Hear Marissa Mayer's roar and buy Yahoo

The Internet company's new CEO is setting up what might be 2013's biggest turnaround on Wall Street.

By TheStreet Staff Oct 17, 2012 11:25AM

TheStreet.com logoPhotodisc Getty ImagesBy Rocco Pendola

 

I finally pulled the trigger. I am long Yahoo (YHOO).

 

On Tuesday morning, I got in at $15.80. While the stock could very well break out above $16.00 again, I intend to accumulate below that level. Opportunities should present themselves, whether on earnings or as part of broad market pullbacks.

 

If you enjoy the tech space and appreciate innovation, it's difficult to find a more attractive proposition than YHOO.

 

As usual, numbers only tell part of the story, however, they do support Yahoo as a viable turnaround candidate.

 

We forget that the company does about $5 billion in annual revenue, has very little debt and, thanks to a deal with Alibaba, sports a war chest full of cash. Yahoo's Web properties are some of the world's most heavily-trafficked sites with strong presences in crucial areas such as sports and finance.

 

Everybody uses Yahoo. Some of us love it.

 

I'm not sure Yahoo requires a turnaround per se; rather, it needs a few pipes cleaned, meaningful cosmetic changes and better focus.

 

Yahoo's board not only made the right choice when it hired Marissa Mayer as CEO, it did the right thing by providing her with what appears to be free reign over the resources she needs to execute.

 

Think about what's going on at Yahoo. And think about how it makes practically every other public company we follow in tech come off as less than.

 

Yahoo had the guts to give the under-40 Mayer her first gig as CEO when she was just weeks away from having a baby. A young woman with a brand new kid as CEO. That's almost as groundbreaking as a black president or openly gay top executive.

 

Let's unpack that.

 

Mayer came back to work just two weeks after having her child. That should shut up what I previously called on TheStreet the chauvinist pigs who thought the pregnancy might pose a problem.

 

I have to assume that Mayer's quick return, particularly because she dug right back in poaching another key player from Google (GOOG), helps rally the troops. Male or female, it has to fire you up to have a strong, confident woman as your leader during a time when you're starving for competent leadership.

 

Mayer's hiring, presence and subsequent actions turn Yahoo into more than a company. It becomes a mass appeal, pop culture story.

 

Magazines do features. Late night television pays attention. Women around the world look to a higher-profile role model.

 

Yahoo broke ground. This would not have happened had it gone the typical route, hiring a fifty-something "veteran" CEO such as Meg Whitman.

 

It might sound like psychobabble, but there's something to be said about the place you work becoming something bigger than the sum of its parts. In other words, you work at Yahoo and, all of a sudden, that matters again.

 

This dynamic drives loyalty, creativity and hard work, which drives results. It's not all that different from the culture -- as perverse as it certainly was in some respects -- Steve Jobs created at Apple (AAPL).

 

But it's more than what is probably a premature urge to call Mayer "the female Steve Jobs."

 

Lately, tech just seems to be missing something. Mayer comes in and helps energize the space.

 

I've written about the hopeless, ranging from Microsoft (MSFT) to Hewlett-Packard (HPQ). Companies who will rest on laurels and destine themselves to mediocrity. (Microsoft owns and publishes Top Stocks, an MSN Money site.)

 

Then, there's Apple. At the top of its game, but as I wrote on TheStreet.com simultaneously dogged by uncertainty over its ability to innovate at the same level it did under Steve Jobs.

 

We have loads of companies using everything from the presidential election to the fiscal cliff as excuses not to spend. They're hoarding cash. But that's not the case at Yahoo.

 

Mayer spends at varying levels. Multi-million dollar packages for new executives at the top end to iPhones and free lunch for the staff.

 

Through all of this, Mayer flashes signs that she's got it all figured out at Yahoo. She knows what she needs to do. She commits most of her 2012 tenure to laying the groundwork. In 2013, she flips the switch on a simpler, more straightforward, easier-to-navigate and refreshingly social, competently mobile Yahoo.

 

At the time of publication, the author was long YHOO.

 

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1Comment
Oct 17, 2012 12:09PM
avatar
I have a question, Rocco. I don't know the answer to this but I wonder why I haven't seen it addressed.

If we are seeing a massive shift towards mobile, such that Intel is struggling, and Microsoft, and Facebook, and many other companies that arose in the "old" PC era, what does that shift mean for Yahoo? What is Yahoo's penetration into the mobile market? Is it used as much as it is on desktops and laptops? If so, can it turn that into cash?

I'm personally not sold on the notion of the imminent demise of the PC, but is there something that makes this play out more favorably for Yahoo than for Intel, Facebook, et al? Or is your premise mainly that Yahoo is strong enough to thrive despite headwinds that others can't overcome?
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