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Yahoo! Goes Caroling

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It's official: Carol Bartz is the new CEO at Yahoo! (Nasdaq: YHOO  ) .

Word of her potential hire began leaking to the press last week. The disclosure was likely a trial balloon; after the media didn't give the struggling search engine any grief, Yahoo! must have felt comfortable turning to the former Autodesk (Nasdaq: ADSK  ) CEO.

Bartz may not be the snazziest choice for CEO, but Yahoo! has been burned before by choosing star power over solid skills. The Hollywood glitz of the Terry Semel era started out well, but crumbled late. And the storybook return of co-founder Jerry Yang ultimately didn't end happily ever after.

She may lack a flashy dot-com pedigree, but Bartz ran a real tech bellwether, guiding the CAD software specialist through spectacular growth for 14 years until she stepped down in 2006.

Isn't a steady, experienced leader what Yahoo! needs at this point? Catching up with Google (Nasdaq: GOOG  ) just isn't feasible anymore. The company must now make the most of its position as a distant silver medalist, and that challenge demands an industry vet with turnaround experience.

Yahoo! doesn't have to feverishly grow its top line to matter. If it can merely get its net profit margins in line with Google's performance, its earnings would double.

The company's unlikely to ever get that good, but it's worth a shot. When Mark Hurd came over to Hewlett-Packard (NYSE: HPQ  ) as a turnaround expert, few figured that the company could ever give Dell's (Nasdaq: DELL  ) margins a run for their money. Now the two companies have traded places, and Dell's scrambling to catch up to HP.

The CEO spot isn't the only position changing at Yahoo! -- President Sue Decker is also stepping down. Decker was a rising star at the company, even earning a seat on the prestigious board of Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) . However, Yahoo!'s serious funk under Yang's watch has hurt Decker's reputation by association. Decker probably still has exciting chapters to author in her corporate life, but she'll need a change of scenery first.

Investors must be patient -- which should go without saying, if they've already suffered through Yahoo! since the Microsoft merger went bust. It will be several more quarters before we know whether Bartz has a worthy turnaround strategy in place. The clock starts now, but it's a slow ticker.

The world according to Yahoo!:

Dell and Berkshire Hathaway are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers selection. Berkshire Hathaway is a Motley Fool Stock Advisor pick. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz thinks that the Microsoft-Yahoo! merger will inevitably happen. He does not own shares in any of the stocks in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy is worth searching for.

Read/Post Comments (2) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 14, 2009, at 2:40 PM, garyc27 wrote:

    In my opinon, Carol Bartz who is 60, has not been hired to turn the business around. She has been hired to sell the business or at least parts of the business and I would not be surprised to see Microsoft purchasing part of Yahoo.

  • Report this Comment On April 13, 2009, at 12:05 PM, TMFCop wrote:

    Hey Morgan628,

    If the rumors are true, congrats on a prescient call. Seems YHOO and MSFT may just be back in bed again.


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