Investment Contrarians

Yahoo! CEO Speaks—What’s the Message for Investors?

By for Investment Contrarians |

Message for InvestorsMarissa Mayer, the new CEO of Yahoo! Inc. (NASDAQ/YHOO), recently spoke about her plans for the future of the company. As we all know, technology stocks in this sector are constantly evolving. At one time, Yahoo! was a giant among technology stocks; those days have long since passed. Growth in corporate profits has been evasive for the firm, and Mayer took this opportunity to voice her opinion on where the company should be heading.

Mayer comes from Google Inc. (NASDAQ/GOOG) with an engineering background. She helped build the Google brand and, ultimately, drive corporate profits. While her success at Google is laudable, the long-term problems at Yahoo! still exist. She’s starting at the beginning and announced a dramatically redesigned homepage. She believes that this, along with changes to the search and e-mail functions, will help attract more viewers to Yahoo! and, ultimately, raise corporate profits.

Her plan includes a greater focus on its mobile platform. All technology stocks and their investors are spending a lot of time scrutinizing mobile platforms. This segment will be a crucial push for the next leg of higher corporate profits. The number of smartphone users is growing, and this segment will be critical to the success of technology stocks over the next decade. Technology stocks that can’t convert users into corporate profits will most likely see their shares languish.

Mayer also spent some time discussing the need to attract talent. I’ve lamented on this topic before; once technology stocks start to fall behind, the best talent starts to leave. As innovation is the key driver for corporate profits growth in this industry, technology stocks need to be able to attract the brightest and best.

Can Mayer succeed? She’s ambitious and has a lot of energy, which has certainly been a positive over the short term. We will need to see some evidence that she’s able to execute on any of these goals. Certainly, the stock has had some more life since she joined the company, but it’s still within a long trading range. While many technology stocks have had extremely strong years, Yahoo! is still seen as a runner-up.

Yahoo Chart

Chart courtesy of www.StockCharts.com

While the move up in recent days was nice, as you can see from this chart, the stock is stuck in a tight range. An investor might look at this stock as an option; it doesn’t have much downside left and any signs of improving corporate profits would significantly boost the stock price.

I do like the energy of this new CEO, as she has proven to have been quite successful in her experience at Google. Running an entirely new organization will prove to be a challenge, as will trying to change the perception of Internet users and attracting talent. This change of perception is needed to ultimately drive corporate profits. With heavy competition from other technology stocks, I would wait for evidence that Internet users are starting to migrate back to Yahoo!

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