How Yahoo! Has Become the Best 'Has-Been' on the Market

NEW YORK ( TheStreet) -- It's hard to quantify the level of embarrassment, if not the grossly pathetic punch line that has become search giant Yahoo! ( YHOO). As a recent shareholder, learning that Scott Thompson has been ousted as CEO arrived as another black eye on the company. It seems to me that Yahoo! saw this as a way to address its own lack of credibility -- by getting rid of Thompson who has been battling credibility issues of his own due to an alleged bio that included a college degree that he never received.

Although the company has forced Thompson to fall on the sword hoping that all of this goes away, it only serves as a reminder to investors of the company's own past failures with due diligence. In plain point and fact, the company and its board have now become an absolute disaster. The question now is, what's next?

What this tells Wall Street is that the faith (misguided or otherwise) placed in the company's ability to execute a turnaround has been wasted -- generating even more restlessness from employees and shareholders who saw Thompson's arrival (four months ago) as a way to restore the technology beacon that once graced visitors with its search intelligence.

Ironically, the company has now been entrenched in a search of its own for a CEO -- one that can last longer than counting by months. Remarkably, the person that assumes the post next will bring the company's average to one CEO per year over the past five years -- each failing to live up to promises of "this time will be different."

What makes all of this even more disappointing is the fact that these challenges and distractions have unfolded while rivals in Google ( GOOG) and Bing by Microsoft ( MSFT) have dominated the search realm and enjoying increased online advertiser spending -- an area where Facebook's ( FB) arrival as a public issue will only serve to further suppress Yahoo!'s ability to recover and magnify its failures to duplicate (if not) pioneer what Facebook has been able to accomplish.

The company's annual revenue has fallen from its high in 2008 where it reached $7.2 billion to just $5 billion for fiscal 2011, while Google has enjoyed a revenue increase during that same span, reaching $38 billion last year. As another sign of the company's past failures, these events continue to bring to the forefront what an egregious mistake it was to have turned down a buyout offer from Microsoft four years ago (this month) at a price of $33 per share or $47.5 billion. Today, the company has a market cap of just $18.6 billion while having never traded above $20 during that same span.

I don't see how the company will be able to recover from these collapses. It begs the question, what should now be at the top of its mission? And if it is reached, will it be enough to say with any degree of certainty that the company is once again a success? As an investor, I am starting to appreciate the reality that this run is over -- regardless of where the company goes from here. Yahoo! has followed the irrelevance path pioneered by AOL ( AOL) and Research in Motion ( RIMM) and as such it will likely never be anything (again) other than a has-been -- a dubious category where its recent announcement have now catapulted it to the top ranking. The company's hopes now rest on interim CEO, Ross Levinsohn, a Carol Bartz hire two years ago who has had some successful stints while at News Corp ( NWS).

The good news for Yahoo! is that Levinsohn's media experience may prove to be exactly what the company needs to further execute its turnaround. But how long are investors willing to sit through another failed strategy -- one that constantly leads to adapting to a new personality? Disappointing in all of this is how the company's board continues to be shielded from public scrutiny as attention is placed solely on the failures of the CEO. But the fact is, not only has the board been responsible for all of these botched hires, but it was also the board's decision to turn down almost $50 billion from Microsoft and now it appears to be struggling to close the deal on its 40% stake in China's Alibaba Group.

Bottom line

As much as I hate to say this, I don't envision a scenario where this ends well for Yahoo! absent some type of an acquisition -- interestingly Facebook might be a great candidate. While the company deserves a considerable amount of credit for having survived the tech bubble ways that once dominant rivals such as Netscape and Lycos were unable to do, it has also failed miserably by grossly overlooking niche opportunities founded by the likes of Twitter, Pandora and especially Facebook -- markets that could have all belonged to Yahoo! had the company and its board were worth anything.

Working in its favor is the fact that the company is (yet) profitable with a considerable amount of cash with some interesting and somewhat appealing assets. However, from an investment perspective, I don't see how owning Yahoo! can be perceived as anything other than dead money until it can demonstrate not only that it can keep a CEO for longer than one year, but it can execute successfully within that same fiscal calendar year.
Author is long YHOO and plans to exit position at market open.