Yahoo may well ditch its CEO, Scott Thomson, by the end of this week — assuming he lasts that long. Activist shareholder Daniel Loeb discovered that Thomson had padded (a polite term for ‘lied about’) his computer science qualifications when joining Yahoo. That padding (lying) had been going on for years, as it now transpires.
For his part, Thomson acknowledged an oversight on his résumé, but it’s hard to see how his explanation may hold water.
Grok’s personal favourite was a short burst by Michael Arrington on his <i>Uncrunched</i> blog, “Thompson has to go. I wouldn’t even take a phone call from that guy at this point. The kinds of people who lie on their résumé…those people don’t belong in Silicon Valley.”
None of this outrage is confected, particularly in dotcom land where tech cred is in currency. But in reality, it is hard to dismiss the suspicion that Thomson’s real “crimes” in the eyes of Valley insiders are the way he has conducted himself since joining Yahoo.
This included suing Facebook for patent violations, despite Facebook providing Yahoo with millions of referrals through Social Bar, alienating Microsoft by playing hard ball and threatening to abandon them for Google, and generally annoying the bejesus out of the Yahoo rank and file by behaving, in the eyes of many, like an absolute tosser (this means ‘jerk’ in Australian slang for our North American readers).
All these points come from an internal note by disgruntled employees and published on <i>Business Insider</i>.
To this list of Yahoo’s sins (also sourced from <i>Business Insider</i>), you can add its undue haste to sell its share in Chinese Web giant Alibaba to overcome short-term problems. This is raising eyebrows.
According to BI editor in chief Henry Blodget, Yahoo has given up on trying to sell its stake in a way that would avoid huge capital gains taxes, and instead has decided to take the bird in the hand over the two in the bush.
According to the story, Yahoo wants to sell about half of its 40 per cent stake in Alibaba back to Alibaba in a move that would generate somewhere between $5 and $8 billion in cash — at least until the tax man comes calling.
“The idea that Yahoo would sell its stake in Alibaba to appease short-term shareholders seems crazy to many observers, who think that Alibaba will go on to create one of the largest Internet companies on the planet. Instead of cashing out now, these observers say, Yahoo should just focus on its core business and let the Alibaba stake amass value. Then, if it wants to cash out later, it can,” wrote Blodgett.
Of course, if Yahoo can extract a gigantic price for its stake, then it might change the mathematics. But nothing in the company’s recent history or posturing provides much confidence in such an outcome.
Facebook IPO — retail investors beware
There’s talk that Facebook will open up a larger piece of its float to the retail market. Normally for marquee IPOs like this, the little guy doesn't get a look in, so on the surface this all seems pretty democratic.
Well, there’s your first warning bell right there.
Here’s a few more: Despite months of speculation that Facebook would IPO with a $100 billion valuation, and despite stock sales on the secondary markets suggesting a $104 billion valuation, Facebook only valued itself at $75 billion during its recent purchase of Instagram barely a fortnight ago.
Now, Big Numbers get thrown around like peanuts at a frat party all the time in the dotcom sector, but that $29 billion gap suggests to Grok that somebody, somewhere is about to get their leg pulled.
And here’s a final thing for you to ponder if you are considering stumping up the loot. In its prospectus, Facebook warns about the uncertainty for its business model as its audience migrates to mobile — and that migration looks more like the Diaspora every day. To understand what that means, look at the quality of Google’s earnings lately — once again thanks to <i>Business Insider</i> to pointing this out.
Google is discovering that advertising yields on mobile simply aren’t as strong as they are on the Web, and Facebook with the rapid transfer of its core audience to smartphones will undoubtedly have to confront the same reality.
Now, Grok is an optimist on Facebook long term. That’s because unlike Instagram, which is an app, and Pinterest, which is a gimmick, Facebook is DNA. Facebook also has a nice little transaction business to buttress itself against the vagaries of the advertising world. But that’s no reason to forget the fundamentals. Some $90 billion looks a bit toppy when you factor in all the uncertainty over mobility and Facebook’s own assessment of its current value.
Andrew Birmingham is the CEO of Silicon Gully Investments. Follow him on Twitter @ag_birmingham. These are opinions, not investment advice. For God’s sake consult a professional. Grok has also quickly re-appraised his CV details on LinkedIn. The IT stuff looks fine, but those details about his Bachelor’s degree are a little hazy, like the years themselves. Luckily, no one ever hired him on the strength of his BA
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