No, I’m not going to echo the same harsh criticism that’s been plastered all over the popular press. The universally negative coverage faults Marissa Mayer for failing to turn around Yahoo. It reminds me of a classic Harvard case study where people reacted differently to an executive’s performance where all the details were the same except the name. Some students read the case with “Heidi” as the protagonist and others got a version with “Howard” in the lead (Heidi was the actual executive in real life). Students were critical of Heidi and not Howard despite the other details being exactly the same. From the date Marissa became CEO on 7/12/2012, the stock is up 126% vs. the SPX up 67% so it’s almost doubled the market’s return. People can argue about how much of that performance is attributable to Mayer, but the fact of the matter is that shareholders have done great during her tenure. I can’t help but wonder whether this highly relevant fact would be overlooked if Marissa were Michael.
Core Yahoo was a mess before she got there and it remains a mess today – it is exceedingly difficult to turn around a business. However, she bought back stock at a time it was clearly undervalued and took efforts to spin-off Alibaba, which helped highlight its value (even if there have been subsequent roadblocks to a full implementation). Today’s NYT’s article faults her for not “betting the farm” and rather making a bunch of small bets. The latter is a much better strategy as the literature is clear that most large acquisitions destroy value, so to advocate for a large deal signals that the basic business is so strategically challenged that making a negative expectation bet is worthwhile. Of course with hindsight bias, you can look back and see what worked and say she should have bet big on that. Kara Swisher faulted her for not buying all of Netflix when she joined, which would have been a brilliant move in hindsight but who really would have done that? No one. The proof is no one did. Jeff Bezos, Amazon’s brilliant CEO, failed to buy Netflix in 2012 when it was trading at 10 percent of today's price and he’s in the Internet video distribution business already so he understood that strategic landscape better than the vast majority of people. This reaction is worse than the “Devil Effect” where people attribute too much blame for negative outcomes to the person in charge (opposite of Halo Effect where too much positive is also ascribed) because shareholders have actually done WELL! Rant over.
The views expressed in this report reflect those of the LMM LLC (LMM) strategy’s portfolio manager(s) as of the date of the report. Any views are subject to change at any time based on market or other conditions, and LMM disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results. It shall not be assumed that other strategy investments will be profitable or will equal the performance of the securities mentioned.
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