Whenever I see a struggling company like this I ask myself the simple question. If the company didn't exist, would there be a need to create it? In the case of Yahoo I think the answer is no. If they disappeared tomorrow there would be no compelling reason for others to try and fill the gap it left behind. Hell, I doubt most people would even noticed they had gone. So they need to build a new business from the dying…
They are already bringing in outside consultants from McKinsey, but in this day and age, how about turning to the crowd for help? If they posted significant cash prices (say $1m total) and let their users vote on the best ideas, I bet they could find some fresh directions.
Also bet it would cost a fraction of what they pay McKinsey.
Edit: In fact, why stop there. How about making it a quarterly challenge. With follow-ups on what ideas they decided to work on and progress reports. Make Yahoo the People's company. Just my 2 cents.