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Yahoo expected to name Carol Bartz as new CEO

January 14, 2009|Jessica Guynn

SAN FRANCISCO — She may not have experience running an Internet company, but new Yahoo Inc. Chief Executive Carol Bartz says her hard-driving, no-nonsense management style is just what the battered giant needs to revive itself.

Yahoo ended a two-month search Tuesday by hiring Bartz, the 60-year-old former CEO of design-software maker Autodesk Inc. She replaced Jerry Yang, the mild-mannered company co-founder who stepped down after a stormy tenure in which he was criticized for his indecisive style and for bungling merger talks with Microsoft Corp.

On a conference call to introduce herself to Wall Street, Bartz, who is now the highest ranking woman in Silicon Valley, said she intended to buy Yahoo "some friggin' breathing room" so that she could position the company to "kick some butt."

She sees Yahoo "as a company with enormous assets that frankly could use a little management," she said.

Whether Bartz, a seasoned executive with a track record of turning around tech companies, has the right stuff to rescue the ailing Yahoo remains to be seen. Investors aren't convinced, sending the Sunnyvale, Calif., firm's shares down 12 cents Tuesday to $12.10.

"We are very confident she is exactly the right leader to get Yahoo back on track and help the company achieve its full potential," Yahoo Chairman Roy Bostock said, adding that Bartz was the only person offered the job.

But analysts say Bartz will face daunting challenges in trying to boost the company's stock price and sharpen its strategic focus. Competition with rival Google Inc. is heating up, the economy continues to soften and Wall Street is calling for more aggressive action, including a corporate break-up or renewed talks with Microsoft Corp. for a search advertising deal.

And Bartz has no experience running a company such as Yahoo that makes money through advertising.

"I think the Wall Street reaction is going to be tepid," said Anthony Valencia, media analyst for TCW Group in Los Angeles. "This is going to be a 'show me' story."

Yang will remain in his titular but influential role as "chief Yahoo" and on the company's board. His No. 2, President Sue Decker, who was in contention for the CEO job, will leave the company.

Bartz said Tuesday she would not discuss Yahoo's strategic direction on her first day on the job because she wanted time to do "a deep dive into the business."

But she dismissed concerns that she lacks ad-industry experience, saying she can learn, and talked tough about the heavy criticism that began during Yahoo's three-year slump and snowballed when merger talks with Microsoft fell apart.

"It's been too crazy, everybody on the outside deciding what Yahoo should do, shouldn't do, what's best for them," she said. "That's going to stop."

Microsoft CEO Steve Ballmer has said he would pursue a search deal with Yahoo when new management was in place. Bartz will need to evaluate that possibility and a long-discussed merger with Time Warner Inc.'s Internet unit AOL, as well as decide whether to purge under-performing businesses. She also faces a divided board that includes dissident shareholder Carl Icahn. And she will have to restore morale among uneasy employees.

Yang decided to step down after an advertising partnership with Google collapsed. Yang had hoped the deal, which would use Google's technology to sell ads alongside Yahoo search results, would boost profit and pacify investors. But Google backed out of the deal when antitrust regulators threatened to block it.

Yang also drew investor ire when he rebuffed Microsoft on several occasions, including a $47.5-billion offer to buy Yahoo in May. Microsoft withdrew the bid, and Yahoo's stock price has since wallowed in the teens.

People familiar with the CEO search said the short list included former Vodafone Group CEO Arun Sarin and Decker, who was Yahoo's chief financial officer before becoming president.

UBS analyst Benjamin Schachter called Bartz "a solid choice" that signals that the Yahoo board is "eager for some new energy and a fresh perspective."

Bostock said she was picked because she is seasoned and decisive. The company has shed top managers and familiar faces over the last year, and its lack of direction has made budget-planning difficult for advertisers.

"The industry is looking forward to Yahoo deciding what kind of company it wants to be and in which businesses it can compete," said Jeff Lanctot, chief strategy officer for Razorfish, a digital marketing firm that is an independent operating unit of Microsoft.

Bartz has a lengthy resume. She sits on the boards of Cisco Systems Inc. with Yang and Intel Corp. with Decker. She was an executive at Digital Equipment Corp. and 3M Corp. before spending nine years at Sun Microsystems Inc., eventually becoming the No. 2 executive behind then-CEO Scott McNealy.

Her main credential is running Autodesk, based in San Rafael, Calif., from 1992 to 2006, when she became executive chairwoman. Autodesk is about half the size of Yahoo, with roughly 7,000 employees.

But it's what's missing from her resume that troubles some.

Sanford C. Bernstein analyst Jeffrey Lindsay said Bartz could take months to learn Yahoo's business and even longer to formulate a turnaround strategy for the sprawling international business.

"We would rather see a knowledgeable CEO taking some difficult shots and producing some out-of-the-box thinking," he said.

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jessica.guynn@latimes.com

Times staff writer Alana Semuels in Los Angeles contributed to this report.

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