What Will Yahoo! Do Now?


The Carol Bartz experiment is over at Yahoo! (NAS: YHOO) .

After nearly three years of tough-talking rhetoric but more progress on the bottom line than the top, Yahoo! is ready to move in a new direction at the top. The dot-com giant is tapping CFO Tim Morse as its interim CEO as it initiates a search for its next leader, but is that Morse code for a company that is open to buyout offers?

The news shouldn't come as a surprise. Bartz became CEO on Jan. 13, 2009, when the stock closed at $12.10. The stock's close yesterday -- after a monstrous bullish rally for tech stocks that began a few weeks after her arrival -- was less than 7% higher. Larger rival Google (NAS: GOOG) has seen its stock appreciate 10 times faster in that time, up 66%. China's Baidu (NAS: BIDU) has been a whopping 12-bagger during Bartz's tenure at Yahoo!.

A bad paid search outsourcing deal with Microsoft's (NAS: MSFT) Bing, bad blood with China's Alibaba, and bad news when growth at its flagship display advertising business flattened out sunk her ship.

Where will Yahoo! go from here? Is it time to dust off the old rumor about a combination with AOL (NYS: AOL) ? The chatter will undoubtedly gain steam, especially now that former Google exec and current AOL CEO Tim Armstrong has a clear path to head both companies. Does Alibaba smell an opportunity here by acquiring all of Yahoo! instead of simply negotiating to buy back Yahoo!'s chunky stake in the Chinese dot-com conglomerate?

The next few weeks will be interesting. The board will try to fill the haunted CEO slot as rivals and private equity firms begin to unofficially kick the tires.

At the very least, Bartz can say that she's not the one who blew off Microsoft's buyout offer in the low $30s. That happened the year before she arrived. Her legacy won't be completely tarnished, since she was able to drive substantial margin improvement at the company. However, sometimes a turnaround on the bottom line isn't enough.

Investors want Yahoo! to stand up, and that's something that it failed to do under Bartz.

If you want to follow the search for a CEO more closely, add Yahoo! to My Watchlist.

At the time thisarticle was published The Motley Fool owns shares of Google, Microsoft, and Yahoo!. Motley Fool newsletter services have recommended buying shares of Google, Baidu, Yahoo!, and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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