Yahoo Closes At $13.76. What A Train Wreck.
techcrunch.com
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There might be more pink slips and cost cutting in the future. But they are coming out with some pretty cool open source technology and getting some decent street cred with developers: Hadoop, YUI, BOSS, Web analytics. They're seen as "getting" open source in the developer community.
Maybe it's too late for them, but I have the feeling that the hackers as Yahoo, under Jerry Yang are going to start putting out cool new products again, and eventually the stock price is going to reflect that.
If the stock drops another 50% in the next six months like it did over the previous six months, I'm pretty sure those hackers won't be happy nor will they likely be working there.
Do you actually understand the concept of stock and what is happening when people trade stock on the market?
Stocks are reflective of performance, rarely (if not) the other way around. Doesn't mean it never happens that way, although.
Stocks are just things on the side. They sync with what is happening inside, but a stock price dropping will NOT cause a company to fire workers.
So the argument I addressed is silly, because it is then as if the company will start firing people as soon as stock goes low.
I took his statement to mean, "If employees are looking at their options tank, while seeing their friends at MS and GOOG options rising, the best are more likely to abandon the sinking ship." In the valley stock is often a big part of a compensation package, and so a company whose stock is doing very poorly cannot hire or keep the best talent.
It has nothing to do with profits or income and everything to do with whether people want to work there.
Of course, in a depression, people keep their jobs far more often, and people tend to choose steady work over risky but higher reward positions. So, as long as Yahoo can prove they aren't going to have to let anybody go, and that a hostile takeover (which seems more likely by the day, by a Chinese or Russian or European holding company...since the dollar is so weak, and Yahoo's shares are so depressed) isn't going to result in a mass downsizing, they'll probably hang on to their great stable of nerds, and they'll probably keep increasing value in subtle, but real ways, on a day by day basis. I think it's a company that lost focus, and failed to ever quite recover from the drubbing it took during the first bust, and has had some vision problems...but it's also a company with a great innovation culture. Yahoo builds and launches new stuff all the time, tons of it Open Source, lately, though their APIs are important, too. All that Open Source leads to them having a giant pool of possible hires who already know their infrastructure (while GOOG has to train), and a huge bunch of websites that rely on Yahoo for existence (anything that uses their APIs needs Yahoo). Those are good things for Yahoo's long term prospects.
However, this is a business and the bottom line is Yahoo is frankly struggling and has no business focus. This is essentially the executive's fault.
I remember watching both Yang and predecessor Semel on Charlie Rose and I was absolutely shocked at how little idea they had about where the business had to go.
They are making some progress towards narrowing the business focus, but they need to replace Yang.
Previously I thought Decker had to be put in charge, but she is already de-facto CEO. As time passes, I am more and more uncertain about her ability to pull Yahoo out of this.
And seriously who wants a Microsoft Yahoo merger apart from Michael Arrington? Should so much power be concentrated?
It's STOCK! The company already made the money from the stock sale, whatever price outside traders want to bet on is not relevant. I think I'll be buying some Yahoo stock actually.
Also, the executives of a company care about the stock price, because if it goes too low, the investors will call for their heads. This pressure can make the executives do things like reduce expenditures and headcounts.
The market in general is going to be coughing up some blood for awhile, and I'm going to bookmark this post and send it to Mr. Arrington when I'm proven right. I remember owning Yahoo at $300+ (which split) back during its high-flying days, and Google will be no different with its heavy reliance on advertising for revenue.
While GOOG may not be bottomed out at ~$340 (I bought a few shares at $349, and am pretty happy with the price...and if it keeps dropping, I'll buy more, once it starts climbing again), I just don't see how you can possibly imagine it's a $40-$50 stock. Terrible companies trade at better than three times earnings, average companies trade at 10 times earning, and I don't think anyone is going to accuse Google of being a terrible, or even an average company. Google would pretty much have to start bleeding money to trade as low you're suggesting is inevitable.
really i want to understand your point of view
Obviously, because I've wanted to buy some GOOG for a while now, and it's been way too expensive. Maybe it was still a few bucks too expensive and my enthusiasm for the company blinded me to the still dropping state of the market...but I think Google is one of the best companies in the world, and it's currently trading at a fair price.
If I believe that Google is going to weather the economic storm better than the average company (I do), and I believe that rapid inflation is going to insure that any money that I keep in cash is going to decline in value (I do), and I believe that Google revenue is going to grow faster than the returns from a CD (I do), and that when the market comes to its senses in a month or two or three it'll realize that GOOG is one of the best companies in the world and worth more than 22 times earnings, particularly given the huge stockpile of cash Google is holding (I do), then I don't feel too bad about missing the bottom by a few percentage points. And it's only 12 shares (so, $120 on a $4400 holding). And, like I said, if it keeps going down, I'll try to spot the bottom, or maybe wait until it actually starts a steady climb, and buy a few more shares.
really i want to understand your point of view
Do you understand it now?
Basically, I just view it as a chance to own shares in a great international company at a dramatic discount off of recent valuations. It's not a "bargain" stock, even now, but that's because it is a stronger company than most of the stocks that were hit as hard. Yahoo has been hit far harder, but they're obviously not as good a company--though I think they're being maligned unfairly. They're still a great media company...they just have some problems making money. But I think Yahoo probably is a great buy right now.
There's going to be some major spending cutbacks across the board over the next couple years because there HAS to be (from people to business to government), and advertising/marketing is going to be at the top of the list. There is a fundamental shift in the economy right now - credit is drying up and people are going into conserve and save mode.
There's no way in hell Google will have a $15 EPS two years from now, you can put this post in your calendar for October 2010. So yes, when Google's EPS is something like $1.50, it will make a ton of sense when they're trading at $40-50. Unless they've got some mysterious source of income, advertising is going to suffer horribly in this recession and so will the companies that depend on it.
Umm...yes?
But, at least you're making a little sense now. I don't believe they will lose as much revenue as you think. Marketing does decline in a downturn--but it also retreats to quality (i.e. the overall ad spend declines, but what is spent is refocused on the best performing tools). And AdWords is among the absolute best bang for your bucks advertising model available. Anybody that's doing even basic metrics will know that (I advertise on a half dozen different networks, and AdWords is pretty much the head and shoulders best performer, and in response to that knowledge I've increased AdWords spend, and decreased spend with folks like AdBrite and Yahoo). Also, the downturn will hit smaller advertising networks much harder than Google, who have huge cash reserves. Google will survive. Many of its competitors will not. So, the number of places companies can advertise is going to get smaller, possibly a lot smaller.
So, while I agree that everything is going to see cuts, including marketing, I don't think it's going to just stop. As long as a company is in business, it must be marketing, or it'll die soon after. If you aren't reaching people every day, you can't survive. Cuts will happen, and some of Googles customers will die off, but marketing spend isn't going to dry up any more dramatically than other aspects of the economy--maybe less so, since it is core to making money. And companies really want to make money now.
So, long-term, I'm still bullish on Google. Particularly if the stock price continues to drop. I should probably shake down some of my friends at Google for hints on how much impact this is really going to have on their bottom line...but I'm kinda running on gut feeling right now. So, I could be wrong, and you could be right. I'm not betting any money I can't afford to lose, but I'd certainly like to win rather than lose.