Yahoo! (YHOO) will never recover from its botched negotiations with Microsoft (MSFT), in which the larger company offered to buy it in early 2008. The initial offer was for $44.6 billion, or $31 a share. Yahoo! turned the deal down and by November of last year, its stock traded below $9.
Yahoo!’s new CEO, Carol Bartz, has made a series of mistakes early in her tenure, and the company probably cannot recover from them either.
Yahoo!’s current dilemma, from a financial standpoint, is that it is not growing and operates on razor thin margins. In the first quarter, the firm made only$121 million on $1.82 billion in revenue. The company has no significant margin to keep its earnings positive if revenue drops. Bartz’s initial answer to this was to let people go. Yahoo! fired 1,500 staff members beginning late last year, to save $400 million annually. That may only be the beginning of employee reductions if sales remain weak.