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Yahoo Hires Scott Thompson Chief 4 Months After Firing Bartz

Yahoo Names Scott Thompson CEO
As PayPal’s president, Scott Thompson helped increase the payment service’s users to more than 100 million, helping it close in on a goal of revenue as high as $7 billion by 2013, compared with $3.4 billion in 2010. Photographer: Michael Nagle/Bloomberg

Yahoo! Inc. hired Scott Thompson as chief executive officer, asking the former president of EBay Inc.’s PayPal unit to complete a strategic review and reverse a growth slump that led to the September ouster of Carol Bartz.

Thompson takes the helm Jan. 9, Sunnyvale, California-based Yahoo, the largest U.S. Web portal, said today in a statement.

The new CEO will need to assess options that include divesting Asian assets and selling a stake in itself to private equity firms. Thompson’s appointment makes a sale of all of Yahoo less likely, said Brett Harriss, an analyst at Gabelli & Co. His background in online payments may leave him ill-suited to run a company reliant on advertising to help it vie with Google Inc. and Facebook Inc., Evercore Partners Inc. said.

“It’s a surprising choice,” said Ken Sena, an analyst at Evercore in New York who has an “equalweight” rating on Yahoo. “Scott has a great track record in payments and has proven an effective executive at PayPal and has major tech chops and international experience, but at a content company, which Yahoo has increasingly become, his experience is kind of lacking.”

Yahoo Chairman Roy Bostock said on a conference call that he has no plans to take Yahoo private. Thompson said his priorities are boosting revenue and putting the company at the forefront of innovation.

Yahoo, founded in 1994 by Jerry Yang and David Filo, fell 2.6 percent to $15.86 at 1:20 p.m. New York time. The stock lost 3 percent last year. John Donahoe will serve as PayPal’s interim chief, working closely with the PayPal leadership team, said John Pluhowski, an EBay spokesman.

Thompson’s Record

Yahoo has been considering selling all or part of its stakes in Alibaba Group Holding Ltd., China’s biggest e-commerce company, and Yahoo! Japan Corp. It’s also fielding proposals to sell a stake in itself from a group led by private equity firm Silver Lake, and another from TPG Capital. Microsoft Corp. has expressed an interest in helping finance a purchase.

As president of PayPal, Thompson contributed to an increase of the payment service’s users to more than 100 million, helping it close in on a goal of revenue as high as $7 billion by 2013, compared with $3.4 billion in 2010.

PayPal, the fastest-growing part of San Jose, California-based EBay, has services that help retailers and individuals exchange funds for purchases or payments, even without a credit card. Thompson, who has run the business since January 2008, also engineered the company’s expansion to online daily deals and mobile payments.

EBay fell 3.9 percent to $30.12.

Alibaba, Yahoo Japan

Thompson may play a role in extracting value from Yahoo’s international assets. Aside from its main Internet portal business, Yahoo holds about 40 percent of Alibaba and co-owns Yahoo Japan with Softbank Corp. Yahoo estimated the Alibaba stake was worth about $14 billion on a pretax basis in October.

Thompson’s primary focus will be on the “core business,” and he will work closely with the board on the company’s strategic review, Bostock said in the statement.

Yahoo is considering a “wide range” of opportunities for the company’s business, as well as specific investments or dispositions of assets,” Bostock said.

Some investors had speculated that Yahoo would sell itself after Bartz was ousted.

“It’s probably a slight negative because I think the best outcome for Yahoo would be an all out takeover by Microsoft,” said Gabelli’s Harriss, who is based in Rye, New York and recommends buying the shares. “Hiring a new CEO makes the sale of the whole company unlikely.”

Bartz Stumbles

In her less than three years as CEO, Bartz reduced costs with job cuts and formed a search partnership with Microsoft Corp. Still, Yahoo failed to make much headway in the U.S. advertising and search markets.

During the second quarter, Bartz’s last full three-month period as CEO, Yahoo reported revenue that fell short of estimates as her overhaul of the U.S. sales force made it harder to close deals and slowed growth in display advertising.

In early September, Bostock fired Bartz over the phone, kicking off a wave of takeover speculation. Tim Morse, who had been chief financial officer, became interim CEO. The company initiated a strategic review “to position the company for future growth.”

Yahoo drew interest from multiple parties after announcing the review, according to a memo to employees in September.

No ‘Distraction’

That included Jack Ma, chief executive officer of Alibaba Group, who said in October he was interested in buying Yahoo. Private-equity firms TPG Capital and Silver Lake signed non-disclosure agreements to help size up a possible bid for Yahoo, people close to the companies said in November.

Yahoo’s Asian assets will not be Thompson’s main focus and won’t get in the way of his attention to building out Yahoo’s core Internet business, Bostock said.

“That will not be a distraction for Scott,” he said on the conference call. “Given where we are and how we have gotten there and the people we have staffing that, there’s no way.”

Microsoft signed a non-disclosure agreement as well, a person briefed on the matter has said. KKR & Co. and Blackstone Group LP also were among the private-equity firms considering possible bids, people with knowledge of the matter said in October. Also, Google was considering providing financing for an acquisition of Yahoo by another company or a group of bidders, according to another person who has been briefed on the matter.

No Plans to Go Private

Bostock said he plans to keep the company in the hands of the public market.

“If you and I were to sit down tomorrow and say, ‘Let’s take this company private,’ I think we’d have one hell of a challenge on our hands,” Bostock said on the call. “It’s not on the radar screen.”

Yahoo will turn its focus increasingly to mobile devices, such as tablet computers and smartphones, Thompson said. Thompson has partnered with EBay on mobile initiatives that let customers scan products over their smartphones and check the availability at local retail stores and on EBay’s website. When he left PayPal, Thompson was working with the top 100 U.S. retailers to push the payments services into physical stores, ramping up competition with companies such as Visa Inc., by giving users the option to pay with a smartphone at a point-of-sale terminal.

“The intention that we have is we will be great across all devices,” he said. “Mobile is a wave that’s bigger than people can even imagine it to be.”

Thompson said he will harness Yahoo’s brand and talent to guard against employee turnover and make headway with consumers with more content and use of the company’s data.

“This company, long before I arrived, had the aspiration of being the premium digital media company,” he said on the call. “I would not come if I didn’t believe the future.”

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