Yahoo Names PayPal’s Scott Thompson New CEO

He replaced Carol Bartz, who was ousted from digital company in September

Yahoo! has selected PayPal president Scott Thompson as its new CEO, the company announced Wednesday, thus ending a search that began with Carol Bartz's firing in September.

Thompson has run PayPal, a subsidiary of eBay, since 2008 and becomes the fourth Yahoo! CEO in less than five years. Tim Morse, the company's CFO, will return to that position having served as interim CEO since Bartz' acrimonious departure.

"Scott brings to Yahoo! a proven record of building on a solid foundation of existing assets and resources to reignite innovation and drive growth, precisely the formula we need at Yahoo!," said Yahoo chairman Roy Bostock said in a statement. "His deep understanding of online businesses combined with his team building and operational capabilities will restore the energy, focus, and momentum necessary to grow the core business and deliver increased value for our shareholders."

Thompson takes the helm of a company that was one of the Internet's early search giants, but has since fallen on hard times. Though it retains a large user base and generates a great deal of revenue, its net value has dropped by more than 50 percent just in the past few years while its advertising business has slipped well behind the likes of Google and Facebook.

Also Read: Yahoo Under Siege: As Hedge-Fund Raider Closes In, Founders Hint at Sale

Indeed, Bostock said on a call Wednesday morning that Thompson will be "out there calling on advertisers."

While Wednesday's press release release trumpets Thompson's success in growing PayPal's user base and its revenue, the greater challenge at Yahoo is defining the company's identity.

Bartz was hired to succeed Jerry Yang in Jaunary of 2009 and her mission was to revitalize a flagging brand. She came from Autodesk, which makes design software, and had served on the boards of tech companies like Intel and Cisco. 

While Bartz refocused Yahoo's efforts on content — particularly in the sports and finance sectors — and left search to one-time foe Microsoft, her new plan did not have the intended effect of increasing profitability. On the call Wednesday morning, Thompson faced questions about Yahoo's identity and opted not to go into specifics, emphasizing the company's great assets instead.

Also Read: Ousted CEO Carol Bartz: Yahoo 'F—ed Me Over' 

Many felt Bartz never established a clear mission at Yahoo, but that did not stop her from telling Fortune that Yahoo "f—-ed" her over.

Since Bartz' departure, there have been many rumors about the potential sale of Yahoo, with a group of suitors including private equity firm Silver Lake and another ailing early industry leader — AOL.

This is not the first time that a potential Yahoo sale has been bandied around, and back in 2008 the company resisted Microsoft's attempted takeover. It later struck an advertising search partnership with the company.

Though the chances of a full sale would appear to further diminish with this announcement, the possibility of a smaller divestiture remains. Yahoo has been looking to sell part of its stakes in its East Asian holdings, notably the Alibaba Group in China and its Japanese affiliate. There have been rumors that if such a sale does not occur, Alibaba will look to strike a partnership with a private equity firm to buy all of Yahoo.

Thompson's new job seems to have surprised his old bosses at eBay, as in an internal memo obtained by AllThingsD, eBay CEO Jason Donahoe says he was "shocked." Thompson just told him of his decision on Tuesday.

Prior to serving as president of PayPal, Thompson was its Chief Technology Officer.