The minus sign above isn’t a typo.

Think of Yahoo as a traditional enterprise (with all the assets just mentioned) stuck on top of a small safe deposit box. Inside that box: a huge pile of cash, plus stock certificates of two Asian tech companies. Yahoo owns about 15 percent of Internet giant Alibaba, a stake that would trade on the open market for roughly $29 billion. It also has a 36 percent holding (worth about $9 billion) in Yahoo! Japan, a publicly traded company based in Tokyo that long ago abandoned Yahoo’s search technology for Google’s. If you add up the cash and the stocks, you’ll notice that the value of the contents of the box totals $43 billion. That’s $8 billion more than the market capitalization of Yahoo, $35 billion, which includes the company and the stuff in that imaginary box. The implication: Everything you think of as Yahoo—apps, websites, employees, computers, buildings—has a negative value.

A more charitable analysis, where one imagines Yahoo selling its stock and paying the full corporate tax rate, yields a depressing result: Its operating business might be worth $6 billion.

This discrepancy, or the “significantly negative value” of Yahoo’s operating business, as the hedge fund Starboard Value put it in an exasperated letter in November, is also a withering assessment of Marissa Mayer, Yahoo’s chief executive officer, who until recently was one of Silicon Valley’s brightest stars.

“It’s hard to get someone of this caliber,” the venture capitalist Marc Andreessen said when Mayer’s hiring was announced in 2012. Andreessen celebrated the move as a bold departure from what had been a series of ineffectual CEOs—Mayer was the sixth in five years—who’d allowed Yahoo to fall behind Google and Facebook. Investors were charmed, as were the media, which found in Mayer, 40, something severely lacking in most techies: glamour. Mayer, “an unusually stylish geek,” as Vogue described her in 2013, was the rare Silicon Valley figure who could credibly attend both an all-night hackathon and a Met Gala after-party.

Mayer’s plan for Yahoo was straightforward, if hard to do: Develop products and revamp old ones to transform the mid–1990s-vintage company into a startup capable of exponential growth. It was an audacious idea, but Mayer seemed qualified to pull it off. A graduate of Stanford’s Symbolic Systems Program, she was employee No. 20 at Google and the product manager responsible for the design of the search bar. Partly thanks to her eye for simplicity, Google became not just a searchable index of Web pages but, for many users, a synonym for the Internet itself. Mayer helped sideline Yahoo; now she was going to help save it.

Given another three years—the amount of time Mayer recently suggested she would need to complete a turnaround—it’s possible her high-risk strategy could bear fruit. But it seems less and less likely she’ll be able to hang on anywhere near that long.

In December, SpringOwl Asset Management, a small activist hedge fund, published a 99-page litany of Yahoo’s missteps, including—by its calculation—$2.8 billion spent on failed acquisitions, $450 million on free food, $9 million on new phones, and $7 million on a Great Gatsby-themed holiday party. “I don’t think she has any management skills,” says Eric Jackson, managing director of SpringOwl.

Mayer vigorously defended her turnaround in a February call with investors, during which the company also reported its largest-ever quarterly loss. She contended that Jackson’s figures for the food and holiday party were “exaggerated by more than a factor of three,” while characterizing Yahoo’s flat revenue as a sort of achievement. “Yahoo today is a far stronger, more modern company than the one I joined three and a half years ago,” she said, announcing layoffs of 15 percent of her staff and drastic cost-cutting measures.

These moves haven’t mollified investors. In March, Starboard Value, which once got the board of Darden Restaurants replaced by, among other things, criticizing Olive Garden for failing to salt its pasta water, announced that it would attempt to unseat Mayer and Yahoo’s entire board—if the company didn’t sell itself first. (On April 27, Yahoo announced a compromise with Starboard, giving the hedge fund four board seats.) Yahoo is now in the midst of what it terms a “strategic review,” a nice way of saying “for sale.” Preliminary bids were due on April 18. According to someone who’s seen them, the bids for Yahoo’s core business range from $4 billion to $8 billion—which, true, would be a big step up from –$8 billion. Among the candidates are Verizon and YP Holdings, better known as the publisher of the Yellow Pages.

Mayer’s position is so weak that when a Bloomberg Businessweek reporter and an editor visited the company’s offices in New York to press the case for an interview, a security guard asked, unprompted, whether Mayer would keep her job. When the question was put back to him, he shook his head, grimaced, and tugged at his collar. “Those hedge fund guys,” he said, “they really don’t like her.”

Mayer, who declined multiple requests for comment, has said she hopes to stay at the company. But two people familiar with the thinking at Verizon, the leading candidate, say that’s not the plan.

The most commonly discussed charge against Mayer, which was distilled in an unauthorized biography by Business Insider reporter Nicholas Carlson, Marissa Mayer and the Fight to Save Yahoo!, is that she’s guilty of micromanagement. In the book, Mayer is depicted as agonizing over such details as colors and fonts and is described as “robotic, stuck up, and absurd in her obsession with detail.”

Privately, her defenders suggest these criticisms of Mayer are sexist. Micromanagement is a fetishized quality among many male CEOs—Elon Musk, Mark Zuckerberg, and Larry Page are all fluent in the minute details of their products. High-risk acquisitions and spare-no-expenses human resources policies are celebrated practices in Silicon Valley. Mayer’s appointment, her defenders argue, represents a perfect illustration of the so-called glass cliff, where women promoted to the C-suite are set up for failure.

The implication: Any turnaround at Yahoo was probably doomed from the start. There are CEOs who specialize in extracting cash from declining companies, but they’re not common in Silicon Valley, and Mayer, who’s spent her entire career at a highly profitable, fast-growing company, isn’t one of them. She’s what’s known in the Valley as a product person, who, with the blessing of Yahoo’s board and the enthusiastic encouragement of her peers, focused on an aggressive revamp of Yahoo’s product portfolio, treating a stagnating media company as if it were Google or Facebook or the next big unicorn. Instead of scaling back Yahoo’s ambitions (which would have certainly meant huge and immediate layoffs), she followed a well-worn path of tech evangelists who’ve attempted long-shot corporate reinventions—for instance, former Apple retail chief Ron Johnson and his short-lived rebranding of JCPenney, or Facebook co-founder Chris Hughes, who had a brief and controversial stewardship of the New Republic magazine. “It’s like a 39-year-old home run hitter who keeps swinging for the fences,” says Aswath Damodaran, a professor of finance at NYU’s Stern School of Business and a Yahoo shareholder. “And all he does is keep striking out.”


“Revenue solves all known problems,” proclaimed a sign outside Mayer’s office at Google. The slogan, which was popularized by Google’s then-CEO Eric Schmidt, was meant as an exhortation to businesspeople not to fall back on financial engineering but to instead keep coming up with enormously profitable products and services. “It wasn’t until I came here that I understood [the slogan],” says Dylan Casey, a Yahoo vice president for product management who reported to Mayer at Google. “When you have a fire hose of cash coming in, it’s like, ‘Problems? Who cares?’ ”

Yahoo once had a very fat hose: display advertising. But by the time Mayer arrived in July 2012, the use of its search engine had been declining for a decade and more recently, advertising rates had been flat. Banner ads look fine on desktop computers, but they don’t work well on smaller screens. As a result, according to a person familiar with the company’s finances, Yahoo was earning about a penny on mobile traffic for every dollar it made on desktops. Mayer saw that discrepancy as an opportunity. “The nice thing at Yahoo,” she said in an interview at the 2013 World Economic Forum in Davos, Switzerland, “is we have all the content people want on their phones. We have these daily habits.” She implied that even Google might be vulnerable if Yahoo’s apps and websites, such as Yahoo Finance, were tailored to their users, making people less likely to do traditional Internet searches. “There’s always opportunities for new disruption,” she said.

Mayer backed up this bold talk with several small but, to employees, meaningful moves to energize Yahoo. She offered free gourmet meals in the cafeteria and issued employees new smartphones—a must, she argued, at a company that would be developing apps. To get people to collaborate more, she banned telecommuting. She removed the high-walled cubicles, making the offices more open and startuplike, and began hosting weekly, companywide “FYI” meetings—a practice borrowed from Google. She became a regular at Dev Random, an informal forum frequented by Yahoo’s engineers and scientists. Even the quality of the coffee improved. “People were stopping me in the halls saying it’s a different company,” says Senior Vice President Jay Rossiter, who resigned under Mayer’s predecessor, Scott Thompson, and returned several months later under Mayer. “She made fundamental changes. The all-hands meetings. The goals. Those intangibles made a palpable difference in how people behave. Even the free food thing was huge.”

These changes, like pretty much everything Mayer has done at Yahoo, were widely and loudly criticized. Many HR experts, and Virgin Group CEO Richard Branson, portrayed Mayer’s decision to end Yahoo’s work-from-home program as heavy-handed—“a backwards step,” Branson wrote in a blog post—but few people seemed to notice it was a great deal less cruel than the 50 percent layoffs that many inside and outside the company had urged. The free lunches and phones, while initially praised as an inexpensive way to keep and attract talent, only later became evidence of Mayer’s profligacy.

She did improve Yahoo’s hiring. At companies like Google and Facebook, recruiting is often cited as the most important challenge—and she saw things no differently. Yahoo had only about 50 engineers working on its mobile apps, and Mayer set out to recruit hundreds more. She oversaw this personally and led an ambitious effort to acquire small companies with talented engineering teams. Yahoo had customarily spent three months performing due diligence on any company it acquired; under Mayer, startups could be wooed, bought, and situated in Sunnyvale in 10 days.

Yahoo made some 20 acquisitions in her first year on the job. In the first quarter of 2013, for example, she acquired three tiny app companies (Snip.it, Propeld, Jybe) for a combined $10 million, bringing 16 employees, mostly mobile engineers, to Yahoo, according to LinkedIn searches. Although $10 million might sound like a lot for such a small group of people—roughly half of whom have since left the company—it’s actually a decent value by Silicon Valley standards, where “acquihire” deals typically go for $1 million per employee.

Mayer focused much of her energy creating advertising products for mobile phones and redesigning Yahoo’s apps. Flickr, the widely used photo-sharing service, was revamped, as was Yahoo Mail and apps for News, Sports, Finance, and Fantasy Sports. Nick D’Aloisio, who was just 17 years old when Mayer bought his app Summly for $30 million, adapted the product for Yahoo, relaunching it as Yahoo News Digest. The company also released a quirky messaging app, Livetext, that was designed to compete with Snapchat and WhatsApp.

Members of Mayer’s executive team describe their boss as intense and exacting when it comes to product development. She conducted weekly reviews with product managers and personally approved any new hire during her first few months on the job. “Yahoo desperately needed someone who would ask the next question,” says Jeff Bonforte, a senior vice president who runs most of the company’s mobile apps. Until Mayer, “no one was saying, ‘But why isn’t it working?’ ” Mayer has been known to stop meetings to correct the labels on a chart. That sort of thing can be off-putting, but Bonforte says it’s a good thing. “She’s auditing,” he says. “She’s evaluating whether you have any competency and how worried she should be.”

Mayer’s biggest bet was on Tumblr, the New York-based social network. Like Yahoo, Tumblr had been struggling to sell ads and wasn’t increasing its audience on mobile phones nearly as quickly as rivals such as Snapchat and Instagram. It was, in other words, another old company trying to seem young. “Tumblr and Yahoo had complementary neuroses,” says Chris Mohney, Tumblr’s former editor-in-chief, who left a month before the acquisition was announced. Yahoo bought it for $1.1 billion in the spring of 2013, similar to what Facebook had paid for Instagram, and Mayer promised “not to screw it up.” Earlier this year, Yahoo announced it had written down Tumblr’s value by $230 million.

In some ways, Mayer’s strategy has worked. Yahoo’s apps have received stellar marks from both reviewers and users, and the company has created new lines of business that accounted for $390 million in revenue last quarter. “Mavens as a revenue source didn’t exist at all in 2011 and was nascent in 2012,” Mayer said proudly on the February earnings call, using an acronym that stands for “mobile, video, native advertising, social.” Yahoo has more than 600 million mobile users, up from about 150 million before she took the job.

But those improvements are nowhere near big enough to turn the company around. “Marissa likes to present Mavens as though it should be compared to some nascent startup,” says SpringOwl’s Jackson. But startups, he points out, don’t begin with a billion users. “It’s as if Yahoo took an above-ground pool, dumped it into a bucket, and said, ‘Wow, we’re really filling up this bucket fast,’ ” he says.

And that traffic isn’t necessarily users delighting in Mayer’s new products and telling their friends; much of it comes from Yahoo paying ever-larger sums to other companies to direct their users to Yahoo’s sites and apps. It paid almost $900 million in traffic acquisition fees in 2015, up from $200 million in 2014. Predictably, Yahoo users are spending less and less time with its sites. A report by The Information, a tech news site, showed that as of early December, the average time spent on Yahoo properties had declined 32 percent for Yahoo Mail, 29 percent for the home page, and 20 percent for Tumblr over the previous 12 months.

And many Yahoo critics point out that for all of Mayer’s investments, she’s yet to have a breakout hit. None of Yahoo’s apps has cracked the top 50 in the iPhone’s U.S. app store this year, according to data from mobile research firm App Annie. Yahoo News Digest feels innovative, but it’s less popular than apps for a bunch of local TV stations; Livetext was shut down earlier this year. Many of Mayer’s high-profile acquihires—like D’Aloisio, the programming prodigy—have left. “A lot of talented people saw the writing on the wall,” says Shashi Seth, a former senior vice president who departed in 2013.

Even Facebook has flops. In December it quietly discontinued three apps—Rooms, Slingshot, and Riff—but no one seemed to notice because the company’s revenue grew 44 percent in 2015. (Revenue solves all known problems.) Livetext’s demise, on the other hand, was described as a “fiasco” in SpringOwl’s presentation. Yahoo employees say the experience was a perfect expression of what Silicon Valley types call a “fail fast” mentality. (“Failure and speed are inherently linked,” Mayer said in a 2012 radio interview. “Failure is totally OK. As long as you fail fast.”) “People got mad at Livetext as an example of something that went wrong,” says Bonforte. “Livetext was something that went right. It’s a sign of a healthy company that will experiment.”

How could Wall Street and Yahoo’s senior managers reach such different conclusions? Mostly because they’ve always been focused on different parts of the business. Yahoo’s stock price shot up in 2013 and 2014, thanks to the soaring valuation of Alibaba. The press often presented the runup as a result of Mayer’s turnaround, and Yahoo did little to discourage that perception. During her first few months as CEO, she resisted calls—which today seem prescient—to lay off large numbers of employees. (Mass layoffs would come, but years later.) In mid–2013, on her one-year anniversary, a group of Yahoo employees urged colleagues to “send [Mayer] a personal ‘Thank You’ message for everything she’s done for Yahoo! over the past year.” The messages were printed and bound as a coffee-table book, and according to an article in Vanity Fair the following spring, Yahoo passed out additional copies of the book. “I kind of wish the story hadn’t been told that Yahoo was miraculously saved by Marissa,” says Bonforte. “I remember coming here and thinking, it’s gonna be so hard.”

In private meetings with employees, Mayer frequently refers to Steve Jobs’s return to an ailing Apple Computer in 1997 to emphasize that turnarounds of tech companies are hard but not impossible. Jobs had been at Apple for a decade by the time the iPhone was released. Mayer may also be trying to remind herself and her colleagues that these things take time.

Of course, the big difference between Apple and Yahoo is that Apple didn’t have an extremely valuable stock portfolio or a thorny tax situation. Mayer and Yahoo’s investors have long agreed on the need to separate Yahoo from Alibaba. That would turn the stake into cash while removing the uncertainty around Yahoo’s valuation. The problem is that if the company simply sells its stock portfolio, it could face a tax bill of $10 billion or more. One way around this would be to sell Yahoo’s core business to a company like Verizon, a move first floated by Starboard Value in 2014 but resisted by Mayer. Instead, her preferred solution was a tax-free spinoff, a novel maneuver that would allow her to maintain Yahoo’s independence—and keep her job as CEO. The plan was for Yahoo to park its Alibaba stock in a new company, called “SpinCo,” along with a small Yahoo division—a sort of player to be named later that would ensure the Internal Revenue Service treated SpinCo as an operating business rather than as a tax shelter. The new company could then be sold back to Alibaba tax-free.

The strategy worked for Liberty Interactive, which spun off a 22 percent stake in the travel company TripAdvisor in 2014 without paying taxes. But tax-free spinoffs are controversial. In May 2015 an obscure official—Isaac Zimbalist, senior technician reviewer, Corporate Branch 5 of the IRS—gave a talk at the Washington bar association in which he suggested that tax-free spinoffs might be scrutinized more closely. Yahoo’s stock fell 7.5 percent that afternoon.

The incident didn’t derail Mayer’s plans initially. Yahoo’s lawyers insisted that the IRS would come around. But Mayer’s hand weakened in September when the government declined to endorse the deal publicly, as it had the TripAdvisor spinoff. By March, Yahoo was under attack from Starboard and was scrambling to cut costs. Still, Mayer gave no ground. In an interview with Charlie Rose, she said that even though Yahoo had abandoned the SpinCo idea and would instead explore selling, the spinoff would have worked. She blamed “various accounting rules” for hundreds of millions of dollars in recent writedowns and argued that her turnaround strategy “makes sense.” “We’ve made a lot of progress over the past few years,” she said, sounding at once defensive and resigned.

That Mayer hasn’t reinvented Yahoo wholesale has widely been portrayed as a failing, but it seems just as likely the company’s decline is a function of Silicon Valley’s ruthless cycle of creative destruction. Yahoo was able to use inexpensive software in a fast-growing market to become a media and technology juggernaut in the 1990s; Google and Facebook did the same and displaced it just as quickly. “A tech company that is 20 years old is like a regular company that is 60 years old,” says Damodaran, the NYU finance professor.

Mayer’s struggles at Yahoo also underscore that in the Valley there are winners and smoking craters—but very few middle-of-the-road successes. Venture capitalists generally discourage their startups from becoming modestly profitable enterprises; they fund them until they blow up—one way or the other. The result of this system is a labor market that’s extremely fluid. As soon as a company’s growth slows, the best and brightest start looking for the exits.

That’s happening today at Yahoo, despite the company having paid what probably amounts to millions of dollars in retention bonuses. Among the departures: Chief Marketing Officer Kathy Savitt; Prashant Fuloria, senior vice president for advertising products; and Sandy Gould, the senior vice president who oversaw talent acquisition and development. (After announcing Gould’s resignation on April 1, Yahoo said on April 28 that he had un-resigned.) One of Mayer’s closest allies on the board, PayPal co-founder Max Levchin, has also left.

Those who’ve stayed describe a mood that’s grim, but not hopeless. Mayer believers argue that any criticism of her is simply unfair or the result of a clique of hedge fund guys who just don’t like her. “Marissa has done a terrific job there,” PayPal co-founder Peter Thiel said at a conference in April. “She’s been by far the best CEO they’ve had, maybe ever.” He went on: “It’s like, even if Marissa can’t quite get this restarted, we’re not going to hire somebody else.”