Jan. 13 (Bloomberg) -- Yahoo! Inc. named Carol Bartz as chief executive officer after a two-month search, looking to the former head of Autodesk Inc. for new direction in its fight with Google Inc.

Bartz, 60, takes over immediately, Yahoo said today in a statement. President Susan Decker, who had been considered for the job, will leave the company after a transitional period. Jerry Yang, who co-founded Yahoo in 1994, agreed in November to step down as head of the company.

Bartz, CEO of Autodesk from 1992 to 2006, faces the challenge of reviving Yahoo’s growth after the company spurned a $47.5 billion takeover attempt by Microsoft Corp. last year. She also has to learn a new business -- Internet advertising -- a switch from the design software sold by Autodesk. Yahoo ranks second to Google in Internet searches and online ads.

“She was an inoffensive, but largely unexciting candidate -- someone who would be a steady hand at the wheel -- but investors were hoping for a lot more than that,” said Jeff Lindsay, an analyst at Sanford C. Bernstein in New York. “She’s undoubtedly a competent and able executive. The problem is, is she the right fit for the job?”

The Yahoo board had been informally discussing three leading candidates over the past few weeks, a person familiar with the matter said. Bartz met with director Carl Icahn in New York before Christmas, the person said.

Right Combination

In recent days, Bartz emerged as the favorite candidate, and the board began to negotiate hiring terms, including salary. The board met today to vote on those terms, the person said.

“She is the exact combination of seasoned technology executive and savvy leader that the board was looking for,” Yahoo Chairman Roy Bostock said in the statement. “Carol meets all of the criteria we set for the search and is the only person to whom we offered the job.”

Yahoo, based in Sunnyvale, California, fell 12 cents to $12.10 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares lost 48 percent in 2008.

The reaction from investors suggests they don’t expect Yahoo to get a new acquisition offer from Microsoft, said Youssef Squali, an analyst with Jefferies & Co. in New York.

Microsoft, which had offered as much as $33 a share last year, walked away from talks after Yahoo demanded more. The two sides later failed to agree on a deal to sell Yahoo’s search business alone to Microsoft.

Dimming Hope?

“There was basically hope and anticipation that maybe Microsoft would come back,” Squali said. The CEO announcement signals that “maybe the board has decided to go it alone after all.”

Bartz will need six to 12 months to get fully up to speed on her new job, and a deal to sell the search business couldn’t be hammered out until then, he said.

One of the most prominent women in Silicon Valley, Bartz has also served as an executive at Sun Microsystems Inc., Digital Equipment Corp. and 3M Co. She had previously been considered for other high-profile CEO jobs. Before Steve Jobs became the permanent chief at Apple Inc., she was one of the people in the running.

When Bartz stepped down from the CEO job at Autodesk in 2006, she said she was taking time to help her daughter, who was going to college. She remained executive chairwoman, focusing on boosting sales in emerging markets such as India.

‘Hands-On’

“Carol is hands-on as required and can be aggressive as required, but she’s also very supportive of her people,” said Steven West, an Autodesk director and founder of the consulting firm Emerging Company Partners LLC in Incline Village, Nevada. “She has a really balanced leadership style.”

Under Bartz, Autodesk survived the slump of the early 1990s and the dot-com crash, as well as a fight with Microsoft for market share. She added software for three-dimensional designs, helping spur orders. The company also boosted its international revenue, getting more than 60 percent of sales overseas.

“I was on the board search committee when Autodesk hired Carol in 1992, and it was my best decision as a director and one of the best business decisions in my 37-year career,” said Mark Bertelsen, a partner at the law firm Wilson Sonsini Goodrich & Rosati who still serves on Autodesk’s board.

Cancer Battle

At the beginning of her tenure at Autodesk, Bartz fought breast cancer, taking only limited time away from the job. Bartz learned she had cancer on her first day at Autodesk and took a month off to battle it.

Yahoo’s profit has fallen in 10 of the past 11 quarters. The company also faces slowing Internet advertising sales, a market already dominated by Google. Google accounted for almost two- thirds of U.S. search queries in November, giving it more opportunities to sell ads. Yahoo had 20.4 percent, according to research firm ComScore Inc.

Microsoft, which ranks third in U.S. Internet searches, pursued Yahoo last year to help it catch up with Google. Microsoft CEO Steve Ballmer said in November that the company was finished with attempts to buy all of Yahoo, though it still may be interested in a search agreement. That remains Microsoft’s position, a person familiar with the matter said last week.

Bartz may consider selling off Yahoo’s Asian operations to refocus the company. Yahoo also has talked to Time Warner Inc. about buying that company’s AOL business.

Google Deal

Yang tried to broker a search-advertising agreement with Google last year. Google walked away from the partnership after regulators threatened to block the deal. Yang will stay at the company, returning to his previous job as “Chief Yahoo,” an advisory role.

“The biggest thing Yahoo needs to do is focus on what they’re good at and outsource what they’re not,” said Gene Munster, an analyst at Piper Jaffray & Co. in Minneapolis. He recommends buying Yahoo’s shares and doesn’t own them. “She hasn’t done anything on the Internet side or the media side, but she’s not getting the job because of that. She’s getting it because she knows how to right-size and organize a company.”

A three-person board committee, working with executive- search firm Heidrick & Struggles International Inc., had winnowed an initial list of about five candidates down to three, a person familiar with situation said last week. In addition to Bartz and Decker, an unnamed executive was considered, the person said.

The search committee was made up of Yang, Bostock and former Northwest Airlines Corp. Chairman Gary Wilson. Former Vodafone Group Plc CEO Arun Sarin was among the people initially contemplated for the post. He withdrew his name from consideration last month.

Bartz is “a good strategist and also a good cheerleader,” said Walter Price, managing director at RCM Capital Management in San Francisco. “She has to get the company to believe in itself again as a force in the Internet.”

(Yahoo will hold a conference call at 5:30 p.m. New York time today. Call +1-888-253-4037 and use the passcode 379105, or go to http://yhoo.client.shareholder.com/index.cfm.)

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

Last Updated: January 13, 2009 17:25 EST