NEW YORK (Reuters) - There are few surer ways for an executive to lose a good reputation than to be CEO of Yahoo Inc. Just ask Carol Bartz or Terry Semel.
As the company searches for Bartz’s replacement, its biggest obstacle is likely the track record of past CEOs after they moved under Yahoo’s figurative purple umbrella.
“They are going to have a lot of trouble filling that job,” said a tech industry consultant who asked to remain anonymous because of a relationship with Yahoo. “Anybody great is not likely to go there.”
A second source close to Yahoo added: “It’s a very risky move for an executive to moor their reputation to Yahoo. No one has been able to turn it around.”
Bartz came to Yahoo in 2009 as the tough-talking, bottom-line oriented CEO who led software developer Autodesk to prodigious revenue and share price growth. When she left Yahoo Tuesday, she was viewed as an executive incapable of innovation and lacking vision, an executive who failed to move Yahoo’s stock price or operating performance in any meaningful way.
She is also widely seen as having made a bad deal to hand Yahoo’s search engine operations to Microsoft.
“Bartz’s demise underscores that fallen angels in the Internet space are really hard to turn around,” Needham & Co. analyst Laura Martin wrote in a report Wednesday. “Her lack of success raises the risk that perhaps it simply can’t be done by anyone (unless you’re Steve Jobs).”
Yahoo co-founder Jerry Yang served as the company’s CEO immediately before Bartz. But the beloved co-founder lasted just over a year in the role, changing in investor eyes from the heart and soul of the company to a fool who turned down a roughly $45 billion takeover offer from Microsoft for reasons that some say had more to do with ego than economics.
Then there’s Terry Semel. Prior to his six-year tenure at Yahoo, Semel spent 24 years running Warner Bros, transforming the studio into a brand name by expanding internationally, diversifying into television, and rolling up record labels. By the time Semel was done, he had grown Warner Bros into a multibillion-dollar company.
That’s all a distant memory now. Semel is now known more for earning roughly $500 million during a six-year stint at Yahoo in which he failed miserably trying to move the company into content and — as a result of that change in focus — was deemed to have caused Yahoo to fall behind in technological and product innovation.
Part of the reason Yahoo’s CEOs face such difficulty is because, sources say, they are just one prong of a leadership trifecta, with the board and Yang also having significant input into the decision-making process. Those influential camps are often not on the same page.
For example, the decision to fire Bartz without naming a successor, along with the plan to initiate a “strategic review,” suggested that the company was laying the groundwork for a sale or merger. But Yang told executives during a meeting on Wednesday morning that the company was not for sale, according to a person familiar with the matter.
Some industry insiders and investors believe Yahoo is sending out mixed messages about whether it hopes to initiate another effort at reviving the company’s fortunes or simply wants to sell its various assets to different bidders because of differences within the three factions.
“Don’t discount the possibility that inside Yahoo and Yahoo’s board, there’s real dissent,” said Adam Seessel, Director of Research at Martin Capital Management and portfolio manager of the Riverpark/Gravity Long-Biased Fund. “Jerry Yang has wiffled and waffled, he’s the guy who didn’t want to sell Yahoo to Microsoft at $33 a share. So who knows where his head’s at?”
“Part of the reason why they’re sending confusing signals is that I wouldn’t be surprised if they were confused.”
But countering any reputational harm to the next potential CEO are several factors, including the glory that comes with restoring a tarnished brand and a large paycheck.
Yahoo owns some of the Web’s most visited real estate, but the company has seen its popularity and revenue decline amid competition from Google and Facebook. Much of its $16 billion valuation is ascribed to its roughly 40 percent stake in China’s Alibaba, the parent company of websites including Alibaba.com and Taobao. Yahoo also owns a stake in Yahoo Japan, along with Japanese mobile company Softbank
“I don’t think running Yahoo is a no-win situation,” Mark Cuban, tech entrepreneur and owner of the Dallas Mavericks basketball team, wrote in an email.
“It’s a difficult situation. Yahoo had a cash cow product (display advertising) that was preempted by competitive advances. The challenge they face is finding a transformational product that can knock off an industry standard.”
Plus, he added, taking the helm of Yahoo would bring “huge money.”
Trying to unlock the upside potential in Yahoo may be too tempting for some to pass up — despite the risk of dimming any glory an incoming CEO had previously achieved.
“It’s a great challenge for any CEO, therefore sort of irresistible to a certain type of person,” said a third source close to both Yahoo and AOL.
Reporting by Peter Lauria, Alexei Oreskovic, and Nadia Damouni; Editing by Edwin Chan, Gary Hill