In addition to hiring new people to fill key positions, Yahoo! has been acquiring talent and products by snatching up small startups. Since Mayer took over, the company has acquired Stamped, OnTheAir, and Propeld – three mobile software development companies that will become part of Yahoo’s engineering talent.
With Yahoo!’s recent focus on mobile — a segment of the market where they have achieved very little success — it stands to reason that Yahoo! will continue to make many of these small acquisitions, slowly building their talent pool, product portfolio, and market share.
Yahoo!’s focus on mobile is a step in a new direction for the company. It represents a risky and innovative approach to doing business in an environment that’s radically different than it was even five years ago. In much of the mobile market, there’s no clear dominating force for many of the services. Yahoo! has always had the size, scale, and resources to move forward and innovate on opportunities like this, but until recently, it lacked the vision.
I believe Marissa Mayer will spot incredible opportunities in the mobile environment. I also believe she will transform the company into what it needs to be to compete in the modern technological landscape.
4.) The Turnaround
Optimistic investors of Yahoo! are quick to compare the company to AOL (NYSE:AOL) . After naming former Google executive Tim Armstrong as CEO and selling off $1 billion worth of patents to Microsoft, AOL began undertaking its own turnaround journey. The rescue effort finally paid off when — in its Q4 2012 earnings report — the company announced year-over-year revenue growth for the first time in 8 years. Investors of AOL have witnessed a stunning 100%+ gain over the last 12 months. Similarly, Yahoo has enlisted Marissa Mayer — a former Googler — as CEO and is currently in the process of returning capital from the sale of large investments to shareholders in the form of a share buyback.
AOL is currently proving to Wall Street that you may just be able to teach an old dog new tricks after all. Will Yahoo! follow in the footsteps of this iconic underdog?
5.) Hype & Momentum
Since Marissa Mayer was made CEO on July 16, 2012, Yahoo shares have increased in value by 36%. In that time, the company has released multiple major product updates, returned billions of dollars to shareholders through buybacks, hired new management, purchased numerous startups, and even beat earnings expectations. More share buybacks are expected as the company sells off its significant Asian investments for a hefty profit and the company is also expected to continue buying small mobile software development companies and hiring fresh talent to help guide its turnaround.
Many analysts feel that while the upside to Yahoo! is unpredictable, the downside feels limited because the company is currently engaged in a stock buyback program and is trading at a below-average price-to-book ratio.
In Summary
With good management in place, old investments finally paying off, and optimism high among investors and employees alike, Yahoo is looking better than it has in years. If nothing else, this potential turnaround story is worth watching from the sidelines.
While I personally believe in Marissa Mayer’s ability to turn things around with the team at Yahoo!, this is by no means an endorsement of Yahoo! stock or advice to buy or sell any stock. My goal is simply to educate, amuse, and enrich. Thanks for reading!
The article Top 5 Reasons To Buy Yahoo! originally appeared on Fool.com and is written by Nathan Bradham.
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