Yahoo! Inc. (YHOO), Microsoft Corporation (MSFT): Reorganization Is Not a Panacea for All Corporate Problems

Page 1 of 2

Some firms which were once on the cutting edge now find themselves struggling to keep up with the competition. As revenue slips and competitors continue to innovate, once-successful companies try to breathe new life into their firms by reorganizing. Whether working from the bottom up or the top down, companies are striving to reform themselves.

Working from the top down

On July 17, 2012, Yahoo! Inc. (NASDAQ:YHOO) brought Marissa Mayer on board as CEO. Hiring this 13-year Google veteran was Yahoo!’s first step in becoming more “tech-focused.” Though revenue decreased 7% in this year’s second quarter, there is still hope for Yahoo! under Mayer.

She made her intentions known; she will gladly sacrifice short-term gains to develop a stronger future for her company. This outlook should make investors more confident in her decisions. We can also ground our confidence in the results we already see. For example, Yahoo! Inc. (NASDAQ:YHOO) managed to increase search traffic 5% since last year after years of decline. (A feat rarely accomplished in the industry.)

Mayer also strives to shift Yahoo! Inc. (NASDAQ:YHOO)’s focus to mobile apps. Hundreds of engineers at Yahoo! currently work to develop better mobile app services. The firm is also in talks with Apple about preinstalling additional Yahoo! apps on iPhones. Even though Yahoo! lags behind mobile app competitors, it has seen an increase of users. Only 8% of iPhone users had Yahoo! apps on their phones in July 2012. That percent double by June 2013.

Mayer faces a hard battle rebuilding Yahoo! Inc. (NASDAQ:YHOO), but her progress during her first year boosts hope and morale in the firm. A steady stream of job applications continues to flow into Yahoo!. 10% of these applications in the second quarter are previous Yahoo! Inc. (NASDAQ:YHOO) employees who chose to return. As employee confidence returns, so should investor confidence.

Revamping the organizational chart

Microsoft Corporation (NASDAQ:MSFT) faces great challenges in the ever-changing tech environment. PC shipments continued to decrease in the second quarter and global unit shipments dropped by 10.9% in the second quarter. Windows 8 was not well received by the public, doing even worse than Vista sales in 2007. And Microsoft felt pressured to drop the price on its Surface RT tablet by $150. To overcome its many challenges, Microsoft Corporation (NASDAQ:MSFT) is taking a play out of Apple’s and Google’s playbooks. The firm aspires to shift its strategy and become known more for services and devices that run its software and less known for the software itself.

To execute this strategy, Microsoft Corporation (NASDAQ:MSFT) plans to flatten its organizational structure. The firm is currently divided into product groups that function separately from one another. The new setup will have managers overseeing functions (such as marketing or finance) instead of specific products. Reorganization will allow the firm to pursue the new strategy. However, it is too late for this strategy to work for Microsoft as it tries to enter the mobile market.

Microsoft Corporation (NASDAQ:MSFT) successfully executed the strategy with its Xbox, becoming associated with the game console and Xbox live service. But the firm is too late to the smartphone and tablet game. Some 61% of cell phone owners in the U.S. own smartphones. And the number of Americans upgrading their smartphones is down 9% from 2011 to 2012. Even with its partnership with Nokia, whose Lumia phones run Windows, Microsoft has little hope in conquering the smartphone market.

The tablet market provides little hope for Microsoft Corporation (NASDAQ:MSFT). As you can see, Microsoft commands an unimpressive 0.9% market share of tablets.

Microsoft’s restructuring effort may help the firm change its strategy, but that strategy provides no guarantee of success. It is too late to the game and will not make a name for itself as a smartphone maker, tablet maker, and service provider.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!