Reorganizing Yahoo!

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Case Details:

Case Code : BSTR258
Case Length : 24 Pages
Period : 2000-07
Pub Date : 2007
Teaching Note :Not Available
Organization : Yahoo!
Themes: Corporate Restructuring
Industry : Internet and E-Commerce
Countries : US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

In spite of total revenues going up from US$ 5257.67 million in 2005 to US$ 6425.68 million in 2006, Yahoo's net income fell from US$ 1896.2 million to US$ 751 million (Refer to Exhibit I for Yahoo's Income Statement between 2001 and 2006). According to analysts, the problem was that Yahoo was not focusing on any particular product, but was trying instead to cater to different customers through a single portal. Though Yahoo acquired several companies, it failed to integrate them. Even in search-related advertising, which had emerged as a major revenue generator in the Internet business, Yahoo fell behind its competitor Google, which was generating twice as much revenue on each search ad.

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The challenges that Yahoo was facing externally were further compounded by the internal turmoil in the company brought about by the complex organization structure and slow decision-making process. Yahoo delayed several product launches as it wanted to focus on Panama, which had been delayed by more than two quarters. Panama was to be launched in the second quarter of 2006 but was not launched even at the end of 2006.

Yahoo's problems were reported widely in the media. At the same time, The Wall Street Journal8 published an internal memo that was circulated by a Senior Vice-president at Yahoo, about the lack of focus in the company due to which its resources were thinly spread across several business segments.

Within a month, Yahoo introduced a new organization structure, under which the company was reorganized into three operating units, namely the Audience Group, the Advertiser & Publisher Group, and the Technology Group with the focus on the customers, advertisers, and technology.

The heads of the three units reported directly to Terry Semel (Semel), Chairman & CEO of Yahoo. Analysts opined that with the reorganization and Panama in place, Yahoo could well be on its way to regaining its lost glory...


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8] Dow Jones & Company owned The Wall Street Journal is a daily newspaper published from New York, with a circulation of around 2 million a day.


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