That’s a fact that is likely true in the video space, as well. Google’s YouTube video sharing site has a massive head start and huge market position in the United States. Yahoo! Inc. (NASDAQ: YHOO) will have to do some pretty heavy lifting to unseat the company.
If an ad campaign by Microsoft touting the look and performance of Bing hasn’t done much to change the search picture, what exactly is Yahoo! going to do on the video side? And Microsoft Corporation (NASDAQ: MSFT) has a far stronger business than Yahoo!, so it can better afford such fights.
J.C. Penney Company, Inc. (NYSE: JCP)
In this, J.C. Penney Company, Inc. (NYSE: JCP) should be a cautionary tale. The retailer brought in a former Apple exec as CEO to much fanfare. The idea was that Ron Johnson would bring along with him some of the Apple store magic. Exactly the opposite has occurred, with major miscues resulting in plummeting sales and earnings. And a moribund share price.
Investors clearly haven’t benefited from Johnson’s Apple experience. At this point, all but the most aggressive investors should avoid the company until results show a consistent turn for the better.
The lesson is that just because a person achieved success at one company doesn’t mean he or she will repeat that achievement at a new company. While it is a time honored practice to run interference by entering a competitor’s markets, Yahoo! needs to grow again, not block and tackle Google. Buying a video business could be a step in the right direction or an expensive folly that does little for the underlying problem.
Not a sign to buy
In the end, Mayer’s first big move shouldn’t be taken as a sign for investors to jump aboard. Yahoo! Inc. (NASDAQ: YHOO) has a lot more to prove before it’s safe to flash the all clear.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends Google. The Motley Fool owns shares of Google and Microsoft.