Is Yahoo`s New CEO Up to the Challenge?

Carol Bartz accepted what may be the biggest challenge of her career when she agreed to take on the post of Yahoo CEO. The venerable search engine’s stock rose nearly two points on the news, and then promptly fell seven percent. In this article we’ll take a look at Bartz’s background and what the future holds for the beleaguered search engine.

It’s important to note that 60-year-old Bartz was Yahoo’s first choice for the position of CEO, now that co-founder Jerry Yang is stepping down from that post. Ray Bostock, chairman of Yahoo’s board of directors, said as much when he introduced her. He said a lot of other nice things about her, too. So why is Bostock “very excited to have Carol Bartz leading Yahoo into its next era of growth”?

Let’s look at Bartz’s background. When Yahoo co-founders Jerry Yang and David Filo were busy putting Yahoo together and getting their new creation off the ground, Bartz was already a veteran in her industry. In fact, at about the same time Yahoo was founded, Bartz was busy being CEO of Autodesk, a maker of computer-aided design software. She went on to hold that position for 14 years, eventually becoming its executive chairman.

So how did she do? It would be no exaggeration to say that she transformed the company. During her tenure, revenues increased from less than $300 million to more than $1.5 billion, and the company’s share price increased nearly ten-fold. No doubt Yahoo’s shareholders fervently hope that Bartz will be able bring a little of that magic to their struggling firm. Nor is Autodesk the only company with which Bartz can claim experience; she’s held important leadership roles at companies such as Sun Microsystems, Digital Equipment and 3M.

She is certainly the “seasoned technology executive” that Bostock called her in the press release. Other qualities she brings to the post include “deep management expertise, strong customer orientation, excellent people skills” and a “firm understanding of the challenges facing our industry,” according to Yahoo’s press release. She will need every one of these skills, and then some, to get Yahoo out of its current mess.

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Bartz’s appointment as Yahoo CEO put her under the magnifying glass of every blog and media outlet that covers technology and the Internet. On the whole, the reaction has been a little mixed. Nobody disputes her chops, but almost everyone points to what she lacks. This has been described by various sources as “direct experience in the media industry,” “consumer Internet experience,” and so on. All of which is to say that Bartz doesn’t have experience working at a company quite like Yahoo.

But how much does that matter? On the one hand, it might not slow her down at all. Though she is well-known for a forceful style of leadership – and offers energy enough to raise morale among Yahoo employees – she is quite capable of learning from others. When the “media vs. tech” issue was raised during the conference call that introduced her as Yahoo’s new CEO, Bartz said “I think that’s a lot of nonsense. I have a little brain power to learn what it takes to understand media. There are people here who can jump start my education.”

On the other hand, she’s wary of taking too much advice, or advice from the wrong quarter. As she said during the same conference call, “There have been too many people on the outside giving Yahoo advice, what to do, what not to do. That’s going to stop; let’s give this company some friggin’ breathing room.” I have to admire the sentiment, profanity and all. Whether she and Yahoo will get that breathing room is another question entirely.

It’s certainly true that what Yahoo really seems to need right now is a good manager, and Bartz brings that skill in abundance. But after the transition, they will lose someone else thought to have good management skills: Susan Decker. Yahoo’s former CFO and current president agreed to leave the company after a transition period. Jerry Yang took the option of staying on as “Chief Yahoo,” falling back into his former role; either Decker did not have that option, or did not want it. Whether this loss will help Yahoo in the long term remains to be seen.

{mospagebreak title=What about Microsoft?}

The most obvious challenge facing Bartz and Yahoo right now, of course, is something of an elephant in the room – a very large elephant named Microsoft. Yang and Ballmer struggled for the better part of a year to come to terms on some kind of a deal, with the press speculating wildly about everything from Yang’s commitment to a deal (or lack thereof) to whether the two companies, once combined, would be able to compete successfully with Google. When the two sides could not settle on a price, Microsoft CEO Steve Ballmer insisted that his company was no longer interested in buying Yahoo, and that he was putting the whole situation behind him.

It’s hard not to wonder, at this point, whether or not he was serious. As recently as January 9, Ballmer said that a deal between the two companies could happen within the next few months, thanks to new leadership in place at both companies. At that time, he was anticipating a new CEO at Yahoo – someone who might be more amenable to a deal than Yang. Additionally, Microsoft’s Online Services Group, which includes search, now has a Yahoo veteran at its head – Dr. Qi Lu.

Here’s more evidence that Ballmer’s not ready to walk away: the press have been reporting that he and Bostock have met at least twice in the past couple of weeks. In the same time frame, Bartz said she had a telephone conversation with Ballmer. He may not be interested in buying all of Yahoo, but he’s certainly interested in doing some kind of search deal.

Would Bartz be willing to go along with a such a deal? Should she? There doesn’t seem to be a clear answer to either of these questions. While the press is widely reporting that she has a “gut feeling” not to sell Yahoo’s search assets, a more precise reading of what she actually said seems to indicate otherwise. Her actual words were that her gut feeling was, why would you sell? In other words, she might sell, after due consideration of arguments on both sides, if there were compelling reasons. At least, that’s the sense that Rob Hof, writing for Business Week, seemed to take away from what she said.

Whether she should go along with such a deal is, again, another question altogether. Danny Sullivan thinks the two companies should go ahead and get it over with. Abby Klaassen, writing for Advertising Age, however, has a different take: “if Yahoo sells search it loses the thing that most sets it apart from other display-ad-centric portals: It has both.” Losing search could mean that Yahoo loses something that has let it survive this long rather than fade like other portals.

{mospagebreak title=Yahoo’s Other Challenges}

Bartz faces a company that has suffered through layoffs, downsizing, at least one brain drain, some major restructuring, and serious morale issues. Its stockholders recently revolted. It has had two CEOs in succession that did not improve its competitiveness. She was certainly correct when she said that the company could use a little management. What else could it use?

Bartz is keeping mum about her own plans for the moment. She is said to be talking with Yahoo employees; perhaps she needs a little breathing room herself before deciding to set anything in motion. Naturally, this hasn’t kept analysts and other observers from playing “armchair CEO.” Klaassen offered some interesting advice.

Not only should Bartz not sell search; she should make the most of it as far as finding synergies with its portal and advertising. “Yahoo has great sports and finance sites, for example. It should start marketing its search users coming through the vertical sites as highly valuable, pre-qualified searchers,” Klaassen suggested.

That’s just a start. Imagine what Yahoo could do if it combined its behavioral and registration data with search queries. Matt Naeger, executive VP of operations search marketing firm Impaqt, speculated on the effect. “Would I pay more for someone who’s visited a review site in my category in [the] last 30 days? I’d be willing to pay more for that, and Yahoo would have more of that info than any of its competitors.”

The tricky part about this approach would be to come up with a way to use it that doesn’t look like an invasion of privacy. Still, I can’t see Yahoo just sitting on this big of a competitive advantage. It’s not the only thing the venerable search engine can do to get out of its current crisis, but it could be a step on the road to recovery. Now if Bartz could just deal with the low morale, low stock prices, general chaos, and more…it’s a tall order to ask of anyone. The coming months will reveal whether Carol Bartz is up to it.

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