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After CEO Carol Bartz’s Ouster, What’s Next for Yahoo?

Analysis: Yahoo’s board has its work cut out for themselves after firing the company’s CEO

Carol Bartz's tenure at Yahoo, which ended unceremoniously Tuesday, is a reminder how tough it is to maintain dominance and sustain growth in the fast-moving tech world.

Yahoo's next leader — or owner — has a big challenge ahead in attempting to return the company to the heady growth of its early years.

Once the No. 1 search engine, Yahoo had already lost ground to Google by the time Bartz took the top spot in January 2009. During her tenure, she oversaw a comatose giant that has enviable basic numbers as the third-biggest web portal (after Facebook and Google) but is plagued by ongoing weaknesses in display advertising and in search.

The company is still undergoing a rocky transition in concert with Microsoft after a failed takeover bid.

Also read: Yahoo CEO Carol Bartz: 'I've Been Fired Over the Phone'

Yahoo draws 500 million unique visitors a month, compared to Facebook, which brings in 700 million uniques monthly.

Dating back to when Yahoo! was "cool" — a fairly quaint notion today — it has remained at or near the top of the charts in users of its mail, news and finance sites. It has beefed up its original content, marrying those stories with news from outside sites, including TheWrap. The company also failed to gain ground with social media and mobile platforms.

Also read: Yahoo Q2 Earnings Slip on Disappointing Search Numbers (Updated)

Although Bartz couldn't grow the basic user numbers, Wall Street has been more critical of her handling of Yahoo’s significant Asian assets, Yahoo Japan and China’s Alibaba. There has been mounting pressure over recent months to sell either of both assets and pour the huge, resultant cash grubstake into fixing the core business.

Alibaba has been particularly nettling, as the mercurial Bartz’s somewhat hostile relations with Alibaba CEO Jack Ma seemingly prevented transparency in their business dealings. This was never more obvious than when Ma sold off the important subsidiary Alipay, a Paypal-type online service worth $5 billion, purportedly without informing Bartz and the Yahoo board.

With news of that sale — and the protest from Alibaba’s bosses that they had in fact warned of the move — Yahoo’s stock price tumbled 14 percent in a week. A Bloomberg commentator says the reverse posed “huge corporate governance issues.”

Also read: Yahoo, Google, Amazon, Dish Bidding on Hulu — But They Have Concerns

According to a day-after Wall Street Journal story about analyst reaction, Bartz can take comfort in Wall Street’s unimpressed reaction to her firing. While the share price showed an initial uptick, the Street's savants were still skeptical. A Journal Market Beat post quoted Barclay’s Capital as among the unimpressed.

"This transition is likely to prolong Yahoo’s turnaround in an internet environment that is rapidly changing," it read, "and could further destabilize its sales force.”

Although Yahoo replaced Bartz with CFO Tim Morse, on an interim basis, it may be difficult to find a superior chief executive after the company has run through three of them in four years.

As a numbers man, Morse may not be the answer to Yahoo’s ongoing quest for a marketable identity.  Via a quote from Stifel Nicolaus analyst Jordan Rohan, the New York Times hinted that Yahoo's installation of a quintet of Yahoo execs to advise the interim boss may have to do with Morse’s less-than-visionary history as a CFO at brick-and mortar businesses: “Yahoo hasn’t asserted what it wants to be — whether it wants to be a media or technology company — and Carol, rightly or wrongly, is being blamed for a bad search deal and a less than stellar performance.”  

Evercore analyst Ken Sena said that beyond talk of the Asian difficulties, “We view the Leadership Council and Board remarks as evidence that the Board is becoming more keenly aware of its current opportunities (or challenges, rather). Yahoo management has had issues in the past with clearly defining what these are for investors.”

All Things D’s Kara Swisher posted her choices for the next CEO ranging from volunteer-by-Tweet Snoop Dogg (“Im takn over as tha CEO of Yahoo. Need sum of tha Snoop Dogg content ya digg. Nuff Said.” ), through AOL’s Tim Armstrong, former News Corp. exec Peter Chernin, and a bevy of Silicon Valley types with specialties in consumer-friendly branding, from Hulu to Google. The message seemed to be that a charismatic, user-friendly type is needed to rebrand the portal.

However, with word that longtime potential partner AOL had hired bankers for the presumed task of managing acquisitions such as a Yahoo deal, and Yahoo itself is bringing in deal-making experts, the analysts at Jefferies think Yahoo will sell itself "before it finds a new CEO."

The ouster apparently took Bartz by surprise. The acerbic executive didn't sugar coat her exit, sending out an email announcing that Board Chairman Ray Bostock had fired her by phone.

There’s now a certain pressure for the board to move quickly, lest the shareholders refocus their ire on them. Whoever comes into the job is faced with no easy task.

As Wells Fargo commented: “We think there is now an opportunity for someone different to come in and effect some positive changes at the company, although it clearly cannot happen overnight.”