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Yahoo! Inc. (YHOO), Google Inc (GOOG): Why You Should Take CEO Changes Seriously

In the month of July last year, Yahoo! Inc. (NASDAQ:YHOO) appointed Marissa Mayer as its new CEO. With this appointment, it shows that Yahoo! has gone through five different CEOs in the past 3 years. There is certainly a correlation between the market value of Yahoo! with its ever changing chief executives. This correlation may reflect the performance of Yahoo!’s CEO, but it may also be market’s perception of a company that simply can’t find the right person for the job.

In 2010, Carol Bartz was the CEO of Yahoo! Inc. (NASDAQ:YHOO). Under Bartz, Yahoo! had a high of $19.12 a share in 2010 and a low of $12.94, both numbers decreasing into the next year. In 2011, Yahoo’s CFO, Tim Morse, was named interim CEO. The market saw a 1.46% decrease in the high, falling to $18.84, and the low dipped 14.30% to $11.09 in August. Morse returned to his title as CFO in 2012, and Scott Thompson became the third CEO of Yahoo! in under 6 months. Thompson was CEO at Yahoo! for only 5 months.

Yahoo! Inc. (YHOO)

Ross Levinson, then executive vice president at Yahoo! Inc. (NASDAQ:YHOO), became the next interim CEO. In 2012, the market value did not start to rise until later in the year after the announcement of the newest Yahoo! Inc. (NASDAQ:YHOO) CEO, Marissa Mayer. In 2012, the high was $20.88 (10.83% higher than the previous year) with a low at $14.35 (29.40% higher than in 2011).

This is a significant change, and does show some volatility. So far this year, under Mayer, Yahoo! Inc. (NASDAQ:YHOO) is at a high of $23.09. We can speculate that this growth may be the result of Mayer’s history with Google. Will Mayer stay with Yahoo? If so, how will this change in Yahoo!’s market behavior affect its market value? Time will tell.

To compare, competitor Google Inc (NASDAQ:GOOG) has also changed their CEO in the past 2 years. However, the changes have not been nearly as volatile. CEO Eric Schmidt had stepped down in 2011 after 10 years. Larry Page, co-founder of Google Inc (NASDAQ:GOOG), had taken the role of CEO. In 2010, Google had a high of $630.85 and a low of $433.63. The high rose 2.52% in 2011 under Page, and the low rose 9.08%.

Page remained CEO throughout 2012, where Google Inc (NASDAQ:GOOG) jumped to a high of $774.38 (a 19.73% increase) and a low of $556.52 (17.65% increase from 2011). This year, Page is still CEO and Google Inc (NASDAQ:GOOG) has a high of $844 with the low is sitting at a lofty $695.52.

Jeffrey Bezos, however, has been the same CEO at titan internet retailer, Amazon.com, Inc. (NASDAQ:AMZN) since founding it in 1994. In 2010, Amazon had a high of $185.65 and a low at $105.8. In 2011, Amazon’s high jumped 32.89% to $246.71 (and the low rose 51.79% to $160.59). Both the high and low rose over 7% in 2012, to $264.11 and $172, respectively. From every indication, Bezos does not appear to be ready to abdicate his position any time soon. Presently, Amazon.com, Inc. (NASDAQ:AMZN) currently has a high of $284.72.

What does all this mean

The market’s perception of a company’s performance is vital. As far as the market is concerned, performance really should be a CEO’s sole job description. This correlation between trending values and CEO turnover rate recognizes a single aspect of the market’s expectations.

A lot of us might not know it, but most of the strategic moves made by CEOs go a long way in determining every given company’s stock price movement. One of such strategies is the growth strategy. According to Keith McFarland, a well-known entrepreneur and former Inc. 500 CEO, companies can maintain fast-growth if the management puts together growth strategies that bring “the most results from the least amount of risk and effort”.

Some of the growth strategies he listed include Market Penetration, Market Development, Alternative Channels, Product Development, and New Products for New Customers. In terms of market penetration, the company maintains growth by selling more of its current products to its current customers. Market development is a strategy that enables the company to sell more of its current products to extended and adjacent markets. This is a strategy that has worked for a lot of CEOs and management teams.

As for alternative channels, it is a fast-growth maintenance strategy that entails reaching out to current customers and prospects through other methods like online retail division. Product development strategy is built around the development of new products which are sold both to current customers and new ones.

Finally, on the strategic moves CEOs employ to positively impact on their company’s stock price movement, is creation of new products for new customers. Concentrating on one product can, in most cases, put a company in dire straits. With the development of new products geared towards new prospects, a new market is subsequently opened with greater earning potentials.

Mayer may have brought some innovative faith along with her from Google Inc (NASDAQ:GOOG), giving Yahoo! Inc. (NASDAQ:YHOO) the surge it needs after its leadership disaster over the past couple of years. Google Inc (NASDAQ:GOOG) and Amazon.com, Inc. (NASDAQ:AMZN) remain stable in their executive choices, potentially promoting growth in Google, and a possible plateau in Amazon. Keep an eye out for the next big job change and strategy, the results might be fruitful.

Naomi Warmate-Igwe has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Google. The Motley Fool owns shares of Amazon.com and Google.

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