Game over, Carol Bartz

September 30, 2010: 11:45 AM ET

Yahoo's stock price is abysmal, employee morale is low, and top-level executives are fleeing. What's left? An Internet property slowly limping to its death and a mouthy CEO with no vision. Her days are numbered.

Photo: Daniel Acker/Bloomberg

"I don't want to hear any crap about something magical that the fine people of Yahoo are supposed to do in this short time. So f*ck off."  -- Yahoo CEO Carol Bartz, May 2010

At the height of the dot-com boom, Yahoo was considered one of the hottest web properties, a go-to "portal" for search, email, and media and a lofty stock price to prove it.

Fast-forward a decade, and Yahoo (YHOO) is a company under siege, both from its competition and from within. Its stock closed yesterday at an abysmal $14.34, second quarter net revenue grew by an anemic 2% over last year, and analysts at ThinkEquity value the company's core business at "less than nothing." Morale at its Sunnyvale, California headquarters is reportedly in the gutter and top-level brass are leaving in droves. On Friday, according to All Things D, Yahoo is expected to officially announce the departure of several top executives, including executive vice president Hilary Schneider, senior vice president of audience David Ko, and media vice president Jimmy Pitaro. This follows other recent key departures, like former vice president and editor-in-chief Srinija Srinivasan, who announced her resignation last month, and executive vice president Ash Patel, who left back in March.

At the center of the tempest remains 62-year-old CEO Carol Bartz. Since she assumed the position in January 2009, Bartz has shed areas no longer relevant to Yahoo's core business -- outsourcing Yahoo Search to Microsoft (MSFT), Yahoo Shopping to PriceGrabber, Yahoo Personals to IAC and selling job search engine HotJobs to Monster and business-oriented collaboration suite Zimbra to VMWare. She has also expanded Yahoo's editorial operations, including its $100 million purchase of Associated Content.

But besides restructuring and reshuffling management, Bartz has done little more than ruffle feathers.

A loose cannon

In recent months, Bartz has become more notable for shooting off her mouth to the media than for innovating. In May at the TechCrunch Disrupt conference, when aggressively confronted by Michael Arrington onstage, she concluded her appearance by belittling him and finally, cursing at him.

Earlier this month, at the Goldman Sachs Communacopia Conference, her attempt to defend the embattled company failed miserably. Though Yahoo Mail remains twice as large as Hotmail, user product engagement has dropped, and Bartz placed much of the blame on consumers who now send pithier messages via social networks like Facebook. When asked about the dizzying turnover at the company, she said, "I can't tell you how many times I've gone to my assistant and said, 'Do you know who this person is?' and they're about six layers down."

While such frankness may have been passable at Autodesk, the design software company she led before moving to Yahoo, it's clearly not acceptable at a company where every word and action is dissected in the media.

"She's an idiot," says one large shareholder. "She swears at everybody, and is flip to everybody. She does that with employers, she does that with shareholders, and she does it to employees. That's not the way to win hearts and friends." Moreover, this shareholder says, Bartz simply doesn't have a handle on how to run an Internet company.

And according to the shareholder, it's Bartz's abrasive and dismissive behavior that's driving away high-ranking execs and making her an unpopular leader among her employees. At best, interactions with her are described as frustrating. At worst, they're completely unproductive.

What strategy?

More disturbing than Bartz's incapacity to handle herself professionally is an apparent lack of vision for the company. Bartz and her recent hire chief product officer Blake Irving have had trouble articulating what Yahoo, as a brand, stands for, even when asked repeatedly.

"Yahoo is a global series of web experiences across a variety of devices that gives people what they want," said Irving at a press conference earlier this month. "In content, it connects advertisers to an audience that is global in scope. Yahoo is all about delivering experiences to individuals that make them engage with each other. Folks [ask]: Are you a search company? A content company? A communications company? We would like to engage with people on the things that matter most to them."

Bartz's own explanation of Yahoo isn't much clearer.

"Yahoo is a company that is very strong in content," she said this past May. "It's moving towards the web of one. We have 32,000 variations on our front page module. We serve a million of those a day. It's all customized. Our click-through rate went up twice since we started customizing this. People come to check the things they like. 'You can just get it together.' Yahoo is one site people always stop at."

AllThingsD's John Paczkowski called Irving's response  "the world's worst elevator pitch," and analysts agree that such a vague, amorphous definition just doesn't cut it. It could also describe any number of giant tech companies. Given Bartz's recent moves with HotJobs, Yahoo Shopping, and search, you'd think it should be easier than ever to provide a definition.

Gary Singer, CEO of branding firm Buyology, believes Yahoo has done a poor job of managing itself as a brand, describing the company, or what's left of it, as a motley collection of loosely-connected technology offerings that happen to be branded 'Yahoo.' "There's no cohesiveness, no personality, and no relationship," he says.

Really, what is Yahoo? The name itself once had a cool factor, but now it persistently raises questions of identity that Bartz and Irving can't answer. There's no question that Yahoo ceded every piece of real estate it owns: it's not the undisputed email leader (at least as far as product engagement goes), or search leader (Google leads with about 65% to Yahoo's 17%) or online portal.

As with any CEO role, it's not enough for Bartz to streamline her company, as she's arguably done. She needs to innovate with a long-term strategy beyond bringing a company's product line up to parity. But all evidence indicates Bartz doesn't really have one. So far, there has been no sign that Yahoo has an iPod-like innovation up its sleeve – the only new efforts it has disclosed are an upcoming Yahoo Mail redesign and an iPad app.

The creative void explains why Yahoo's Asian investments in Yahoo Japan, of which the company owns a 34.9% share, Alibaba.com (29% stake) and Alibaba Group (40% stake) are worth significantly more than Yahoo's core business and why Bartz herself appears keen on holding onto those shares, despite Alibaba's offer to buy some of them back.

What's next?

Earlier this week, AllThingsD reported that members of Yahoo's board convened an emergency meeting at company headquarters to discuss management issues and how to deal with them. At this point, pundits are speculating the board could appoint a choice second-in-command that would take over for Bartz once her contract runs out in 18 months.

But by then, it may be too late to reverse the course for Yahoo, its shareholders and the company's 13,000 employees, into becoming just another historical footnote in the growing list of fallen tech companies.

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About This Author
JP Mangalindan
JP Mangalindan
Writer, Fortune

JP Mangalindan is a San Francisco-based writer at Fortune, covering Silicon Valley. Since joining in 2010, he has written on a wide array of topics, from the turnaround of eBay to the evolution of net neutrality. A graduate of Fordham University, Mangalindan has also written for GQ, Popular Science, and Entertainment Weekly.

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