Carol Bartz at Yahoo: Set up to fail?

Carol Bartz at Yahoo: Set up to fail?

Summary: Some people think Carol Bartz drove Yahoo onto the rocks. I think she was given command of a sinking ship.

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Let me say this straight out: I think Carol Bartz was a great CEO. She worked miracles at Autodesk. Bartz took a company headed straight to hell and transformed it into a profitable giant. At Autodesk, though, she had a free hand to set the company's course. At Yahoo, her hands were tied with a lousy board of directors who had already set a strategic course that pointed Yahoo straight at the rocks. Bartz was doomed from the start.

Look at the record. Bartz made multiple smart moves to get Yahoo back on track, but the company was already sinking underneath her. Frankly, I blame Yahoo's stick-in-the-mud board. As my old-friend Charlie Cooper put it, "With a board of directors as incompetent as this one, even the most talented CEO would be hard pressed to engineer a Yahoo turnaround." Amen.

Let's take the way-back machine to Yahoo 2009 shall we? Yahoo has beaten back a hostile takeover attempt by Microsoft, knocked back a related proxy fight with Carl Icahn, many of its best executives have left and it has a failed AdSense/search deal with Google to its "credit."

When I say "hostile" by the way I meant that then Yahoo CEO Jerry Yang thought Microsoft's $47 billion offer was "substantially undervalued." Let me check, yes, a bit more than two years later, Yahoo's market-cap is $17.1 billion. Great job Yang!

You know, there's a reason my buddy, Jason Perlow, with my full blessing, recently listed Yang's refusal of the Microsoft acquisition offer as one of the all-time worst tech industry executive decisions. It was one of the worst technology business decisions of all time.

Getting back to the point, in walks the no-nonsense Bartz and the Yahoo ship is sinking. Since Yahoo's board refuses to sell to Microsoft, Bartz is forced to make the best deal she can to prop up Yahoo's staggering search business: she makes a search deal with Microsoft. This is not an easy deal to pull off. In the end, Microsoft strip mines Yahoo for its search expertise and advertising contacts for its own none-too-successful Bing search engine.

In the meantime, Google was continuing to kick Yahoo's teeth in the search market. In Bartz's first quarter as captain, the company's year-over-year profits were down 78% and the company started to lay off even more employees.

As Yahoo continues to turn over more and more of its core search business to Microsoft, the company also decides to kill off Yahoo Publisher Network, it advertising platform for small-to-medium businesses (SMB) and its one time answer to Google's AdSense. So, tell me again Yahoo board why you turned down Microsoft's offer since you were determined to wreck your own business?

I could go on, but I'll sum it up for you. Yahoo brass flees the company; staffers are fired; and Yahoo spins off one subsidiary business after another. Of course, having sold the search soul of the company for a pittance, I'm really not sure what Yahoo's core business is anymore anyway. Does anyone really know?

In the end, all Bartz could do was to try to steer the wreck of what was once an Internet giant to the rocky, lee shore that the Yang and the board had pointed it to. She won't have the chance to salvage what she could from this disaster. Perhaps it's just as well. Bartz deserved a better company than Yahoo.

Related Stories:

Yahoo's Bartz era: The non-stop drama in her own words

Yahoo doesn't need new CEO, it needs to sell, say analysts

CBS News: Yahoos in charge: Blame the board

CNET: Yahoo's trials and tribulations since 2008 (timeline)

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19 comments
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  • RE: Carol Bartz at Yahoo: Set up to fail?

    Well, if she was not comfortable doing her job with all the pressure from the board - why did she stick around? Why not refuse the job, or even quit? If you are in the job - you need to take responsibility
    vijayasankarv
  • I think CEO's are overpaid but..

    Something else is going on here. She gets fired over the phone? This proves SJVN's point that the board is incompetent. It also shows the Icahn was right too...they should have sold to MS.

    These guys are as bad as HP's leadership.
    otaddy
  • RE: Carol Bartz at Yahoo: Set up to fail?

    "As Yahoo continues to turn over more and more of its core search business to Microsoft, the company also decides to kill off Yahoo Publisher Network, it advertising platform for small-to-medium businesses (SMB) and its one time answer to Google?s AdSense. So, tell me again Yahoo board why you turned down Microsoft?s offer since you were determined to wreck your own business?

    I could go on, but I?ll sum it up for you. Yahoo brass flees the company; staffers are fired; and Yahoo spins off one subsidiary business after another. Of course, having sold the search soul of the company for a pittance, I?m really not sure what Yahoo?s core business is anymore anyway. Does anyone really know?"

    Bartz definitely didn't. She had no clue. Everything you list here in these two paragraphs are all 100% Bartz actions. She is 100% accountable for these things. And yet you're blaming the board?

    C'mon, the only things Bartz did was fire people, cut off subsidiary businesses, and killed it's core search business, outsourcing to Microsoft.

    And "having sold the search soul of the company for a pittance" - again ... THAT WAS CAROL BARTZ!

    Yup, Yahoo was already a sinking ship, and yup, the Board at Yahoo is made up of a bunch of well, yahoos.

    But what Yahoo needs, and needed before Bartz came aboard, is not corporate killer that does nothing but slash jobs, products and services, but a creative visionary that helps improve products and services and helps create new ones, making Yahoo more compelling, driving up business.

    But Carol Bartz is just another cookie cutter corporate CEO (99% of all CEOs), who can do nothing but cut cut cut cut, and is totally incapable of doing anything productive or useful.

    Mark Hurd was the same way at HP. Nothing but cut cut cut cut, and not creating a damn thing.

    I swear to God, a trained monkey, or worse, a constipated baboon, could be a CEO in corporate America, and nobody would know the difference.

    And yet, even with their unmitigated incompetence and uselessness, they get paid astronomical sums of money, and their epic fails get rewarded with ridiculously huge golden parachutes.

    This is the crap that is sending America's economy into the sink hole, not taxes or government or whatever else.

    Shed no tears for Carol Bartz. She, and 99% of corporate upper management, board of directors, and shareholders, can all go stick it.
    jasdude
    • very few creative visionaries

      @jasdude You are right that almost anyone can be a CEO these days...cut jobs, cut this, cut that,...

      But it is because of the close ties between business and government that got us here. Nowadays, you dont need to be a visionary, you just need to have political connections.

      By the way, look at how our govt bails out bankers, creates artificially low interest rates, encourages people to buy houses, prints money...the list goes on and on.

      It's all a big game, and we are the pawns. Think about that the next time you want govt to "do something" about jobs, the economy,etc.
      otaddy
    • RE: Carol Bartz at Yahoo: Set up to fail?

      @jasdude Amen.
      Skippy99
  • RE: Carol Bartz at Yahoo: Set up to fail?

    Carol was screwed from the start. Yahoo never quite got over the idea that it was a premier (in the French sense of the word, meaning first) marketplayer that lost its mojo when google (and a slew of smaller, more innovative and aggressive segmented players) came out of the blocks. I wish her well. She deserves more than what Yahoo could offer.
    Hilarus I
    • RE: Carol Bartz at Yahoo: Set up to fail?

      @Hilarus I
      Carol only proved that she fit the mold of most of today's CEO's.
      Don't evaluate the possibilities of success, just eveluate the compensation.
      arlkay1
  • Icahns boys chose her

    Icahn got himself and 2 supporters into the board at Yahoo. He did this by selling "European Style Put Options" at $19.50 (note this price carefully). A trick by which he doesn't risk his own money to attack a company but gets to squeeze management.

    http://blogs.wsj.com/deals/2008/05/15/how-icahn-influences-yahoo-without-buying-the-stock/

    His boys then made Yangs life unbearable till he leaves, and they get in Carol Bartz in. It's easy to blame her, but there were hostiles on the board whose sole aim seemed to be to take the crown jewel 'Search' and hand it over to Microsoft. Search is the market Google makes most money on, so it was the biggest potential to turn around into big profits, but she couldn't do that with the hostile board members.

    Icahns deal with Microsoft (which included a term where they would buy some undisclosed Yahoo stock at.... $19.50 a share, yes that magic number again ) fell through of course, but they still get the prize they wanted, Yahoo's search.

    http://www.forbes.com/feeds/afx/2008/07/14/afx5211642.html

    See "Microsoft would also be making a substantial equity investment in the remaining company at $19.50 per share, he stated"

    The trouble with Yahoo was they had a parasites eating at their brains.
    guihombre
  • Wrong person for the job

    One might say that Lou Gerstner was setup to fail when he was hired to lead IBM as well. He had lots of experiences with turnarounds though whereas there is little indication that Carol was suited for this job.

    This was clearly the wrong person for the turnaround job. I blame the board for choosing her and her for taking the job.

    The shareholders are the ones that deserved better, not Carol or the Board.
    woan
  • Yahoo = AOL

    Does anybody else see the similarities with Yahoo and AOL?
    Both seem destine for the scrap heap because they are the Internet of old.
    jscott418-22447200638980614791982928182376
    • but it wouldnt have to be this way

      @jscott418 if they had competent leadership.
      otaddy
  • RE: Carol Bartz at Yahoo: Set up to fail?

    This one is easy. Whoever succeeds her will do no better, as the Yahoo brand peaked prior to Bartz joining. Yahoo's biggest mistake was not selling to Microsoft for $37 billion - yes, remember that?! Right in the middle of the worst economic downturn since the Great Depression, Yahoo turned down a $37B offer! Now that's what I call a bad decision...
    krisoccer
  • RE: Carol Bartz at Yahoo: Set up to fail?

    Carol Bartz knew full well ahead of time that she was hired specifically to rescue a sinking ship. If Yahoo had been doing well, any mediocre manager could do the job. That was why she was paid big bucks to try to steer Yahoo back into good health. No tears should be shed for her firing because except for her pride, she comes very well ahead money-wise from the termination clauses. She still gets tens of millions of dollars of compensations for having not achieved her goals. Any regular staff would be fired for failing to to meet expectations in a corporation, and her treatment should be no different.
    ilixir
  • Worst move ever...

    Jerry Yang had more money on the table, but the worst strategic move has to be Gary Killdall's decision to do something else the day IBM visited.
    pwatson
    • Too right

      @pwatson
      If it weren't for Gary's arrogant attitude, the PC scene would be very different today, simply because we wouldn't have been saddled with MS DOS and Windows.

      Perhaps Carol could join Microsoft? Then Ballmer could go to Procter & Gamble and sell soap, which is about all he is capable of doing.
      rahbm
  • RE: Carol Bartz at Yahoo: Set up to fail?

    Just a note for those that Love Bartz... those of us that had to live with some of her bad decisions while at Autodesk don't think that much of her. She was reckless in pushing bad code out the door (R13) just to make the quarter. And rarely listened to advice or concerns from the coders. I was glad to see the back of her. Hopefully she learned from it and got better at her job.
    jb_at_the_tool
    • But still, they fire her by phone?

      @jb_at_the_tool There is more to this story.
      otaddy
  • In Two Years...

    Yahoo will be dead and the Yahoo brand will be sold to Microsoft for a couple of million dollars. Yahoo e-mail addresses will become Hotmail addresses and about 20 people will be crammed into a Silcon Valley office with the air conditioning turned off to liquidate the rest of the company. That fat lady? She hasn't started to sing but she is warming up in the wings.
    ernie_l_jackson
  • RE: Carol Bartz at Yahoo: Set up to fail?

    I think she made big statement but no action. The board at yahoo got impressed by her tough back alley talk. Life is not a movie.
    edifeldman