For a man who has seen his company's value slide by nearly $40 billion in six months, Tim Koogle is looking remarkably calm. In fact, he looks more than calm. The Yahoo! president and chief executive officer seems positively joyous.
Sitting in the study of the Dean's house at the London Business School, just before he addresses some future masters of the universe, Koogle shows no outward sign that he is a man who believes Silicon Valley will soon be renamed Death Valley due to the recent bloodbath in the dotcom sector.
Perhaps it is because Koogle believes he is blessed with what he calls the gift of 'serendipity'. 'I've been making money since I was very young. As I look back over four decades of making money the huge value for me in doing that from such an early age is that it has put me in the shoes of my customers and I've got enough perspective to have a pretty accurate view of real consumers. I find a lot of joy in serving up great product and the one thing that drives people's consumption patterns is serendipity.' And serendipity is? The faculty of making fortunate discoveries by accident. Hmm.
Before the age of 10, Koogle was a precocious travelling salesman, knocking on his neighbours' doors offering gardening services. As a teenager he worked for one R McDonald, making sure that burger equipment in one of the grinning clown's franchises worked properly. By his forties he had become president of Intermec Corp, a Seattle-based data collection firm. Before that there was a nine-year spell with Motorola in a number of executive positions.
Koogle's talk of serendipity might make some of the older heads at the London Business School a little bemused. It conjures up pictures of shareholders looking nervously at each other and asking: 'So this serendipity thing, where d'ya get it and what's it doing to the bottom line?' The answer is a) you either have it or you don't, and b) a great deal. Yahoo! has grown from a company valued at $4 million in 1995 to one which, before the bubble burst, was worth nearly $70bn.
The massive surge in the company's value has been largely predicated on the fact that Yahoo! seems to have found a way of linking the separate worlds of media, e-commerce and services like email to create a virtuous circle for the new economy.
'We've always been very clear and focused. We have always been open, comprehensive aggregators of world- class content and services. We know that consumption patterns get driven by serendipity. People bump into things that they wouldn't have predicted they wanted.'
This might seem a nebulous concept to follow, but Koogle is convinced the approach will work. He argues that the old media distribution methods - such as cable or radio - are no longer where real value lies.
'On the internet, no one company controls physical distribution. Anyone with access to internet can access any site - independent of their or its location. So on a slightly philosophical level, the distribution asset begins to be the relationship that is formed between a service and its end users.' And that's where Yahoo! comes in.
Koogle, funny and warm with more than a hint of West Coast philosophy professor about him, says this was always the company's intention. 'Even back as early as 1995 we had a vision that we wanted to create a global branded network. It's not just navigation - we're more than a portal. We have many, many services and hosted content throughout the network. We're integrating deeper and deeper within content, commerce, delivery and services across our network. In a very straightforward way, we are a distribution platform for many great providers.'
But the danger is that distribution is not where the real value lies - instead, it belongs to the content providers, those firms who in the future will produce the media we will all want to consume.
Certainly AOL, in the middle of trying to merge with media giant Time Warner, believes this to be the case. And, in addition to the AOL deal, search engine Excite was taken over by cable operator At Home, while Lycos has married Latin lover Terra Networks, of which Spanish telecoms and media company Telefónica is the majority owner.
So would Koogle consider a similar sort of deal? 'Not at this time. We of course have considered it. We've had lots of discussions with lots of companies worldwide, some of which are quite large franchises in traditional media. We're very respectful of Time Warner and AOL. We think they're great businesses and great competitors. There's no doubt if they get their merger completed they'll have some kind of financial clout and flexibility but we're believers in the open model. Great content always seeks out great distribution in the history of media. There's great business to be had without owning each other.' However, it is clear Koogle is looking at forging numerous content alliances. 'There are interesting specialised content partnerships that we will be continuing to build and evolve. I think in those kinds of cases there are great content suppliers that see huge value in our distribution, but I don't think we need to own each other. Our goal of being very large and maintaining our size in terms of audience breadth is better-served by being independent.'
A merger with a big old media company would go against everything Yahoo! stands for. Set up by two twentysomething Stanford graduates, Jerry Young and David Filo, in 1994, Yahoo! still retains something of a campus mentality. Koogle, who was headhunted the following year, is known to all as TK. Ties are, of course, effectively banned. Hawaiian shirts, of which Koogle owns a particularly ferocious collection, are de rigeur .
'We have this really free approach to Yahoo! We all share that same philosophy. You can deliver real joy to customers worldwide if you give them the ability to discover things they otherwise would not have predicted. That's about serendipity itself.'
There he goes using that 's' word again. But Wall Street seems less sure about its long- term viability these days. The company is now worth a notch above $30bn. Admittedly this still values Yahoo! at a vertiginous 150 times earnings, but Koogle says the company is now undervalued because analysts are looking too short- term. 'The way we run the business is for the long term. We've built it on great fundamentals. There have been very few companies that have grown to this scale and profitability so quickly.'
Hang on. Did he say profitability? The 'p' word is not usually found in the same sentence as the words 'internet company', but Yahoo! is something of an exception. Analysts are pencilling in profits of nearly $280m for the year. Earlier this month the company beat all forecasts to ratchet up third-quarter sales of nearly $300m.
Unfortunately, it also had to confess to the fact that it had lost more than 200 online advertisers over the period - a huge worry for analysts, who fear that the company's business model, which depends partly on advertising revenues, could be in jeopardy. Koogle points out that Yahoo! is becoming less and less reliant on dotcom firms for advertising revenue.
He says he saw the shakeout coming although he did not think it would be so dramatic. 'I knew we were going to have a correction. It was difficult to predict when. There were valuations that had gotten a little bit out of the range of normalcy. And everyone knew that. I've been a little bit surprised by the speed.'
But Koogle argues that the correction now means Yahoo! is in a strong position. 'The concept is to find strategic ways that we can extend our business through acqui sition. The opportunities for us are broader right now because the capital markets are less friendly to early-stage companies.'
Serendipity strikes again.
Profile
Subject: Tim Koogle
Age: 49
Job: President and chief executive
Other directorships: Non-executive of Web Van and E-Loan
Hobbies: Guitars, cars
