Net income for YHOO 2010 1,231.66 m 2009 597.99 m 2008 418.92 m 2007 639.15 m
Their net income may have increased, but they did it by selling businesses (Hotjobs and Zimbra) and cutting costs (sales and marketing and product development) dramatically. Their revenues have dropped considerably, and they have had a humungous brain drain. The 2011 estimates for annual revenues are $4.4 billion, down from $6.3 billion in 2010 and from $7.2B in 2008. That's a plunge of 30% YoY.
This is what a death spiral is. They achieved profitability by hacking and slashing. At some point, which was likely already passed, you cut to the bone, and you no longer can sustain a viable company, and the pace of decline gets quicker.
Also, often times the best outcome for shareholders is to wind down the business and allow them to reinvest the profits, which so far is not an action that YHOO has taken.
Sun was sitting on a cash hoard of billions when Oracle bought it -- plus MySQL, plus some actually valuable technology, plus a lot of great engineers, plus patent portfolio. The assets were probably worth 2-3x the acquisition price!
When HP split into HP and Agilent, the printer business alone was valued at more than the entire market cap of the company; the rest of HP was perceived as having negative value.
A lot of Yahoo's value is in investments in Asia, investments which are rapidly trying to divorce themselves from Yahoo.
Yahoo arguably has a sustainable display ad business, and some destination sites, (although I personally am not into advertising), but to make the turnaround, you'd want to axe the top several tiers of management. The new CEO is a good start; this is a great second step.
A rational world with honest and effective boards of directors, coupled with greedy and self interested PE firms of large size probably would have already broken up Yahoo, HP, and RIM. The biggest crime with these companies is the thousands of great engineers stuck there, not accomplishing what they could at more effective organizations.