By Adam Lashinsky
June 27, 2008

When word first leaked last week about the coming reorganization at Yahoo (YHOO) my immediate reaction was, ‘What, they didn’t do that two years ago?’ I had the same reaction when the shell-game-type shuffling finally was announced Thursday. Then came the following over my transom. Give it a read. It’s from a Yahoo employee who decided to e-mail me directly with a unique view of what’s going on inside the company. I guarantee it’s better than any analysis you’ll see in the media on the subject. It also makes you wonder, does Yahoo’s board, which includes corporate luminaries like VJ Joshi of Hewlett-Packard (HPQ) and Bobby Kotick of Activision (ATVI), have the slightest idea what’s up at Yahoo?

Here’s the e-mail:

“I wanted to let you know about some of the good things going on at Yahoo. We are poised to double free cash flow in two years; we have the right people in the right places; our senior management is aligned with our shareholders; our employees are fully behind our senior management; and our advertisers are delighted with our services. This is the dawning of Yahoo’s best era ever. Things could not be better!

Ok, so there are some details to be worked out about how we actually meet those revenue targets, the fact that our new org chart shows absolutely no changes at the top, and the fact that we can’t get our stock price anywhere near what Mircosoft (MSFT) offered. But those are really just details, aren’t they? A few headwinds now will only make our sailing that much smoother later.

Take the new re-org announced today as one example. It had only one objective: solely to make our organization better aligned with our corporate priorities. Perish the thought that it had anything to do with personal power plays or internal politics. Sure, we just had a major re-org in January, which was really just a completion of the re-org that we had in October. But we work in the Internet, and we have to be nimble and responsive to the market demands. Just by example, when Hillary Schneider was promoted in Spring of last year to run HotJobs, Autos, Real Estate, Local, Shopping, Travel and Personals, we were all moved across campus into one larger org for no reason other than to ensure that our customers would be better served. Then, when Hillary moved on to run Sales for Yahoo (but kept HotJobs) at the end of the summer and we were moved back to our old homes, it was only to meet the needs of our customers again. When that uber-org was divided up in November and Autos and Real Estate went to our old Media group while the others fell under the Search group, it was because our customers demanded it. When the head of this group switched places with the head of the Search group in January just in time to do annual reviews for all of the people in their new orgs, well, you knew all along that our customers would be reaping the benefits. Now that this re-org will put all of those properties back under Hilary – except for Local, which is going to be under the group called Global Products (just out of curiosity, what is the opposite of Local?) – I can say with the utmost confidence that our customers will be delighted with the greater efficiencies that this structure will bring. (As a side note, the Engineering team, which has for the past few years re-org’d in lock step with the business re-org’s will not in fact re-org in lockstep this time, because quite frankly, they don’t need to be better aligned with the business teams.)

Sure, we have lost a few executives over the last week – eight in six days by my count. The fact that so many are leaving in such a short period of time right after we announced the end of all discussions with Microsoft might appear to be a lack of confidence in our own prospects, but I can assure you that nothing could be further from the truth. If you read the official announcements, their motives were made clear: all of them had decided either to spend more time with the families or pursue other opportunities. End of story.

As for the Microsoft offer, well, I can’t emphasize how relieved we are that we did not sell ourselves short. All of us who are working in the trenches know the full potential of Yahoo! Sure, we may be losing market share in search to Google (GOOG) every month and we may be losing market share in pageviews to social networks, but our future has never been brighter! As the market grows and our share declines, our opportunities for growth only increase! Simple math there. We have another 80% of the search market left to capture – Google only has about 30%. Now, whose future is truly brighter?

As for the Google deal, HOORRAY! Now, you might be thinking that we employees – particularly those in Search – who have spent most of our waking hours trying to do battle with Google might in some way be disappointed that we are now getting into bed with the enemy. Au contraire! We love it! Nothing indicates a job well done better than outsourcing your own job to the competition. Am I right, or am I right? After all, it is not as if we had sold the entire search team to another company for a premium price – that would have been a slap in the face! By contrast, outsourcing as much of the search business to Google as legally allowed in exchange for near term cash, that is much more re-assuring. It tells us all that we are truly valued.

So, as you can see, things here are great. Hope you are doing half as well.”

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