Gadgetory

hi everyone welcome to reporters roundtable I am Rick needle in San Francisco hey since Yahoo launched in 1994 has been a major factor in the growth of the web but it looks like that growth is coming to an end 2000 yahoo employees will be losing their jobs that's about fourteen percent of the company's workforce this company is sort of rudderless and struggling to figure out which direction to go and getting hit it in all directions of its business well Yahoo began as a web directory it quickly diversified into several hundred sites trying to find a foothold as a search engine mail server and news hub yahoo for 56 years has been this company that people keep saying what do you do right are you in search sort of but Google is doing that are you in social they tried to buy Facebook didn't didn't happen experts say these layoffs won't affect yahoo websites that see 700 million users a month but too many consumers it's a non-issue I don't use yahoo mail at all so it's just not as cool as Gmail I like gmail has everything I need their search isn't the best but there's still some things that they're good at rest in peace sort of unfortunate but it seems like that's the direction they're heading analysts say this perception is what could be the final nail in the coffin yah whose reputation is terrible this is no way around it to people around the world who use yahoo mail fine to people who use yahoo sports sites fine they have plenty of good properties but as a company and for the people who work there it's got a bad reputation and that's not helpful what will lean or yahoo look like we'll find out on April seventeenth when the company releases its quarterly earnings statement in San Francisco I'm Kara Tsuboi cnet.com for CBS News so to talk about what's going on today with Yahoo and their patent suit against facebook we've got two great guests first here in the studio seen at News executive editor Charles Cooper Charlie thanks for coming in my pleasure and joining us via the miracle of skype kara swisher co executive editor at all things d thanks for coming in or joining us remotely appreciate it problem so um cara first of all what happened where did yahoo go wrong well many places actually over the many years so it's not been just one single event it's been like a series of continual events most of which are missing major trends and not changing when you need to I think you could probably go way back into until when they competed with Google when they decided to focus on competing with google over focusing on how they were found it which was at as a distribution vehicle for Internet information and as a place that people that was easier to use the internet and they focused on search and of course they lost the battle to Google very quickly go ahead I think that's right knee I would just add that mm you know early on there were a lot of zigs and zags that didn't help their case at all you know after Tim Google who the first CEO was forced out they brought in some folks who decided okay we're going to go show biz we're going to open up operations in Santa Monica we're going to go more strongly towards becoming a full-fledged media company whatever that meant within the context of web 10 or web 20 way back when and once they got rid of Terry Semel then there was another shift and another shift and they've had what five CEOs over the course of 17 years so what happened to the founders how did they let this not very rich that's what happened to they said they cashed out no not at all that's not true at all since the beginning um yeah it's never been about money for those two if you know David Philo even slightly that's not even accurate in any way but um you know I think one of the issues was that they were founders that may be needed a lot more help the way Pierre Omidyar brought in other people to help him realize the vision of ebay I think they probably needed that or Larry and Sergey brought in Eric Schmidt they never had that happen as much as they needed to and the other thing was there were all sorts of cross ideas of what Yahoo should be and one of the things they've never been able to do is dis be able to define what the company is even though everybody knew what it was at the beginning and it sort of still is what it was when it started and so that was one of the problems i think is a definition Charlie what is Yahoo I mean that's one of my big questions here I mean is it a search company media media company what is younger what should it be I don't know what I mean they bring in people far smarter than than than the three of us who you know have been charged with trying to but they haven't done such a good job so what is well I think you know what they need to do and this you know responsibility goes back it's not so much you know you know Jerry's fault but you know the board as well that they early on to not bring in somebody who had a really strong idea strategically and also was strong on tactics who could say this is what we are this is how we can define our place and when the internet changed when it became more about search you know they just were not able to come up with a concrete plan that would you know get them going in this new world order and right now if you ask what is Yahoo you can get five different answers from five different people so we're asking what Yahoo was I mean kara yahoo has nearly 700 million users to those users is that a sort of a uh how am I going to ask this Yahoo is it sort of analogous don't I wouldn't make this it's an inelegant analogy but you know sun microsystems for several years just lagged on and they could have continued along the same every path they really weren't a world-beater but they had what six or seven billion dollars you know in reserves you know Yahoo's not going out of business but you know the the pie is shrinking yes so they can hang on but it's not a business that business model what they really want kara want to talk about two divisions in actually that's also not true sorry Charlie sorry Charlie haha funny it's a very successful business it's a very good advertising business is a very good audience business they have 600 million people using a lot of their facilities including email yahoo news i think is the number one Yahoo Finance's number one Yahoo Sports is neither remember one or two so this is not a dead business by any stretch that wasn't what I was suggesting Kara I'm saying that if they want to again impress investors on Wall Street which may not be their first aspiration they need to come up with a compelling story obviously they have those hundreds of millions of eyeballs in this great Yahoo Sports is wonderful I use it all the time but they need to decide what they want to be when they're a big boy now we know what they are I mean they have an advertising business it's just I think the problem is they've never they've even in so many businesses it's like it would happen with Apple when they went down to four products I mean they have some core products that they're very good at and they're just not as exciting a business as search would be or social right now and so when the problem is whenever they never been comfortable in the costume they were supposed to wear they've been very comfortable in other costumes that don't fit them and so I think they've always had that very good core business though that's that's just not been quite as exciting to them even and they haven't really invested in it in the way they should and what they're actually good at to me is what's gone on I don't think we're disagreeing what I'm saying is that if that story was compelling then their stock wouldn't be in what the low teens well as they change as they change their model from being one thing to being another thing that's going to be a wrenching move isn't it's going to cost people is going to cost market share well it just costs 2,000 employees it cost them their jobs that's right any more to come isn't that right care well that the layoffs were inevitable I mean they're too big for what the how their growth is their growth is negative so it's not a question they're profitable it's the growth is not going well and so they're too big a company they've grown too big as because of bad mismanagement these people shouldn't have probably been hired in the first place and so I think one of the issues is that these things happen creep happens at companies at all companies and so they they creeped into a two largest size for the business there in at this point and again it's a good business if they just you know get to the right side is it's a terrific business is by a good business do you mean media do you mean ads do you mean search or some combination of those what do you think is the good business here to me it's the media business I think the media businesses besides the things they own like Ali Baba and the things that they're getting credit for the ownership of other things that's separate that's like owning a really nice house and a nice part of San Francisco or whatever they just happen to buy it at the right time you know I think their business the core businesses and media business really a Miss media distribution business not unlike you know what the Wall Street Journal does what you know all kinds of there's a lot of kinds of me look not what Cena does and so it's just not as exciting or lucrative search business and it's not as sexy as a social networking business and but it's still a business what is the product division that we keep hear about getting decimated what did did it do or does it do that that didn't work for Yahoo one thing they do at Yahoo is they keep moving around the chairs and so they decide this system works better over this system it happens in a lot of companies this is not a lot of companies debate over where to put product and where to put other things and so what they did is that products were were created within the individual units so if you're in yahoo finance you made the yahoo is finance products and then some someone i think with sue decker decided it would be better to have one product organization serving all the units and so they created this mega product organization in the middle that then serve the products to this to the individual parts depend whatever it was flickr or so they would have a product lead and anna content lead and a management lee and so you know it's it's it's one way of running a company it just didn't work here and so now they've decided to change just the way HP just decided to connect you'll bring print and whatever the printer division with the pc division and then they brought it apart now it's back together so it's just what companies do let's talk a little bit about the CEO now Scott Thompson who is this guy it does he have what it takes to rescue yahoo to turn the ship in the direction it needs to go kara Charlie either you Charlie if you wanna start I have a lot of things about him but I love ladies first uh well I think he's you know he cold emailed his way into the job he wasn't on the list of possible names they were looking at a little bit because he had been placed by the talent search firm at de paypal but he emailed them and studied be great at it which was kind of an interesting way to get a job but I think he's which I kind of like it kind of like that idea the gumption of it he's very tough he doesn't know a whole lot about media um but he doesn't hesitate to talk about it I think within yahoo he's a little controversial because he's pretty tough on them the meetings right before the layoffs he pretty much playing the existing management for the disaster and told them so is that a good thing probably is that a good thing at the moment probably not so he's kind of an interesting character in terms of being very brash and cutting things I would say there's probably the biggest complaint about him right now which dan loeb articulated was that he did the cuts before the strategy was unveiled so it's kind of interesting one person at yahoo said it's sort of like right before a war killing half your troops and then telling you what the strategy is so it sort of hurts morale with the rest of the Living groups it must be tough to be a yahoo right now I'm sure it is i got an email from a yahoo yahoo were overseas who was complaining that they hadn't received anything in terms of tricked direction or what's next no word on what businesses are going to depart etc etc you know in theory there's nothing necessarily wrong about bringing in an outsider you know didn't work with carol bartz who you know i have a lot of respect for but she wasn't the right person for the job you know Lou Gerstner came to IBM and didn't know squat about computers but he was expert at listening to customers he understood the mechanics of business and he said about it was about five or six months of his own listening tour before he unveiled his grand strategic plan and he saved the company if you remember back then his predecessor I mean the idea was well we're gonna break up IBM into baby IBM's and gerstner said no I'm not going to do that we're going to go in a completely different direction so Thompson's been on the job what came in in January this is now going on for months he's reaching the point where yeah the company the people the employees really do deserve to know what the direction is going to be do you think they're gonna break it up I have no idea Karen you think are gonna break up your home to component parts I think they're gonna slim it down i would say probably you know i think probably it would be nice for them to be able to sell it i think some people there want that to happen and i just don't know who could buy it a large company bomber must be pretty happy right now that he didn't make that acquisition in fact he said that didn't he yeah you know who knows with that guy uh go ahead sir he M you know I think that they're they're trying to decide what what the core company is and you know it certainly could if they sell off a lot of those Chinese assets which make up a lot of their value at this moment from our financial point of view they could be sold to a private equity company take it private that could be cut someone interesting what they could do privately would be probably and get out of the public eye I think probably in the public eye so much has been hard on them and no that's good that could happen that's certainly it's a big it's a big number they could certainly begin to sell off parts in the probably get rid of things like yahoo answers I'm guessing they may even try to flip off look flicker and all kinds of stuff you'll start to really this guy is going to shed stuff I think there's no point and then he'll buy stuff that is I think that's court to this that is in the areas with their focus on a used to be very hopeful exit strategy for companies in the valley you get acquired by Yahoo Microsoft Google Yahoo back in the day and you remember there was a well hot and heavy delicious acquire seen it yep goodness they're gonna sell off their ads their ad technology business I think or something they're gonna do something with that get out of that business and so there's people arguing that they should keep it inside but a lot of I think probably they'll they'll spin it off in some way and then they'll probably get out of search it's sort of a losing game for them they could buy a company just for their patents and I want to talk about that briefly so Yahoo sued facebook on 10 what they say our fundamental patents and Facebook countersued and it's going back and forth that's an interesting strategy considering the timing i mean as facebook has said it was confusing to be sued by somebody who they saw as a partner Charlie what do you think of this patent suit in the timing of her in particular well a million speculates the cows come home I mean one thing that Facebook did they help themselves with that purchase of patents from IBM a few weeks ago which protected them against well gave them a way to bargain with yahoo if Yahoo isn't a mind to bargain you know whether or not they'll be able to extract this cash ectomy that they're looking to extract whether or not it was a cynical move just prior to the facebook IPO I mean again we can speculate as to motive kara what do you think of the yahoos patent suit against facebook very bad timing ill-thought-out no I thought it was I was fascinated they really did I don't know what there must have been someone who managed to convince Scott Thompson that was a good idea and I thought it was it was timing they didn't they could have gone for a better partnership with Facebook you know here's a career as a company that can really help Yahoo and has helped yahoo recently with a lot of the stuff they've been doing with with integration has been really good for Yahoo Yahoo doesn't have a social strategy social strategies facebook has been facebook so i don't think you kick a partner in the teeth quite like that at a time that is particularly inopportune right before an IPO and you know when it happened i was talking to someone relatively high up at yahoo and I said Facebook is gonna really hit hard back and they were like no they won't they'll settle and I said they're gonna hit hard back and that's what they did this week they have their own lawsuit and I think they'll drag it out as long as they can I don't know pyaar whose advantage to drag this thing out and that's what they're gonna do they can't be surprised that that Facebook slammed back at them I mean this is the way this dance is danced yeah 10 that especially that company like Mark Zuckerberg Facebook doesn't mind being sued there was this whole movie about him being sued and it won an Oscar like you might notice this guy doesn't mind a little bit of litigation example cues from the film Charlie no cure they don't care at Facebook in that regard well one thing it's done it's it's made them extremely unpopular but it's helped some competing companies Yammer put out a 25k twenty five thousand dollar bounty is starting to get engineers coming in from yahoo as well interesting what's interesting is that it's it's where's where's it going to go and I think it's really hard to make Facebook victim and believe me facebook to make facebook look this good is really a difficult thing to do who knows to yahoo for doing that how about yahoo a victim of their own success of victim of their own user base of all the time the water under the bridge on the internet can yahoo rise again I mean you know look the 1969 mets won the world championship I you know Never Say Never these are smart people um you know they made mistakes but you know you can cry over all the mistakes and it's not going to get you anywhere if they get people in there if Thompson shows is his medal if he's as good as he apparently thinks he is that the board thinks he is it comes up with the strategic plan takes the hard decisions yadda yadda yadda they can uh sure I mean this dude there's a ton of ifs of course there a ton of this but you know it's a tough business okay yes absolutely it's a fantastic brand and here in Silicon Valley it seems like you know yahoo has the image of a you know a crazy old man shaking his fist at the internet but it's not it's a great brand globally a lot of people use it there's a lot anything with that many users can be turned into something valuable as far as I can tell it's still a great brand this is not a 0 L here this is not you know think about AOL is still hanging around you know and it's got a whole bunch of problems very similar some of them similar some different but worldwide this says it's a wonderful brand it's got a lot of users who are very happy with its services wonderful employees I mean the problem at yahoo has been a crisis of leadership leaders matter and the problem is Yahoo's employees have not been well served by the leaders and they deserve better leaders because there's some fantastic people who work there and I you know one of the reasons I write about it so much is because I won I think it's offensive to shareholders what they've been doing and to its offensive to the really good employees of y'all so well on that note kara swisher i'd like to thank you for your time is the ACO executive editor editor of all things d which you need to read after you're eating you need to read that's a great site and also you do this fantastic conference the d conference coming right up awesome conference i'll see you there thank you very much Charlie Cooper exec cnet news thanks for coming in and Steve thanks for producing will see you all next time on reporters roundtable you