• Reuters, Monday, October 8, 2007 11:30 AM

To boost its share price, Yahoo needs to either break up its online businesses or go through a major business model makeover, Sanford C. Bernstein analyst Jeffrey Lindsay said in an a research note last week. Viewed separately, Lindsay said Yahoo's operations--which include advertising services, content, and Web search--could be valued as high as $39 per share; its current share price is $27.

Of course, no one seriously believes Yahoo would do this, or follow Lindsay's other suggestion (cited by several other Web analysts and pundits) to outsource search. Try as it might, Yahoo simply can't compete with Google in Web search; the Mountain View, Calif. company has too much volume. Nevertheless, Lindsay says that outsourcing search (to Google), cutting staff by 25 percent (aided by outsourcing search to Google) and restructuring display advertising could boost Yahoo's stock to $45 per share.

Unfortunately--as Lindsay says in the note--"It appears that Yahoo will not take bold measures to right the ship. We believe that Yahoo still has a potentially high intrinsic value. We believe, however, that to stop the inevitable slide into irrelevance the management team must consider more radical actions and strategies." Which is why he pegs the company's rating to $25 per share.

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