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Friday, January 06, 2012

Yahoo Makes Executive Changes

Story first appeared in the Wall Street Journal.
Yahoo Inc. hired top eBay Inc. executive as its new chief executive in an effort to continue as an independent entity, but the move did little to stem questions about the struggling Internet company's future.  Scott Thompson was hired by Yahoo Inc.

Mr. Thompson, the 54-year-old president of eBay's PayPal electronic payments unit, is tasked with turning around Yahoo's core online-advertising business, the company said. His hiring follows more than four months of strategic limbo when the Sunnyvale, Calif., company operated without a permanent leader following the September firing of the previous CEO.

But even with a new CEO, Yahoo faces a long list of strategic questions with many options still on the table, said people familiar with the matter.

In particular, Yahoo's discussions about whether to shed some of its valuable stakes in several Asian Internet companies and whether to sell a minority stake in itself to private-equity investors remain unresolved, these people said.

While the sale of a minority stake to private-equity firms now appears less likely, Yahoo's ongoing discussions about a tax-free exchange of its stakes in its Asian assets, Alibaba Group Holding Ltd. and Yahoo Japan, which are valued at around $17 billion, are likelier to move ahead, said other people familiar with the matter. Yahoo directors also haven't ruled out an outright sale of the company, said one of the people familiar with the matter, though some board members believe it's unlikely a bidder will emerge.

Mr. Thompson will play a big role in the ongoing strategic review that Yahoo's board is conducting, said one of the people familiar with the matter.

The new CEO will have a big role in Yahoo's final decision on its Asian Internet-company stakes and its discussions with private-equity investors, this person said.

In a conference call announcing Mr. Thompson's appointment, a Yahoo Chairman acknowledged that the strategic review of Yahoo isn't over.

But the Yahoo executives emphasized that their first priority would be to turn around Yahoo's core online-ad business, which rivals such as Google Inc. and Facebook Inc. have chipped away at over the years. In the conference call, it was discussed that Yahoo would almost certainly remain publicly traded.

Mr. Thompson, who will assume the CEO post, said in an interview that he wanted Yahoo's business to return to being "one of those great iconic brands" on the Web. "We'll be back to innovation and disruptive concepts," he said.

As CEO, Mr. Thompson said he expects to hire executives and to use Yahoo's "arsenal" of resources, including its balance sheet, to make acquisitions "if it is appropriate." He said Yahoo would build new Web services, and "if we don't have it, we will find it in the market...and we'll do it fast."

Mr. Thompson's appointment is the latest in a long-running game of musical chairs atop Yahoo. Mr. Thompson will be the company's fourth permanent CEO in five years.

Many of his predecessors were bedeviled by Yahoo's strategic challenges, as the one-time Internet leader fell behind Google Inc. and Facebook.

While Yahoo still has some of the Web's most popular destinations, including its home page and sports, news and entertainment-content sites, it has struggled to keep pace with Facebook and such other content sites as

Yahoo's share of the $12.3 billion spent in 2011 on graphical and video ads in the U.S. was 13.1%. That was down 14.4% from the previous year, according to research firm eMarketer. Yahoo's overall revenue has been about $6 billion annually for the past few years.

In making the leap to Yahoo from PayPal, Mr. Thompson is moving from a stable and fast-growing business to a bigger company grappling with its dimmed status. PayPal's annual revenue of about $3.4 billion in 2010 was about half that of Yahoo's, and while PayPal is growing at about 25% a year, Yahoo's revenue has been flat. PayPal has 11,000 employees, and Yahoo has 14,000.

Mr. Thompson, who joined PayPal in 2005 as chief technology officer and senior vice president and rose to president in 2008, has little online advertising experience.

Known for his cordial personality and thick Boston accent, he is expected to be a sharp contrast to his predecessor.

Investors appeared to be skeptical about Mr. Thompson's appointment. In 4 p.m. trading, Yahoo's stock closed at $15.78, down 3.10%.

Directors initially sought a CEO with experience in online advertising and content. But Mr. Thompson's candidacy was helped by his record running fast-growing PayPal, an acquaintance recalled. In addition, Mr. Thompson "was always interested" in the company's top job and expressed the interest during the early days of the search, the acquaintance said.

Mr. Thompson said in an interview that the talks with Yahoo began in November and then started to move at an "accelerated" pace. Yahoo directors approved his selection at a board meeting that some members attended by phone, according to one person familiar with the situation.

The appointment of Mr. Thompson is unlikely to interfere with Yahoo's discussions about the tax-free exchange of its stakes in Alibaba and Yahoo Japan for cash and other assets, some of the people familiar with the matter said. A deal could be struck within six to eight weeks, one person said.

Alibaba prefers a friendly deal with Yahoo, but it could still revisit an alternative plan to bid for the whole company in conjunction with buyout firms if the cash-rich split-off proposal falls through, people familiar with the matter said.

Alibaba's spokesman, said that "Scott Thompson is known to us as a strong leader, and we look forward to working with him to deliver value to Yahoo's shareholders."

Separately, private-equity firm Silver Lake hasn't taken its offer off the table and would be open to interacting with Mr. Thompson to understand his vision for Yahoo and assess ways to work together, a person familiar with the matter said.