Yahoo CEO Carol Bartz’s Departure Opens Door to Strategic Alternatives

Internet firm Yahoo (NASDAQ:YHOO) said its board has removed Carol Bartz as Chief Executive Officer, replacing her with Chief Financial Officer Timothy Morse on an interim basis.

Securities and investment banking group Jefferies says the departure of Bartz opens door for Yahoo to strategic alternatives.

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 a private equity, Microsoft, AOL and may be even Alibaba Group, says Youssef Squali, an analyst at Jefferies.

In all, Squali believes 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.

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, he says.

The move, while not all that surprising, means that the board grew impatient with Bartz, who has not been able to show much progress in turning around the floundering company, after more than two years at the helm, and who has been unable to find a workable solution for the monetization of the Asian assets, says Squali.

While management did cut costs, it failed to ignite growth in search as was expected from the tie-up with Microsoft Corp. (NASDAQ: MSFT), and failed to keep display growth in line with the overall market, he says.

The departure of three CEOs in less than four years shows the difficult strategic position the company finds itself in and the challenge of effecting a successful turnaround when the market is evolving so fast.

While Yahoo remains one of the top Internet brands worldwide, it will be difficult to attract an A player to run the platform given the tough mandate, a tired corporate culture, a multitude of fits and starts and the likely lack of support from investors for another 2 to 3 year turnaround story.

Yahoo stock closed Tuesday's regular trading up 0.31 percent at $12.91 on the NASDAQ Stock Market, while in the after hours trade the stock grew 6.27 percent to $13.72.