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Yahoo! Shareholders Left With a Long Facebook Battle

NEW YORK ( TheStreet) -- For Yahoo! (YHOO - Get Report) investors, what a difference a year makes?

There has been a lot of change, but not when it comes to the floundering tech giant's share price.

At this time last year, co-founder Jerry Yang still held a tight grip on Yahoo!'s board and its digital content transformation, battling with shareholders to retain the company's Asian assets. Yang has since left Yahoo!. Last week, amid the lingering management and board reshuffle, Scott Thompson was ousted as CEO. That, in turn, settled a proxy contest with activist fund Third Point, leading up to Yahoo!'s sale of a 20% stake in Chinese ecommerce giant Alibaba for $7.1 billion on Sunday.

No doubt, it's been a game-changing 12 months for Yahoo! and a busy past week, but forgive investors if they haven't noticed.

Yahoo! runs out of short-term fixes as its competition ratchets up.

Yahoo! shares are off over 4% in the last year, underperforming major U.S. indices. Yet management is now about as shook up as it can be and Yahoo!'s balance sheet is strengthened by its initial Alibaba stake sale. If Yahoo! shares can't break even for 2012 after all this action, it may tell investors that the Web search pioneer's uncertain footing warrants more focus than short-term fixes.

Investors are now faced with a sobering picture of the company's long-term prospects as it tries to build a strategy to compete with the likes of a newly listed tech giant in Facebook (FB - Get Report) and other fast-growing Web threats.

"The bottom line is that with Yahoo!'s now planned sale of its Alibaba assets, the biggest one year catalyst for shares has been removed," wrote Piper Jaffray analyst Gene Munster in a Monday note to clients downgrading Yahoo!'s shares to neutral.

Investors like Daniel Loeb-run Third Point should be celebrating a once-unthinkable amount of change, but instead they're likely bracing for a fast-moving war for Web ad dollars that Yahoo! is pinning its future on, after giving up on the Internet search business it pioneered over a decade ago. In this looming war, Yahoo! has done little to prove that it's dominant Web portal will be a long-term answer to the growing threat of social networks like Facebook, Twitter and LinkedIn (LNKD).

Investors may have taken their eye off of the Yahoo!'s core Web ads business, only to be reminded of its challenges when all the other distractions faded on Monday.

"We believe the turnaround of the core company is likely to be a slow, multi-year process now that the company is again working with a new CEO... We believe investor attention must be shifted to the core of Yahoo!, which we believe remains challenged," Munster concluded.

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