Yahoo doesn't need new CEO, it needs to sell, say analysts

Yahoo is widely expected to sell out before a new CEO is named. At the least, Yahoo will undergo some financial engineering to monetize its Asia assets.
Written by Larry Dignan, Contributor

Carol Bartz is out as CEO of Yahoo and analysts are widely expecting the company to pursue strategic alternatives including an outright sale or monetization of the company's Asian assets.

Yahoo ousted Bartz via phone late Tuesday after more than two years of drama, disappointing quarters and executive turnover. An executive committee and board will determine Yahoo's fate. CFO Tim Morse becomes the interim CEO. The common questions among Wall Street analysts boiled down to two words: Now what?

The consensus view appears to be that there won't be another CEO named. Yahoo is likely to sell itself before it finds a new leader. Patience at Yahoo as well as Wall Street is thin. Simply put, Yahoo is about to go through yet another transition as it looks for its fourth CEO in four years.

Also: Yahoo's Bartz era: The non-stop drama in her own words, Bartz out | CNET: Blown Microsoft sale, Bartz gone, Time to sell? Bartz timeline Roundup | CBS News: Yahoos in chargeTechmeme

Here's a look at some of the analyst comments on Yahoo's future:

Jefferies analyst Youssef Squali:

Given the succession of three CEOs in less than four years, it'll be challenging for the board to find an A player who'd be willing to take on the daunting task, and for investors to wait for yet again another turnaround to happen. We believe that Yahoo! sells itself before a permanent CEO is announced.

We believe a number of strategic options could be on the table for the company, including an outright sale to a large media company like News Corp., or a more convoluted structure that would involve private equity, Microsoft, AOL and may be even Alibaba Group. In all, we believe that it is more likely that the board reaches an agreement to sell the company or parts of the company before a new CEO is found.

Barclays Capital analyst Anthony DiClemente said that Yahoo could hire an internal candidate, which would result in a shorter turnaround timeline, go with an outsider or sell assets or the entire company. DiClemente said:

We believe this leadership change extends Yahoo!’s turnaround timeframe and could further destabilize its sales force—which is also going through a transition—lead to more employee departures, and accelerate its share losses in display.

Wells Fargo analyst Jason Maynard:

In recent quarters, the Search business has underperformed, and its core Display advertising business has also deteriorated. The relationship with Alibaba CEO Jack Ma has also clearly been strained, leading investors to question Yahoo's ability to monetize its strategic Asian assets. Moreover, the company’s attrition rate among engineers and managers over the past year has been abnormally high. We think there is now an opportunity for someone different to come in and effect some positive changes at the company, although it clearly cannot happen overnight.

Evercore analyst Ken Sena:

While a sale of Yahoo! or its Asian asset stakes remains a perennial theme, we view the Leadership Council and Board remarks as evidence that the Board is becoming more keenly aware of its current opportunities (or challenges, rather). Yahoo management has had issues in the past with clearly defining what these are for investors.

Deutsche Bank analyst Jeetil Patel:

Shares of Yahoo! traded higher in after-hours trading on the news, as emotionally exhausted investors have new reason to hope to see value unlocked in Yahoo shares with this change. A new CEO may be better positioned to negotiate with partners in China were relations strained under Bartz. In addition, a private equity buyer could seek to unlock the value of the Asian assets and leverage up the core of Yahoo, which continues to generate cash flow despite competitive and operational challenges.

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