Let's get something straight right here and now: Yahoo makes money. Lots of it. In the second quarter of 2009, it made $141 million in net revenue [source: AFP]. The problem at Yahoo isn't making money; it's spending it.
As we mentioned earlier, Yahoo owns the most trafficked Web sites in major categories like finance and news. Yahoo Mail also dominates the webmail sector, grabbing 56 percent of the total U.S. market share [source: Hopkins]. Flickr, the Yahoo!-owned photo-sharing site, has also gained major ground on Photobucket, the service favored by MySpace users [source: Dougherty].
A year ago, before its stock price took a nosedive, Yahoo was valued at $54 billion. This number represents Yahoo's cash assets plus the moneymaking value of its many Web sites and services, including Yahoo Japan and China's Alibaba [source: Caulfield].
Unfortunately, Yahoo has suffered from a severe hemorrhage of leadership over the past few years, worsened by a nasty case of budgetary bloating. The bloating stemmed from increased investment in product development without sufficient return on that investment [source: Maher].
The bright spot is that Yahoo recorded an eight percent growth in profits in the second quarter of 2009, largely due to cost-cutting measures [source: AFP].