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According to a leaked internal memo written last month by senior vice president Brad Garlinghouse, Yahoo is in serious need of major organisational changes.

In the memo, published by the Wall Street Journal, Garlinghouse argues that Yahoo suffers from a lack of consistent leadership, business focus and a 'single cohesive strategy'. A Yahoo spokesman has confirmed the document’s authenticity.

The company has had a problematic year, with its shares losing 31.5% of their value so far, and the firm struggling to keep pace with its all-conquering rival Google.

The memo has been dubbed the ‘Peanut Butter Manifesto’ as Garlinghouse argues that the company has spread itself too thinly:

“I've heard our strategy described as spreading peanut butter across the myriad opportunities that continue to evolve in the online world."

"The result: a thin layer of investment spread across everything we do and thus we focus on nothing in particular. I hate peanut butter. We all should."

The memo also argued that Yahoo’s strategy lacks cohesion:

“We want to do everything and be everything — to everyone. We’ve known this for years, talk about it incessantly, but do nothing to fundamentally address it. We are scared to be left out. We are reactive instead of charting an unwavering course.”

Garlinghouse points out the conflicts between some of Yahoo's media properties. For example, the company owns Flickr and Yahoo Photos, Deli.cio.us and Yahoo Myweb, and has only just acquired online contests site Bix when it already had Yahoo Talent Show.

He suggests a top-down re-organisation of the company, elimination of competing businesses within the companies, as well as a reduction of 15-20% in the company’s headcount.

Michael Arrington at TechCrunch suggests that the memo was not written to be deliberately leaked, but that Garlinghouse and Yahoo CEO Terry Semel may not be sharing the same company for too much longer. 

Graham Charlton

Published 20 November, 2006 by Graham Charlton

Graham Charlton is the former Editor-in-Chief at Econsultancy. Follow him on Twitter or connect via Linkedin or Google+

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