BREAKINGVIEWS - New Yahoo CEO challenge: to dismantle the beast

Wed Sep 7, 2011 3:02pm IST

A Yahoo billboard is seen in New York's Times Square October 19, 2010. REUTERS/Brendan McDermid/Files

A Yahoo billboard is seen in New York's Times Square October 19, 2010.

Credit: Reuters/Brendan McDermid/Files

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

By Robert Cyran

NEW YORK (Reuters Breakingviews) - Cleaning up Yahoo's business is proving a Sisyphean task -- and the U.S. Internet hodgepodge's corporate dysfunction makes it doubly so. Firing chief executive Carol Bartz could be a step forward -- at the very least it may remove some saucy language from the company's board minutes. But Yahoo's directors have done so in characteristically shambolic fashion, and created even more impediments to progress. Yahoo needs a simpler solution -- a breakup.

It's very hard to arrest the downward trajectory of once-dominant Internet firms. Consider MySpace or AOL. But Bartz took the questionable step of sending the firm's crown jewel -- its search business -- to Microsoft on surprisingly poor terms, precluding a Microsoft bid for the whole company. Moreover, in her 30 months in situ, Bartz never found a way to monetize the group's non-controlling stakes in growing Asian firms Yahoo Japan and China's Alibaba, which comprise much of Yahoo's $16 billion value.

This should be a clear priority for Bartz's successor, one that should allow management to focus on what is left of the company's online businesses, like news, finance and job listings. But nothing is ever simple at Yahoo. After firing Bartz by telephone, it has ominously appointed an Orwellian "executive council" to assist interim CEO Timothy Morse, including co-founders and "chief Yahoos" David Filo and Jerry Yang, co-founders of the company.

Given this duo, along with Chairman Roy Bostock, played key roles in flubbing Microsoft's $45 billion bid three years ago, it's curious they are still involved with the company -- let alone now effectively running the shrunken group. For shareholders' sake, Yahoo needs to whittle down and refocus. It's hard to see how the men who remember the firm's glory days will be especially keen to make that happen.

CONTEXT NEWS

-- Yahoo's chief executive, Carol Bartz, has been fired after 30 months on the job. In a letter sent to staff, she said, "I am very sad to tell you that I've just been fired over the phone by Yahoo's Chairman of the Board. It has been my pleasure to work with all of you and I wish you only the best going forward."

-- Timothy Morse, chief financial officer, has been appointed interim chief executive officer. The company also named five other executives to an "executive council" to assist Morse in decision making. Yahoo's two founders, Jerry Yang and David Filo, will remain "chief Yahoos" and advise Morse and the executive council.

(Editing by Rob Cox and David Evans)

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