case1411414_Yahoo!

8/10/2019 case1411414_Yahoo!

1/17

YahooYahoo--! Inc. .sadfsafda 2009Case Notes Prepared by: Dr. Mernoush antonfas

Case uthors: "a#$d %a&eroony safasf

. Case bstractdfasfas

YahooYahoo--! Inc. (www.yahoo yahoo--.com) is a comprehensive strategic

management case that includes the companys Calendar year-end December "#$$% &inancial statements" competitor in&ormation and more. 'he case time setting is

the year #$$. u&&icient internal and e*ternal data are provided to enable studentsto evaluate current strategies and recommend a three-year strategic plan &or the

company. +ead,uartered in unnyvale in the .. state o& Cali&ornia" YahooYahoo--!Inc. is traded on the ew Yor/ toc/ 0*change under tic/er symbol Y+11.

. '$s$on (tate#ent )ctua*+fasfasdf

2YahooYahoo--! powers and delights our communities o& users" advertisers" and

publishers 3all o& us united in creating indispensable e*periences" and &ueled bytrust.4

C. M$ss$on (tate#ent )ctua*+

2'o connect people to their passions" their communities" and the world5s /nowledge.

'o ensure this" YahooYahoo--o&&ers a broad and deep array o& products and servicesto create uni,ue and di&&erentiated user e*periences and consumer insights by

leveraging connections" data" and user participation.4

Companys 6alues" as stated on their website7

,ce**ence:8e are committed to winning with integrity. 8e /now leadership is hard won and

should never be ta/en &or granted. 8e aspire to &lawless e*ecution and don5t ta/eshortcuts on ,uality. 8e see/ the best talent and promote its development. 8e are

&le*ible and learn &rom our mista/es. (#" 9" :" )

Innoat$on:8e thrive on creativity and ingenuity. 8e see/ the innovations and ideas that can

change the world. 8e anticipate mar/et trends and move ,uic/ly to embrace them.

8e are not a&raid to ta/e in&ormed" responsible ris/. (;)

Custo#er /$at$on:8e respect our customers above all else and never &orget that they come to us by

choice. 8e share a personal responsibility to maintain our customers5 loyalty and

trust. 8e listen and respond to our customers and see/ to e*ceed their e*pectations.(" )

Copyright < #$ =earson 0ducation >imited
http://www.yahoo.com/http://www.yahoo.com/http://www.yahoo.com/http://www.yahoo.com/http://www.yahoo.com/

8/10/2019 case1411414_Yahoo!

2/17

ea#1or:8e treat one another with respect and communicate openly. 8e &oster collaboration

while maintaining individual accountability. 8e encourage the best ideas to sur&ace&rom anywhere within the organi?ation. 8e appreciate the value o& multiple

perspectives and diverse e*pertise. (%)

Co##un$ty:8e share an in&ectious sense o& mission to ma/e an impact on society and empower

consumers in ways never be&ore possible. 8e are committed to serving both theInternet community and our own communities. (@)

/un:

8e believe humor is essential to success. 8e applaud irreverence and don5t ta/eourselves too seriously. 8e celebrate achievement. 8e yodel.

. Customer

#. =roducts or services

. Aar/ets;. 'echnology

9. Concern &or survival" pro&itability" growth:. =hilosophy@. el&-concept

%. Concern &or public image. Concern &or employees


8/10/2019 case1411414_Yahoo!

3/17

D. ,terna* ud$t

CPM Co#pet$t$e Prof$*e Matr$

YahooYahoo-- 3oo4*e M$crosoftCr$t$ca* (uccess

/actors 5e$4ht 6at$n4

5e$4hted

(core 6at$n4

5e$4hted

(core 6at$n4

5e$4hted

(core

Bdvertising $.$ $.$ ; $.;$ $.$

ervice =roductuality $.$ $.$ ; $.;$ # $.#$

=riceCompetitiveness $.$@ $.# # $.; $.$@

Aanagement $.$: # $.# ; $.#; $.%

Einancial =osition $.$ # $.% $.#@ ; $.:

Customer >oyalty $.$ $.$ ; $.;$ # $.#$

=roduct >ines $.$% $.#; ; $.# # $.:

Aar/et hare $.$ $.$ ; $.;$ # $.#$

Customer ervice $.$@ $.# ; $.#% # $.;

'echnology $.$ $.$ ; $.;$ # $.#$

0mployees $.$9 $.9 # $.$ $.$9

Flobal 0*pansion $.$% $.#; ; $.# # $.:

ota* 7.00 2.8 .;< 2.02

=pportun$t$es

. . billion Internet users around the world as o& #$$: and it is still growing#. Internet advertising revenues in the .. remain strong" topping G# billion

in #$$%. Consumers are spending more o& their time online

;. ew business strategies such as bundling Internet access with voice andvideo services are increasing

9. Innovation in technology is the driving &orce in Internet-based businesses:. Aany businesses overseas are &inding advertising on Internet less e*pensive

and more responsive@. Countries such as China and India have stronger economic status and

accordingly the companies are able to spend more advertising dollars viaInternet

hreats

. Due to wea/ economic conditions" Internet-related businesses also have

su&&ered#. In #$$" a number o& Internet content and advertising companies reported

disappointing &inancial results and lowered their &orward &inancial outloo/s


8/10/2019 case1411414_Yahoo!

4/17

. >ow entry barrier ma/es the viability o& e*isting Internet-based businessesdi&&icult

;. Changes in legislative re,uirements concerning technology sharing" patentrights and in&ormation security could increase &uture e*penses and lower

pro&itability9. Constant technology changes causes di&&iculty in being up-to-date all the time

:. Consolidations among Internet-based providers could ma/e the competitionstronger

,terna* /actor ,a*uat$on ),/,+ Matr$

%ey ,terna* /actors 5e$4ht 6at$n4 5e$4hted

(core

=pportun$t$es

. . billion Internet users around the world as

o& #$$: and it is still growing

$. ; $.;

2. Internet advertising revenues in the ..

remains strong" topping G# billion in #$$%

$.$% $.#;

. Consumers are spending more o& their time

online

$.$% $.#;

;. ew business strategies such as bundlingInternet access with voice and video services

are increasing

$.$ # $.%

5. Innovation in technology is the driving &orce in

Internet-based businesses

$.$@ # $.;

:. Aany businesses overseas are &indingadvertising on Internet less e*pensive and

more responsive

$.$ $.#@

@. Countries such as China and India have

stronger economic status and accordingly thecompanies are able to spend more advertising

dollars via Internet

$.$@ # $.;

hreats

1. Due to wea/ economic conditions" Internet-

related businesses also have su&&ered

$.$ $.#@

#. In #$$" a number o& Internet content andadvertising companies reported disappointing

&inancial results and lowered their &orward&inancial outloo/s

$.$@ # $.;

3. >ow entry barrier ma/es the viability o&

e*isting Internet-based businesses di&&icult

$.$: # $.#

;. Changes in legislative re,uirements concerning

technology sharing" patent rights andin&ormation security could increase &uture

e*penses and lower pro&itability

$.$@ $.#


8/10/2019 case1411414_Yahoo!

5/17

5. Constant technology changes causes di&&iculty

in being up-to-date all the time

$.$% # $.:

6. Consolidations among Internet-based providers

could ma/e the competition stronger

$.$9 # $.

ota* 7.00 2.;7

Pos$t$on$n4 Map

,. Interna* ud$t

(tren4ths

. Increase in revenue &rom #$$@ to #$$% by .; percent to G@.# billion#. YahooYahoo--is the second leading global Internet brand

. 1ther than o&&ering advertising and online properties" the company o&&ersInternet access through third-party entities

;. 1ther than advertising &ees" YahooYahoo-- generates additional revenueby charging &ees &or a range o& premium services

9. 8ith additional lay-o&&s" the company anticipates having a betterpro&itability &or the ne*t &ew years


8ide=roduct >ine

1&&ering

arrow=roduct

>ine1&&ering

umber o&6isitors(+igh)

umber o&6isitors (>ow)

Yahoo

Foogle

Aicroso&t

8/10/2019 case1411414_Yahoo!

6/17

:. 8ithin Internet base service" YahooYahoo--! has several revenuegenerated segments such as earch" Display Helated" Classi&ied"

He&errals>ead Feneration and 0mail@. Companys ,uic/ ratio is #.@%" above industry average

5eanesses

. 'he net income decreased by 9.@ percent to G;#; million.

#. 1verall advertising revenue dropped by percent in the second ,uartero& #$$ compared to the previous year

. YahooYahoo--! closed several o& its video properties and is planning toclose twenty video services including its social networ/ site YahooYahoo--!

:$ and its web hosting service FeoCities;. Companys capital lease and other long-term liabilities increased by over

G;% million9. Aicroso&t has tried to ac,uire YahooYahoo--! twice in the last three years

/$nanc$a* 6at$o na*ys$s (1ctober #$$)

3ro1th 6ates >YahooYahoo-

-!Industry (?P 00

ales (tr vs year ago ,tr) -.%$ @.:$ -9.#$

et Income (Y'D vs Y'D) -99.$ .#$ -%.$

et Income (tr vs year ago ,tr) #;#.@$ ;:.$ #;.@$

ales (9-Year Bnnual Bvg.) ;.@ :.@ #.@

et Income (9-Year Bnnual Bvg.) #.#@ %@.$ #.$

Dividends (9-Year Bnnual Bvg.) B B .%%

Pr$ce 6at$os YahooYahoo--!

Industry (?P 00

ales (tr vs year ago ,tr) -.%$ @.:$ -9.#$

et Income (Y'D vs Y'D) -99.$ .#$ -%.$

et Income (tr vs year ago ,tr) #;#.@$ ;:.$ #;.@$

ales (9-Year Bnnual Bvg.) ;.@ :.@ #.@

et Income (9-Year Bnnual Bvg.) #.#@ %@.$ #.$

Dividends (9-Year Bnnual Bvg.) B B .%%

Prof$t Mar4$ns >

YahooYahoo-

-! Industry (?P 00

Fross Aargin 9:. :#.# %.#

=re-'a* Aargin .$ #@. .

et =ro&it Aargin -.; #$.: :.

9Yr Fross Aargin (9-Year Bvg.) 9. :$.@ %.

9Yr =re'a* Aargin (9-Year Bvg.) .: $.; :.9

9Yr et =ro&it Aargin (9-Year Bvg.) . ##. .9


8/10/2019 case1411414_Yahoo!

7/17

/$nanc$a* Cond$t$onYahooYahoo-

-!Industry (?P 00

Debt0,uity Hatio $.$ $.$ .

Current Hatio .; .@ .9

uic/ Hatio .; .@ .#

Interest Coverage B $.$ #@.#

>everage Hatio .# . .9

oo/ 6aluehare %.: %9.: #.9%

Bdapted &rom www.moneycentral.msn.com

4 P@, Pr$ce@ (a*es Pr$ce@ ooNet Prof$t

Mar4$n )>+

#$% @#.;$ #.@ .9 9.

#$@ 9%.$ ;.: .#9 .9

#$: 9%.$ 9.@ .@ .@

#$9 #@.@$ .$@ :.9; :.

#$; 9.:$ 9. @.; #.9

#$ %;.#$ %.: :.%# ;.:

#$# %@.#$ $.;@ ;.$ .#

#$ -$.:$ ;.$ 9. -#.

#$$ $:.$ :.9; %.$ :.;

# 9.;$ #. #.@ %.

oo 'a*ue@(hare

Debt@,Au$ty

6eturn on,Au$ty )>+

6eturn onssets )>+

InterestCoera4e

#$% G%.$ $.$$ .% . B

#$@ G@.: $.$% :. 9.; B

#$: G:.@ $.$% %.# :.9 B

#$9 G9. $.$ ##. @.9 B

#$; G9. $. .% . B

#$ G.$ $.@ 9.9 ;.$ B

#$# G.$ $.$$ ;.@ .% B

#$ G.@ $.$$ -;.@ -. B

#$$ G.: $.$$ .@ . B

# G.@ $.$; .% . B

Bdapted &rom www.moneycentral.msn.com

Interna* /actor ,a*uat$on )I/,+ Matr$

%ey Interna* /actors 5e$4ht 6at$n4 5e$4hted

(core

http://www.moneycentral.msn.com/http://www.moneycentral.msn.com/http://www.moneycentral.msn.com/http://www.moneycentral.msn.com/

8/10/2019 case1411414_Yahoo!

8/17

8/10/2019 case1411414_Yahoo!

9/17

(tren4ths 5eanesses

. Increase in revenue &rom

#$$@ to #$$% by .;percent to G@.# billion

#. YahooYahoo--is thesecond leading global

Internet brand. 1ther than o&&ering

advertising and onlineproperties" the company

o&&ers Internet accessthrough third-party

entities

;. 1ther than advertising&ees" YahooYahoo--

generates additional

revenue by charging &ees&or a range o& premium

services9. 8ith additional lay-o&&s"

the company anticipateshaving a better

pro&itability &or the ne*t&ew years

:. 8ithin Internet baseservice" YahooYahoo--!

has several revenuegenerated segments such

as earch" DisplayHelated" Classi&ied"

He&errals>ead

Feneration and 0mail@. Companys ,uic/ ratio is

#.@%" above industry

average

. 'he net income decreased

by 9.@ percent toG;#; million.

#. 1verall advertisingrevenue dropped by

percent in the second,uarter o& #$$ compared

to the previous year. YahooYahoo--! closed

several o& its videoproperties and is planning

to close twenty video

services including itssocial networ/ site

YahooYahoo--! :$ and

its web hosting serviceFeoCities

;. Companys capital leaseand other long-term

liabilities increased byover G;% million

9. Aicroso&t has tried toac,uire YahooYahoo--!

twice in the last threeyears

=pportun$t$es (-= (trate4$es 5-= (trate4$es

. . billion Internet usersaround the world as o&

#$$: and it is stillgrowing

#. Internet advertisingrevenues in the ..

remains strong" toppingG# billion in #$$%

. Consumers are spendingmore o& their time online

;. ew business strategiessuch as bundling Internet

access with voice andvideo services are

increasing

. Implement a vertical orhori?ontal integration

(&orward or bac/ward) o&a company that has

global presence (#" :"@" 1" 1#" 1" 1;" 19)

#. Increase advertisingspending by additional $

percent on &ee basedsegments (@" 1;)

. Cutbac/ prices onadvertising and &ee-based

segment by # percent(@" 1" 1#)

. Bc,uire innovativetechnologyInternet-

related businesses usinga combination o& cash

and debt (8" 89" 1#"1;" 19)

#. ell o&& low pro&itsegments and pay down

the long term debt (8;"1)


8/10/2019 case1411414_Yahoo!

10/17

9. Innovation in technology

is the driving &orce inInternet-based

businesses:. Aany businesses

overseas are &inding

advertising on Internetless e*pensive and moreresponsive

@. Countries such as Chinaand India have stronger

economic status andaccordingly the

companies are able tospend more advertising

dollars via Internet

hreats (- (trate4$es 5- (trate4$es

. Due to wea/ economicconditions" Internet-

related businesses alsohave su&&ered

#. In #$$" a number o&Internet content and

advertising companiesreported disappointing

&inancial results and

lowered their &orward&inancial outloo/s

. >ow entry barrier ma/esthe viability o& e*isting

Internet-basedbusinesses di&&icult

;. Changes in legislative

re,uirements concerningtechnology sharing"

patent rights andin&ormation security could

increase &uture e*pensesand lower pro&itability

9. Constant technologychanges causes di&&iculty

in being up-to-date all

the time:. Consolidations amongInternet-based providers

could ma/e thecompetition stronger

. 1&&er new mar/eting datacollection &or advertisers

(#" :" '#)#. Create additional

bundling partnership &orsound or video streaming

(" '" '9)

1. Improve innovation toprotect the companys

technology" patent rights

and in&ormation security(8" 8;" ';)

3. (PC, Matr$


8/10/2019 case1411414_Yahoo!

11/17

/$nanc$a* (tab$*$ty )/(+ ,n$ron#enta* (tab$*$ty ),(+

Heturn on Investment : nemployment -9

>everage9 'echnological Changes -

>i,uidity : =rice 0lasticity o& Demand -

8or/ing Capital : Competitive =ressure -#

Cash Elow : arriers to 0ntry -:

/$nanc$a* (tab$*$ty )/(+ era4e .8 ,n$ron#enta* (tab$*$ty ),(+

era4e

-.8

Co#pet$t$e (tab$*$ty )C(+ Industry (tab$*$ty )I(+Aar/et hare - Frowth =otential :

=roduct uality - Einancial tability 9Customer >oyalty -# 0ase o& Aar/et 0ntry #

Competitions Capacity tili?ation -# Hesource tili?ation 9'echnological Jnow-+ow -# =ro&it =otential :

Co#pet$t$e (tab$*$ty )C(+

era4e

-7.; Industry (tab$*$ty )I(+ era4e B.8

Y-a*is7 E K 0 L 9.% K (-.%) L #.$

M-a*is7 C K I L (-.:) K (;.%) L .#

". 3rand (trate4y Matr$


FS

CS

ES

IS654321

Conservative Aggressive

CompetitiveDefensive

1

2

3

4

5

6

7-2-3-4-5-7 -1-6

7

-7

-6

-5

-4

-3

-2

-1

8/10/2019 case1411414_Yahoo!

12/17

. Aar/et Development#. Aar/et =enetration

. =roduct Development;. Eorward Integration9. ac/ward Integration:. +ori?ontal Integration

@. Helated Diversi&ication


WeakCompetitive

Position

Quadrant IIQuadrant I

Quadrant IVQuadrant III

StrongCompetitive

Position

Rapid Market Growth

Slow Market Growth

8/10/2019 case1411414_Yahoo!

13/17

I. he Interna*-,terna* )I,+ Matr$

he I/, ota* 5e$4hted (core

trong

.$ to ;.$

Bverage

#.$ to #.

8ea/

.$ to .

+igh.$ to

.

I II III

Aedium

#.$ to#.

I6 I6

YahooYahoo--!(tores Inc.

6I

>ow.$ to

.

6II 6III IM


he ,/,ota*

e$4hted(core

8/10/2019 case1411414_Yahoo!

14/17

. E(PM

Bc,uire an

Internet-based

business

(hori?ontalor verticalintegration"

bac/ward or&orward)

Increase

advertising

spending byadditional $percent on

&ee-basedsegments

%ey /actors 5e$4ht ( ( ( (

=pportun$t$es

. . billion Internet users around the world as o$$: and it is still growing

$. ; $.; # $.#

2. Internet advertising revenues in the ..

remains strong" topping G# billion in #$$%

$.$% $.#; ; $.#

. Consumers are spending more o& their timeonline $.$% ; $.# # $.:

;. ew business strategies such as bundlingInternet access with voice and video services are

increasing

$.$ --- --- --- ---

5. Innovation in technology is the driving &orce in

Internet-based businesses

$.$@ $.# # $.;

:. Aany businesses overseas are &inding advertisingon Internet less e*pensive and more responsive

$.$ ; $.: $.#@

@. Countries such as China and India have stronger

economic status and accordingly the companiesare able to spend more advertising dollars via

Internet

$.$@ ; $.#% $.#

hreats

1. Due to wea/ economic conditions" Internet-

related businesses also have su&&ered

$.$ $.#@ # $.%

#. In #$$" a number o& Internet content and

advertising companies reported disappointing&inancial results and lowered their &orward

&inancial outloo/s

$.$@ # $.; $.$@

3. >ow entry barrier ma/es the viability o& e*isting

Internet-based businesses di&&icult

$.$: # $.# ; $.#;

;. Changes in legislative re,uirements concerningtechnology sharing" patent rights and

in&ormation security could increase &uturee*penses and lower pro&itability

$.$@ --- --- --- ---

5. Constant technology changes causes di&&iculty in

being up-to-date all the time

$.$% --- --- --- ---

6. Consolidations among Internet-based providers

could ma/e the competition stronger

$.$9 ; $.#$ $.$9

=F 7.00 2.imited

8/10/2019 case1411414_Yahoo!

15/17

percent to G@.# billion

2. YahooYahoo--is the second leading global

Internet brand

$. ; $.; $.

. 1ther than o&&ering advertising and onlineproperties" the company o&&ers Internet access

through third-party entities

$.$@ $.# # $.;

4. 1ther than advertising &ees" YahooYahoo--

generates additional revenue by charging &ees&or a range o& premium services

$.$ $.#@ ; $.:

5. 8ith additional lay-o&&s" the company anticipates

having a better pro&itability &or the ne*t &ew

years

$.$: --- --- --- ---

6. 8ithin Internet base service" YahooYahoo--! has

several revenue generated segments such asearch" Display Helated" Classi&ied"

He&errals>ead Feneration and 0mail

$.$% $.#; ; $.#

7. Company5s ,uic/ ratio is #.@%" above industry

average

$. ; $.; $.

5eanesses

1. 'he net income decreased by 9.@ percent to

G;#; million.

$.$% $.#; $.$%

2. 1verall advertising revenue dropped by

percent in the second ,uarter o& #$$ comparedto the previous year

$. ; $.; # $.#

3. YahooYahoo--! closed several o& its video

properties and is planning to close twenty video

services including its social networ/ siteYahooYahoo--! :$ and its web hosting service

FeoCities

$.$% --- --- --- ---

4.Company5s capital lease and other long-termliabilities increased by over G;% million $.$% # $.: $.#;

5. Aicroso&t has tried to ac,uire YahooYahoo--!

twice in the last three years

$.$ --- --- --- ---

(G=F 7.00 2.9 2.7

(GM =F 6CI',N,(( (C=6, .7 B.0B

%. 6eco##endat$ons

Bc,uire an Internet-based business &or appro*imately G billion (all cash orhal& in cash) that has high presence in areas such as China" India" or 0urope"

by implementing a vertical or hori?ontal integration (bac/ward or &orward).


8/10/2019 case1411414_Yahoo!

16/17

F. ,P(@,I na*ys$s

G Bmount eeded7 G9$$ million

toc/ =rice7 G9.$$

'a* Hate7 #@.;NInterest Hate7 9NO hares 1utstanding7 ""9:$"$$$

Co##on (toc /$nanc$n4 Debt /$nanc$n4

Recession Normal Boom Recession Normal Boom

I' G$$"$$$"$$$ G:$$"$$$"$$$

G"$$$"$$$"$$

$ G$$"$$$"$$$ G:$$"$$$"$$$ G"$$$"$$$"$

terest $ $ $ #9"$$$"$$$ #9"$$$"$$$ #9"$$$"$$$

' $$"$$$"$$$ :$$"$$$"$$$ "$$$"$$$"$$$ #@9"$$$"$$$ 9@9"$$$"$$$ @9"$$$"$$

a*es

%"##$"$$$"$$

$

:";;$"$$$"$$

$

#@";$$"$$$"$$

$

@"99"$$$"$$

$

9"@99"$$$"$$

$ #:"@9"$$$"$

B'

@"#$"$$$"$$

$

9"%;$"$$$"$$

$

#:";$$"$$$"$$

$

@"#:$"$$$"$$

$

9"%$"$$$"$$

$ #9"@;$"$$$"$

hares

";#;"%"

";#;"%" ";#;"%"

""9:$"$$

$ ""9:$"$$$ ""9:$"$

= .; 77.72 78. .22 70.97 78.0

8/10/2019 case1411414_Yahoo!

17/17

In ovember" #$$" Aicroso&t and YahooYahoo-- released in&ormation that theantitrust authorities in Canada and Bustralia have given the green light to both

companies i& they wish to merge. 1bviously" such approval has not been granted bythe .. Pustice Department which is reviewing the deal" but in a Qoint statement"

Aicroso&t and YahooYahoo--say they Rremain hope&ul that the agreement will closein early #$$.R


Documents

case1411414_Yahoo!