With Bartz Out, Yahoo's Board Eyes a Media-Savvy Replacement

Yahoo CEO
Yahoo CEO

Yahoo's (YHOO) embattled CEO Carol Bartz was ousted Tuesday, leaving investors to question who will lead the struggling Internet company in its turnaround efforts. But waiting in the wings appears to be one strong candidate with whom some of Yahoo's board members are "very much impressed" -- Ross Levinsohn, Yahoo executive vice president of the Americas, according to people familiar with the board's thinking.

Levinsohn, who was president of Fox Interactive Media before he joined Yahoo last October to lead its Americas business, has impressed at least one Wall Street analyst during his brief tenure.

"Ross has been doing all the right things, in my view. In particular, sales force attrition has been an issue for years, an issue that Ross inherited," Jordan Rohan, an analyst with Stifel Nicolaus, said in an email interview.

But during the second quarter, Yahoo changed the way its sales organization was structured. And although the company was criticized for sluggish display revenue growth, the amount of revenue generated per display page view increased 6% in the quarter in the Americas over the previous year. The problem was, however, the number of display pages viewed fell 2% during the three-month period. Nonetheless, Yahoo expects its display revenue to increase for its third quarter compared with year-ago figures, the company noted in its Securities and Exchange Commission filing.

Rohan noted that Levinsohn inherited a number of other challenges in coming aboard Yahoo as well.

"The drag from a general consumer trend away from ad-supported email is hard to combat, as it drives page view growth for the news, entertainment, and search assets. Again, that is another problem that Ross inherited. Combined with a poorly drafted search deal (not Ross's deal either), Yahoo has been fighting an uphill battle since Ross joined," Rohan said in an email.

Last year, regulators signed off on Yahoo's search agreement with Microsoft (MSFT). Under the deal, Microsoft's search technology replaces that used by Yahoo and Yahoo gets a cut of the paid search advertising that Microsoft generates on Yahoo websites. But that agreement has fallen short of expectations in delivering the kind of revenue the two technology giants had anticipated.

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Although Levinsohn may have wowed some board members, it's by no means a given he will become CEO. One executive recruiter, for example, finds it curious that Levinsohn was not made interim CEO.

"They didn't put the obvious candidate in the interim job. Instead, they named the [chief financial officer]," observed Jon Holman, who runs executive recruiting firm The Holman Group. "From that, one might conclude there is no internal candidates, or they are planning to sell the company or break it up. In that case, it makes sense to name the CFO.

"However, one source noted that by naming Yahoo CFO Timothy Morse the interim CEO, the company would send a very clear message that Morse was indeed an interim CEO and not the heir apparent. That move was similar to one taken by Hewlett-Packard (HPQ), when it named CFO Cathie Lesjak as its interim CEO, following the ouster last year of CEO Mark Hurd.

Levinsohn's hiring last fall came shortly after questions arose about whether Bartz's time as CEO was running out. A year ago in August, one person close to the company was already speculating that if Bartz had not turned around the company within a year it would be surprising if she would still be in the CEO spot.

Motley Fool contributor Dawn Kawamoto owns shares of no companies listed above. The Motley Fool owns shares of Microsoft and Yahoo. Motley Fool newsletter services have recommended buying shares of Microsoft and Yahoo. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft.

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