SAN FRANCISCO - Yahoo Inc.'s sagging stock drooped to a four-year low Wednesday as impatient investors expressed their exasperation with a turnaround strategy that seems to be progressing at the stuttering speed of a dial-up Internet connection.
The Sunnyvale-based company's inability to snap out of its financial stupor after more than a year of trying is raising questions about whether Yahoo's comeback attempt has become an exercise in futility.
"I'm not sure why anyone would want to own the stock right now," said analyst Clayton Moran of the Stanford Group.
That kind of pessimism caused Yahoo shares to fall as low as $18.58 Wednesday before bargain hunters stepped in to helped the stock finish at $19.05, down $1.76, or 8.5 percent. Yahoo shares hadn't traded below $18.60, on a split-adjusted basis, since October 2003.
Wall Street's latest flogging of Yahoo came after the company reported a lower profit for the fifth consecutive quarter and warned of additional "headwinds" in 2008.
The news was so dispiriting that some analysts believe Yahoo should consider bringing in a new leader just 7 1/2 months after co-founder Jerry Yang stepped in as chief executive and promised to salvage one of the Internet's best brands.
Yahoo's woes also may create pressure on its board to mull a possible sale to a deep-pocketed suitor like Microsoft Corp., which hopes to make more money from the online advertising boom.
Microsoft and Yahoo reportedly held informal discussions about a partnership last year before Yang — one of Yahoo's biggest shareholders — became CEO.
"At this point, we believe a management change or chatter of a sale are the only catalysts that could get the stock heading materially higher," Oppenheimer & Co. analyst Sandeep Aggarwal wrote in a Wednesday note.
Yang insists Yahoo is headed in the right direction. "We're not tinkering around the edges," Yang assured analysts in a Tuesday conference call. "We're making significant and what we believe are game-changing investments in Yahoo's future."
While trying to drum up more ad revenue from Yahoo's heavily trafficked home page, free e-mail service and recently developed features for mobile phones, Yang is also trying to clean out the company's deadwood to boost profit. Toward that end, Yahoo plans to eliminate 1,000 jobs from its work force of 14,300 employees — a 7 percent reduction that could save more than $100 million annually.
Specifics about which Yahoo divisions will be trimmed are expected to emerge in mid-February.
The job cuts still might not enough to appease investors with Yahoo projecting net revenue as low as $5.35 billion for 2008 — well below the average analyst estimate of $5.9 billion, according to Thomson Financial. "There's still a lot of wood to be chopped at Yahoo," said Cantor Fitzgerald analyst Derek Brown.
Some analysts still believe Yahoo will bounce back, although any significant payoff seems unlikely until 2009.
"It's going to take some time, but, strategically, I think they are doing the right things," said Ned May, an analyst with advertising research firm Outsell Inc. "The company just seems incredibly undervalued right now."
Yahoo ended Wednesday with a market value of about $25 billion, less than half of what it was just two years ago.
A large chunk of that valuation reflects Yahoo's $14 billion in holdings as of the end of 2007 in other publicly held companies like Alibaba, Yahoo Japan and Gmarket. The company also held about $2.6 billion in cash and assets that could be easily liquidated.
Those figures imply that investors believe Yahoo's ongoing business is worth less than $10 billion.
American Technology Research analyst Rob Sanderson contends Yahoo could follow in the footsteps of Amazon.com Inc., another Internet icon that fell out of favor for a long stretch before becoming a hot commodity again last year as the e-retailer's profits rocketed.
On the flip side, Sanderson cautioned, Yahoo could also suffer the fate of Time Warner Inc.'s AOL, which has never regained the luster it had in the 1990s as a leading gateway to the Internet.
Yahoo's biggest problem may be its constant comparison to the Internet's most prized company, Internet search leader Google Inc.
With a $171 billion market value, Google casts such a long shadow that Yahoo's recent missteps have been magnified, said Todd Dagres, a general partner with Spark Capital, which specializes in media investments. "If it weren't for Google, people wouldn't be turning up their noses at Yahoo the way they are now," he said.
Yahoo has invested heavily to catch up to Google in the lucrative search market, only to fall further behind.
Google will have another chance to make Yahoo look bad again Thursday when it reports its fourth-quarter results. Analysts estimate that Google made six to seven times more money than Yahoo did during the quarter.