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Wednesday, May 16, 2012

New Yahoo CEO Looks Like a Good Fit

Story first appeared in The New York Times.

As Yahoo’s latest chief executive and newest board members settle into their roles, they will be confronted with the same problem that has bedeviled their predecessors: how to fix one of Silicon Valley’s most crisis-plagued companies.

The turnaround effort will be led for now by the interim CEO, whose roots lie in media, advertising and deal-making.

Among the highest priorities for the interim CEO and the new board members is closing a deal to sell some of Yahoo’s stake in the Alibaba Group of China back to that company, in a deal that could reap billions of dollars. A deal could be signed within weeks, according to people briefed on the matter, but talks may slow a bit as Yahoo’s new directors are briefed on the status of the negotiations.

The selection of interim chief executive stands in stark contrast to the hiring earlier this year of the previous CEO, who stepped down over the weekend after weeks of controversy over his embellished academic record. Unlike his predecessor, who sought to transform Yahoo into more of a technology company, the interim CEO is expected to steer Yahoo to its core strengths in display and search advertising.

The move is likely to please Third Point, the hedge fund that sought the previous CEO's ouster. Yahoo on Monday announced the terms of its settlement with Third Point, including disclosing the board committees that the hedge fund’s three director candidates would join.

Investors also appeared happy by the management shake-up. Shares of Yahoo closed up 2 percent on Monday, to $15.50.

The interim CEO's ascent ends yet another period of tumult for Yahoo, which for years has grasped for a new identity in an age when central Web hubs are increasingly irrelevant. Among Yahoo’s biggest rivals now is Facebook, whose initial public offering this week looms large over Silicon Valley.

Investors like those at Third Point have argued that the key to a Yahoo turnaround is a focus on advertising, which remains the biggest source of the company’s revenues.

Before joining Yahoo, the interim CEO was president of News Corporation’s Fox Interactive Media unit, where he was in charge of strategy and deals. He oversaw News Corporation’s $580 million takeover of Myspace, which later signed a $900 million search advertising deal with Google. (The agreement ultimately proved less lucrative than expected, because of declining visitor traffic to the social network.)

He was brought to Yahoo in late 2010 by the company’s chief executive at the time, to head its Americas operations. Before becoming chief executive, he had served as the company’s global head of media, overseeing Yahoo’s advertising business.

Yahoo sought to quickly leave behind the remains of the previous CEO's brief tenure. The company disclosed in a regulatory filing on Monday that he had left without severance. All he will receive is the $1.5 million “make-whole” cash bonus he received upon arriving at Yahoo, to help compensate him for payouts he forfeited by leaving his post as president of eBay‘s PayPal unit. For the next five years, the previous CEO will be bound by a nondisparagement agreement as well.

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