The honeymoon is definitely over for Yahoo! (YHOO) CEO Marissa Mayer.
At the moment, the Yahoo! stock price suggests investors think the core business is worth minus $4.3 billion. That's a pretty big Marissa discount being slapped on a core business doing over $1 billion a year in EBITDA.
Investors are clearly applying this discount because they believe Mayer will waste the $8 billion in Alibaba (BABA)-derived cash on useless M&A as it has in the past.
Investors want to know: When do we get a Marissa premium?
I'm expecting disappointing results today that show a stalled turnaround effort, which is why there were rumors starting 10 days ago of a big management team reorganization and possibly big job cuts soon. You don't make management changes if the business is humming.
Watch this afternoon to see if they back-track from their October estimate that Tumblr would do $100 million in revenue this year. If they do, that doesn't give much confidence in their ability to make predictions about the business they run.
Yahoo! recently renewed a search deal with Bing. The deal could be really good if the company can shoehorn Google (GOOGL) search in as a Yahoo! partner for at least half of the results. Yahoo! will have a good case to make to the government that it should be able to. But don't be fooled: this will take time. In the meantime, Bing It On.
A recent analysis I did showed that almost half of Yahoo!'s core business revenue comes from things like IP asset sales and royalties from Yahoo Japan. It's not from selling display or search ads like in the good old days for the core business. Things have gotten worse under Marissa's watch and she needs to demonstrate to investors that she has what it takes to turn the business around.
While Mayer's driven down the revenue of the core business and its EBITDA in the past three years, costs for the core business have gone up $500 million. Yahoo! employs almost double the number of employees as Facebook (FB); that's way too bloated. The company should have 6,000 employees, not 18,000.
However, if the results today are bad, Mayer will likely be forced into big job cuts and more IP asset sales to make EBITDA look better. She'll also be less likely to pay $1 billion for things like Foursquare.
All that is good for the stock.