For months, Yahoo (Nasdaq: YHOO), the No. 3 search engine, has been in crisis. Market share fell. CEO Carol Bartz was fired. A Chinese tycoon said he'd buy the company.
That was just the fourth quarter of 2011. So far in 2012, we've seen a new CEO: Scott Thompson, 54, recruited from PayPal, a division of eBay (Nasdaq: EBAY), the No. 1 online auctioneer.
Then there were some fairly decent earnings, a promise by Thompson to position the company for success, the announced firing of 2,000 employees, about 14 percent of the payroll, and retirements of old directors and recruitment of new ones. Then Yahoo sued Facebook (Nasdaq: FB), the No. 1 social network, alleging patent infringement.
All this while Third Point Capital, Daniel Loeb's New York hedge fund, amassed a 5.2 percent stake in the Sunnyvale, Calif., media company and started writing letters to interim and current management.
For better or worse, Third Point's comments have been positive, keeping Thompson's feet to the fire. But Yahoo kept losing share to its ally, Bing, the search engine of Microsoft (Nasdaq: MSFT), the world's biggest software company, which now has a 15.4 percent market share compared with Yahoo's 13.5 percent.
A year ago, Yahoo's share was 15.9 percent compared with Bing's 14.1 percent.
To top it off, Third Point did a little checking and discovered Thompson had embroidered his resume, adding a degree in computer science he doesn't have. Director Patti Hart, CEO of Interactive Gaming Technologies (NYSE: IGT), embroidered her resume, too, and quit.
How could principals and directors of a search engine think they could get away with it?
The annual meeting, scheduled for Thursday, could be crucial. It's not clear if Third Point will prevail, although Capital Research and Management, the Los Angeles mutual funds complex, with about 11 percent of the shares, will join it. Yahoo Finance reports institutions and mutual funds own 81 percent of all shares.
It's products like Yahoo Finance and Yahoo Mail that attracted us to Yahoo in the first place nearly 20 years ago. Co-founders Jerry Yang and David Filo, computer graduate students, were geniuses in transforming computer theory into practice.
Whoever heard of a search engine before Yahoo? To be sure, this was before Google (Nasdaq: GOOG) came along, but there were others forgotten or obscured like Lycos, Excite, AltaVista and Ask.com.
Just by the name, Yahoo connoted fun. Yang and Filo, aided by founding CEO Tim Koogel, understood that as the commercial Internet hit an inflection point, consumers would want to use it. They came up with Yahoo Mail, Sports and features.
Even now, Yahoo's home page is fun and attractive, no comparison to the austere Google home page. Bing is another story.
With a market value now around at $18.5 billion, based on Friday's closing price of $15.19, Third Point and its allies know value when they see it. Yahoo owns about 40 percent of China's Alibaba Group (Pink: ALBCF), potentially worth $17 billion, with about 35 percent of Yahoo Japan (Tokyo: 4689), valued around $6 billion.
Goldman Sachs (NYSE: GS) and Allen & Co. have been working on realizing those assets. Given the potential of the Chinese market over time, it probably would be foolish for Yahoo to sell out.
In a prior era, Carl Icahn bought into Yahoo when he recognized it was undervalued, then sold when new management came in. This time, it looks as if Third Point's pressure may be the catalyst for one of the coolest Internet properties to regain its shine.
Of course, this being Yahoo, you could enter Yahoo takeover prospects into it and see what comes up.