Yahoo CEO Jerry Yang
Internet giant hit by failures, poor economy, falls to lowest trading value since .com bust

Once offered $32/ a share to merge with Microsoft, Jerry Yang's Yahoo Inc. is in financial trouble. The giant's stock closed Thursday at $15.58/share -- a five year low.  Not since its meteoric rise and fall with the dot com boom and bust between 1999 to 2001 had its stock traded at such low levels. 

While today shares have risen slightly to just over $16/share, they still remain at lows not seen in at least 5 years, leaving Yahoo with very tough questions.  The latest fall is just an episode in a steady decline that has been taking place over the last several months.

Yahoo is betting big that its advertising deal with Google will go through, but there's much uncertainty there.  The Department of Justice is under pressure to oversee the deal and may nix it, if it feels Google is gaining too much advertising control from it.  Further, the deal may fare even worse internationally in places such as the EU, which have stricter antitrust laws.

Outside the advertising deal with Google, Yahoo has relatively little that it can hope will bring the big impact needed for a turnaround.  While Google has enough cash to throw millions at wild ideas and spend massive amounts to further its "do no evil" philosophy, Yahoo is struggling just to make ends meet.

Yahoo's search market share, along with Microsoft's, slipped again in the most recent Comscore analysis.  Only Google showed gains.

The company has already ruled out a merger.  Getting a fair deal from a jilted Microsoft might be hard.  And outside Microsoft, there's few that could hope to improve Yahoo's competitive position against Google by an acquisition.

While times are tough, Yahoo continues to plug away at little efforts.  It recently launched a new developer platform which it hopes will create some sort of positive change.  However, it pulled the plug on other efforts such as its latest attempt at a social network, Yahoo Mash.

One thing Yahoo can be thankful of, at least, is that billionaire investor Carl Icahn has been curiously quiet after investing big in the company, and voicing his intention to speed a sale to Microsoft or someone else.  With three board seats at his disposal on Yahoo's 11 person board, Icahn certainly could leverage some kind of influence, possibly demanding CEO Jerry Yang's ouster or a sale.  However, if Icahn has any plans for the troubled company, he's keeping remarkably quiet about them.

In the end, Yahoo's key dilemma is that it simply is not as big and does not have as much resources as Google.  Google already provides nearly every service Yahoo does, and has the means to implement them better.  And Google has name recognition with casual users that Yahoo currently does not. 

Perhaps most importantly, advertising, the life blood of the search engine business is now falling even more into Google's hands with Yahoo's advertising pact.  All this adds up to a big question for Yahoo -- as its stock and confidence slides, what can it hope to do to stay competitive? 

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