Yahoo! Inc. (YHOO): Where’s Its Direction?

When it sold half the stake last year for $7.6 billion, I criticized the move to give more than half of the proceeds to shareholders. Yahoo needs serious capital to remake itself. In essence the company is a startup now with a multi-billion dollar asset portfolio. So, the Alibaba IPO is the best news the firm has had in a while.

In the meantime, the best Mayer can do is continue to focus on exiting from losing ventures while driving towards mobile. Yahoo has recently decided to terminate its email services in China as of August and users can switch to an Alibaba site or starting using the American version of Yahoo, or Gmail or Microsoft Corporation (NASDAQ:MSFT)’s mail service.

In the U.S, Yahoo is permanently shutting down some of its services – such as Yahoo SMS Alerts, Yahoo Kids, Yahoo Deals, the older version of Mai. On the other hand, new apps are being released including Yahoo! Inc. (NASDAQ:YHOO) Mail for iPad and Android and Yahoo Weather for iPhone. Frankly, it is about four years too late, but better late than never, I guess. Cutting the fat is the easy part, however, and returning the firm to profitability isn’t that tough in the short run. The real challenge is finding a successful business with what’s left. When Mayer took over, Yahoo was valued equal to its asset portfolio and its core business had been discounted to zero. That isn’t true today, but it should be.

A company without direction

Mayer is doing exactly what she said she would do when she took over: change the culture and ditch old, irrelevant services. I like Mayer and her sense of what made Google successful, but at this point, Yahoo looks like it has no direction, or at the very least, is waiting for its advertising revenue to crater so that it can purge the past and build a new identity. What that new identity could be in today’s market is anyone’s guess, but,  if the grumblings of employees and investors’ is to be believed, it may not be of Marissa Mayer’s design.

The article Yahoo’s Identity Crisis Continues Despite Profitable Q1 originally appeared on Fool.com and is written by Peter Pham.

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