, tumblr didn't help with that because it's not like a free blogging engine would appear to be a great money spinner. Suggesting you want to make it less R18 then suggests you didn't look too hard at what people use it for.
Similarly, when flickr has a lot of people who are prepared to pay to host photos spattering ads all over it seems like... a lack of understanding of how it works.
flickr makes me particularly sad. The user authentication fuck up was appalling. The ads were moronic. It only needs a couple of minor tweaks, some of which (like albums for groups) to make itself a Facebook alternative on the side.
Second, Steve Jobs focused the company around one or two important initiatives at a time. That was probably his greatest value add. He had a phenomenal sense for which projects were the right initiatives. The original Bondi Blue iMac came out pretty quickly after his return -- not quite a year after Steve had been named interim CEO. That's FAST.
Yahoo! needs to be streamlined (remove poisonous/slack elements), focused (one or two key projects ONLY, kill the others) and fast (release the key projects in 2016). They also need to pick the RIGHT projects. To do this, like another commenter said, they need to remember why they love the Internet. Otherwise they're dead.
Just hypothesizing but imagine if MySpace had focused its industry connections in the music industry to focus more on music instead of social networking, and pushed for an on-demand music streaming player for mobile and desktop. They had millions of dollars in the bank and a head start in the U.S. market over Spotify and Rdio.
Or imagine if Blockbuster video had either taken up Netflix's offer to be bought out or had invested in online streaming long before Netflix.
I'm not saying it's easy or always viable or that luck doesn't play a role, but I often think we discount the potential for a company to still exist today because the only outcome we know of is the outcome that happened rather than the potential of alternate decisions.