Marissa Mayer inherited a Yahoo! in shambles from the perspective of the public.  The company's sales were declining, there were several CEO's in as many years, public board fights, botched takeover attempts and an identity crisis about who or what the company is.

I see things much differently.  Marissa Mayer inherited the best company you could ever hope for as a brand new CEO!  The company generates a ton of free cash flow, has over $1.5 billion in the bank and holdings in other companies worth several billion dollars.  Despite its identity crisis, Yahoo! has a strong presence on the Internet with a highly recognized brand by both visitors and advertisers.  What CEO wouldn't want all of these qualities in a company they are running?

Yahoo! is not a traditional turnaround story where the company is bleeding uncontrollably, the balance sheet is in shambles and desperate measures must be taken just for it survive. Though, it's still a turnaround story in terms of getting the company growing both profits and revenues as opposed to the declines the company has experienced in recent years.  

When Scott Thompson was hired as CEO, I wrote a blog article titled The Formula for Yahoo!'s Success -- HINT, It's Not Their Newly Announced CEO!, which apparently proved correct, just much faster than I expected.  However, the hiring of Mayer is different so that particular article title may not apply this time.  

Why this Time May be Different

As part of my investment criteria, I list stock buybacks as a red flag to investing in a company.  In most cases, stock buybacks are a way companies attempt to artificially support their stock price because they no longer believe they have better ways to spend that money to increase value.  Yahoo! has a massive share repurchase program authorized by the board of directors.  According to their 10Q filed for the quarter ending 6/30/12, the aggregate outstanding amount still authorized by the company to be bought under two share repurchase programs was more than $5 billion.

Mayer has already started reevaluating the proposed return of capital to shareholders from the proposed sale of a stake in Alibaba. That could have returned up to an estimated $4.2 billion to shareholders.  If she puts the brakes on this and the share buyback program, that's close to $10 billion in cash the company could keep in it's coffers.  That certainly would provide the company the financial wherewithal to take some risks in finding new growth opportunities.

Another reason why this time may be different in the turnaround of Yahoo! is that Mayer is very close to the profile of a company founder.  Being employee #20 at Google gave Mayer the startup life experience.  Hopefully, she'll be applying that positive experience to help jump-start innovation at Yahoo!.

What about Mayer's Pregnancy?

Speculation that child birth could affect Mayer's ability to run Yahoo! is a major concern.  I personally think it will actually be a strength to company.  Yes, she may be distracted by this major life changing event, but it may also provide her with the insight and clarity needed to look at the world differently.  

This unique perspective on life may provide her with useful insight on where to steer the company that others would fail to see.  Having a nice financial cushion means that she can make some changes, potentially unfavorable changes in the eyes of the market, but not have to worry about the short term impact.  When you have a bunch of cash in the bank you don't worry as much about the short term implications and it's not like Mayer needs to be at the office so that the company doesn't fall apart.

Before I'd truly consider Yahoo! a buying opportunity they'd have to formally cancel the share repurchase program and decline any returns of capital to shareholders.  When news that Mayer might not return capital to shareholders, Yahoo!'s stock price declined due to the short term focus of most investors.  If they make it formal, the stock price could decline even further creating a buying opportunity for those willing bet on Mayer turning the company back around to growth to in the long term.