The Incredible Shrinking Yahoo

THE INCREDIBLE SHRINKING YAH00 YAHOO'S MARKET POWER TAKES A DIVE There was a time when Yahoo ruled the web. Alongside its contemporaries MSN and a much younger Google, the search engine was a formidable internet presence in the late 1990s and early 2000s and showed little sign of slowing down. Unfortunately, those days are no longer. Due to the company's struggle to keep up with competitors, Yahoo has been shrinking in size and power since the middle of the last decade. Below, we explore how far Yahoo has fallen and what its prospects look like today. A TUMBLING MARKET CAP One of the most prominent signs of Yahoo's distress is its ever-decreasing market cap, which has been on a downward trend for the last 8 years. YAHOO'S DEFLATING MARKET CAP $60 MARKET CAP (BILLONS OF DOLLARS) $55.60 $52.00 $40. $31.00 $34.70 $24.00 $22.00 $20.00 $20 $17.00 $9.70 $0 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 2006 2012 $18.8 $54.9 BILLION $17.26 BILLION Y! BILLION Taken in total, this paints a pretty grim picture for the company over the next several years. As of April 2012, Yahoo's market Additionally, Yahoo's enterprise value has fallen 68.5 percent in the past 6 years. cap sits at just $18.8 billion. FALLING REVENUE GROWTH Another key indicator that Yahoo is shrinking is the inability of company leadership to grow revenue. In fact, their revenue growth has been falling steadily since 2004. REVENUE GROWTH FALLS BELOW ZERO 150 REVENUE GROWTH 132.30% In addition to a lack of revenue growth, expenses at Yahoo have risen from around $589 million in early 2004 to $1.02 billion today. 100 EARLY 2004 $589 Million TODAY | $1.02 Billion 62.30% 50 39.30% 13.40% 7.60% -1.40% -4.10% -11.94% -13.20% -50 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 A DWINDLING WORKFORCE Revenue isn't the only part of Yahoo that is shrinking. Beginning in 2008, Yahoo began addressing its financial issues with two significant rounds of layoffs. 2008 2012 -14% 500 2 000 CEO Jerry Yang laid off around 1,500 workers. CEO Scott Thompson laid off 2,000 workers in early April. This represented a 14 PERCENT REDUCTION of their workforce. -10% SAVE $375 MILLION I ANNUALLY i This layoff represented a 10 PERCENT REDUCTION of their workforce. It is expected that these layoffs will save the company $375 MILLION ANNUALLY. Yahoo's hope is that by reducing its annual expenses, they can IMPROVE THE VALUE OF THEIR STOCK. THE FUTURE OF YAHOO O! $20 V -35%V V-6%V Despite these efforts, the COMPANY'S STOCK PRICE has dropped by 6 percent since Thompson's hiring in early January 2012. Furthermore, Yah0o shares have NOT TRADED ABOVE $20 IN OVER 3½ YEARS. And its web traffic has FALLEN ROUGHLY 35 PERCENT in the past year. YAHOO.COM TRAFFIC (PERCENT OF TOTAL DAILY INTERNET PAGE VIEWS): EARLY 2011 2% EARLY 2012 1.3% Business pundits feel that this downturn has left the company more vulnerable to takeover attempts from buyers who desire Yahoo's iconic brand name and financial, news, and entertainment services. Additionally, Third Point has begun publicly calling for Scott Thompson's firing, stating that he does not have the computer science degree he claims on his resume. HighTable.com SOURCES: YCHARTS.COM I WASHINGTONPOST.COM I ALEXA.COM