What’s Going on at the Internet Company?

On February 1st, Fortune reported a rather embarrassing anecdote about Yahoo. Apparently Marissa Mayer put up to 30 employees on firing lists – employees who were potentially in line for firing if their performances didn’t pick up in future. Somehow, however, this message got lost in transmission and these employees were actually fired. Cue significant embarrassment and a further drop in morale. This story serves to demonstrate the current climate which appears to have enveloped the firm.

Just 18 months ago Yahoo looked poised to attain a level of success not seen in years, flush with cash from their significant stake in Alibaba – and the stock price reflected that, with November 14th 2014’s 51.75 price the highest Yahoo had traded at since the year 2000.

However, 2015 proved to be a much more difficult year for the company. The stock is down by more than 30% on a year ago (currently trading at around the 29.5 mark).

A Company in Crisis

Reports started to emerge last year about the low morale and simmering tensions at Yahoo – a senior staff meeting in October was reported to have gotten out of hand, with verbal barbs traded.

Yahoo remains in a very similar position to how it has been for years – essentially propped up by its successful Far East division, but with a core business which is not profitable and seen as low value by investors. A plan last year to spin off the Asian division was abruptly scrapped, perhaps when Yahoo realised just how much they were dependent on that unit for profits.

An Out-of-Touch CEO?

From someone who was greeted with such high hopes in 2012 when she assumed the mantle of CEO (to the extent that Obama-style ‘Hope’ posters festooned the walls), Marissa Mayers has suffered a drastic decline in popularity. Her comments about large-scale layoffs might have gone down somewhat better if there hadn’t also been simultaneous claims that Mayer spent something in the region of 7 million on a Yahoo holiday party with a theme of the ‘roaring twenties’, an excessive sum for an excessive era.

Not only have Yahoo fired over 10% of their workforce in the past year, but the New York Times last month stated in an article that over a third of the firms’ employees left of their own accord over the past year to seek out pastures new – hardly an overwhelming vote of confidence in the firm.

Tough Earnings

Yahoo closed down by 1.72% on Tuesday, ahead of the earnings which were due to be announced after the US market close. As expected, the news was not good. The firm reported a $4.5 billion net loss for the year as a whole, with the company essentially admitting that its ambitious 2013 purchase of the Tumblr blogging platform had hugely overvalued the company. A year ago, Marissa Mayer was talking about the possibility of Tumblr generating $100 million in revenue during 2015, a figure that in hindsight appears to have been laughably optimistic. At the time of writing on Wednesday, Yahoo stock was down by almost 7%.

Can Yahoo dig itself out of the hole it now finds itself in – and will Marissa Mayer be the one to dig them out? 2016 may well provide the answers to these questions.