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MISSION:INTANGIBLE, the blog of the Intangible Asset Finance Society, offers critical comments on intangible asset, corporate reputation, and finance; supplemented by quantitative reputation metrics. Intangible assets include business processes, patents, trademarks; reputations for ethics and integrity; quality, safety, sustainability, security, and resilience; and comprise 70% of the average company's value. MISSION:INTANGIBLE is a registered trademark of the Intangible Asset Finance Society.

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Yahoo: Reputation by the numbers

C. HUYGENS - Thursday, March 06, 2014
Ken Goldman, CFO of Yahoo, was answering a question about the company's nagging human resource problem. ”When we came to the company, and we talked about acquisitions…frankly, companies did not want to be acquired by Yahoo…and for us to even acquire them we would have to pay a ‘Yahoo premium’ because they didn’t want to come here. That’s not the case any more.”

According to Yahoo's chief numbers guy, Marissa Mayer fixed Yahoo's #1 problem. Unfortunately, the actual numbers suggest otherwise. For while the annual report indicates Yahoo received in 2013 more than double the number of job applications it received in 2012, the applicants appear to be following the money. According to the career site Glassdoor, Yahoo was the third-highest-paying company in Silicon Valley for engineers last year, behind Juniper Networks and LinkedIn.

There's a reputation value link to this, and just like a recent note on Warren Buffett, it tracks back to costs. The thing about being a company with a great reputation is that this intangible asset usually provides savings on human resources costs. If a company has to pay an objectively measured premium to recruit employees, then the company's reputation (among labor) is not great.

CFO's should know better than to speak against their numbers. They're supposed to trust numbers - the same numbers trusted by the capital markets. Numbers are spin-free objective measures. It's the point Theodore Porter makes in his book, Trust in Numbers. Numbers are most trusted in environments where elites are weak, where private negotiation is suspect, and where trust is in short supply.

Let's look at some more Yahoo numbers. Yahoo is trading at 31 times earnings, just behind Google's 34x and way ahead of Microsofts' 14x. Those numbers are trustworthy, and they say investors have very high expectations -- arguably, frothy.

The expectations of other stakeholders are reflected in reputation metrics. Like other trusted numbers, they're based on objective quantitative criteria. The good news for Yahoo's stakeholders is that the 85th percentile ranking for the Reputation Premium among 137 peers indicates plenty of upside. It also may indicate that the reputation is not as strong as it could be for a company this prominent, and may explain the salary premium the company has to pay. (Paying top dollar and not making the 50 best places to work says all that another way).  The 4.0% value for the Consensus Trend, CT, suggests that stakeholders are fairly confident that Yahoo's reputation is properly valued.

The upside, therefore, is less likely to be realized, and that will disappoint the equity investors.

For more background on the Consensiv reputation controls, click here. To view the December 2013 reputational value league table, based on Consensiv's metrics, and available exclusively at CFO.com, click here. Last, to read more about how reputational value is linked to stakeholder expectations and enterprise value, read, Reputation Stock Price and You: Why the market rewards some companies and punishes others (Apress, 2012) (click here).

Yahoo: Celebrating

C. HUYGENS - Saturday, July 21, 2012
Marissa Ann Mayer is an American business executive and the president and CEO of Yahoo!. Previously, she was a long-time executive and key spokesperson for Google. She is the youngest CEO of a Fortune 500 company. That's the short story according to Wikipedia, the top ranking return today for both Google-branded and Yahoo-branded searches on Mayer. Mashable's poll, a distinctly non-scientific process of some 7500 opinions, reports that "88% of people feel Yahoo made the right decision in choosing Mayer as its new chief." So do the Steel City Re reputation metrics.

The reputation rank is up and climbing; volatility is up but less than peers. Vital signs all look favorable. Reputation value trend directions are positive. Economic returns are significantly up relative to the median return of the peer group. In short, there appears to be an ongoing widespread expectations of better things to come at Yahoo! -- a trend reinforced, but not started, by newly appointed CEO Mayer.

Yahoo: Patiently waiting

C. HUYGENS - Tuesday, March 27, 2012
On 26 March, Yahoo Inc. (NASD:YHOO) named three new independent directors to its board. Investors were demanding a shakeup since Carol Bartz was dismissed in amid a wave of colorful invectives last September.

At least one investor is still unhappy. Third Point LLC run by Daniel Loeb wanted to seat three of his own nominees, or absent that, himself. The owner of just under 6% of the firm promised a proxy battle.

Chairman Roy Bostock, whose reputation was tarnished by that encounter, and who announced in February that he will be stepping down, offered the usual platitudes about the benefits of the changes that were made. Stakeholders remain cautiously optimistic. The reputational metrics indicate that major operational changes are not expected in the new environment; rather, they suggest incremental improvements.

The Steel City Re brand of reputational benchmarks indicate that Yahoo's financial performance is at the median level for its peer group comprising 131 firms in the Internet Software and Services sector. Notwithstanding a relatively high reputational ranking of 94th percentile within this group, the firm is not expected to have major reputational changes. All reputational volatility measures are low and going forward stability measures are high. Nevertheless, the indicators show a slow positive change in reputational standing that may reflect optimism over the new CEO and pessimism over the new board and the upcoming proxy fight.

The company, which is a constituent member of the 2012 RepuStars Variety Corporate Reputation Index, is one of only 5 of 38 that have lost value since entering the index.

Yahoo: Doofuses in the house?

C. HUYGENS - Friday, September 09, 2011
Earlier this week, Yahoo’s (NASDAQ:YHOO) board fired CEO Carol Bartz and appointed CFO Tim Morse as interim CEO. That makes 4 CEOs in 4 years and casts a shadow on the board of directors, among whose duties are the selection and oversight of the CEO.

According to the Associated Press (8 Sept, Liedtke), “Carol Bartz's firing as Yahoo Inc.'s CEO isn't going to be enough to placate a loudening chorus of shareholders who believe Chairman Roy Bostock and his fellow board members also should be ousted after years of questionable choices that raised doubts about their competence."

Turning to the numbers, the Steel City Re Corporate Reputation Index shows a steady decline in Yahoo’s reputation ranking over the trailing twelve months relative to its 104 peers in the Internet Services and Software sector. On 3 September 2010, Yahoo ranked in the 89th percentile; yesterday they ranked in the 70th percentile. The 19 point decrease has been associated with an increase in Yahoo’s reputational volatility. Over the trailing six months, the exponentially weighted moving average reputational ranking volatility has climbed from around 10% to 49.4%. The trailing twelve week reputational vector and velocities are reading in at -9.4% and -7% respectively. It is therefore not surprising that the company is underperforming the median its peers over the trailing twelve months by 6.64%.
More globally, the entire sector appears to be rising ever so slightly reputationally relative to the broad market. The sector's median ranking has been edging up from the 40th percentile over the trailing 12 months. Within the sector, however, variance is relatively high reading in at 28% on 8 Sept. Last, looking specifically at Yahoo’s intangible asset fraction, it has dropped recently from around 60% to the low to mid 50%; the median fraction among the peer group is in excess of 80%.

Activist investors are taking note. So are long time stakeholders. The AP story quotes Darren Chervitz, co-manager of the Jacob Internet Fund, a longtime Yahoo shareholder, this way: "This board has presided over some of the worst decisions made by any company in recent history." Bartz frames it more colorfully in a profanity laced interview with Fortune magazine. "The board was so spooked by being cast as the worst board in the country. Now they're trying to show that they're not the doofuses that they are."

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