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Yahoo! taps PayPal chief as CEO

by Olaf de Senerpont Domis | Published January 4, 2012 at 3:56 PM

In naming Scott Thompson, the chief of eBay Inc.'s PayPal division, as its new CEO, Yahoo! Inc. Wednesday chose a respected technologist and accomplished Internet executive, but also one who is viewed by some as lacking the experience necessary to turn around the struggling Internet company.

Thompson, 54, has led eBay's industry-leading online payment division, which it acquired for $1.5 billion a decade ago, since 2005.

When asked about Thompson's perceived lack of turnaround experience during a conference call, Yahoo! chairman Roy Bostock cited the executive's track record of expanding PayPal's revenues from $1.8 billion to $4 billion in 2011 as evidence that Thompson has the ability to do the same for the long-struggling Internet company. Rather than needing a new direction, Bostock suggested that Sunnyvale, Calif.-based Yahoo! has been "treading water" and needs a leader who can unleash the value of its assets.

"We need to build on very strong assets and start swimming at a very fast clip," Bostock told analysts. "You can call it a turnaround, but basically it is taking existing strong assets and building on those assets."

Yahoo! shares responded by sliding 2.6%, to $15.86, in afternoon trading, perhaps because investors have been expecting bigger news pertaining to a sale of the company or its Asian units.

"We view the news as muted, as Yahoo! needs a CEO to run the company, but our call/thesis on the stock is asset sale upside potential, and this announcement does not move that process forward," wrote Bank of America Merrill Lynch analyst Justin Post in a research note Wednesday.

Recent reports said Yahoo! was advancing in negotiations with Alibaba Group and Softbank to sell its ownership stake in Alibaba and Yahoo! Japan for upwards of $18 billion. Bostock said Thompson's hiring will not affect the pace of Yahoo!'s strategic review, which was launched after the company's board dismissed former CEO Carol Bartz in September.

"In looking at alternatives in the comprehensive review ... there will be no slowdown and no delay whatsoever in that process," he said. "Scott has caught up with where we are in those processes."

Rumors have also swirled that Yahoo! might be acquired by private equity firms. Bostock was asked by analysts on the call about whether the company would consider going private.

"We'd have one hell of a challenge to do that," he said. "I do not envision us not being a public company going forward."

Thompson inherits many of the same problems that his predecessor Bartz tried to address during her 2-1/2 year tenure at Yahoo!'s helm. While the former chief is credited with streamlining Yahoo!'s organizational structure and divesting several non-core businesses, the company's revenue growth is still stagnant, and its share price has languished - though it has run up recently on takeover speculation and potential asset sales. Yahoo! also is facing increased competition for consumers and advertisers from companies like Google Inc. and Facebook Inc.

In his remarks, Thompson praised Yahoo! as one of the "great iconic brands of the Internet," one with a strong base of online advertisers and customers. The Yahoo! chief-to-be ducked several tough questions put forth by analysts on the conference call, citing a need to familiarize himself with the ins and outs of the company, but he promised to return it "to a path of industry-leading innovation."

"Speed is critical of course, but we will attack both the opportunities ahead and the competitive challenges with the appropriate balance of urgency and thoughtfulness," Thompson said. "I am personally convinced that the core business assets are stronger here at Yahoo! than people believe at this point."

Prior to joining PayPal, Thompson was an executive with Visa Inc. electronic payment processing unit Inovant.

Thompson's appointment takes effect Jan. 9. Tim Morse, who has served as the company's interim CEO since Bartz was dismissed, will resume his previous role as Yahoo!'s chief financial officer.

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Yahoo! taps PayPal chief as CEO

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Olaf de Senerpont Domis

Bureau chief, West Coast; Editor, venture capital

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