Yahoo! Needs to Find Self, Then CEO

SUNNYVALE, Calif. ( TheStreet) -- Yahoo! ( YHOO), currently in the throes of a major strategic overhaul, needs to work out what it is before tapping a new CEO, warns Ben Schachter, an analyst at Macquarie Group.

"I think they need to figure out who they want to be and where they want to go before they hire anyone," he told TheStreet. "This is a company that doesn't have much of an identity right now."
Yahoo!, still thrashing out its strategy, could struggle in its CEO search.

Yahoo!, which ousted former CEO Carol Bartz last month, is right now engaged in a strategic review that could significantly reshape its future.

Reports over the past month have said Yahoo! was eyeing a sale and had hired investment bankers. Speculation has included revisiting the prospect of a Microsoft ( MSFT) takeover, as well as possible buyout from Chinese Internet giant Alibaba or private equity firms Silver Lake and Hellman & Friedman.

Indeed, the rumor mill has been working overtime. Former CEO Jerry Yang, for example, is reportedly interested in a deal with private equity firms that would take to the company private. Additionally, Alibaba CEO Jack Ma would be "very interested" in buying Yahoo!, and has been working on taking the company private, according to other reports.

Amidst all this upheaval, the company is searching for a successor to Bartz. The AllThingsDigital Web site reports that Yahoo! has hired executive search firm Heidrick & Struggles for its CEO search.

A spokeswoman for Heidrick & Struggles declined to comment when contacted by TheStreet. "Confidentiality is the cornerstone of our business and as such it is company policy not to discuss any client happenings," she explained, in an email.

Macquarie's Schachter, though, thinks that lack of certainty about the company's direction will make it unappealing for potential candidates. "I think it's a very difficult turnaround," he told TheStreet.

Names touted as a good fit for Yahoo! include Juniper ( JNPR) CEO Kevin Johnson, Skype CEO Tony Bates and Facebook COO Sheryl Sandberg.

Reuters also reported this week that AOL ( AOL) CEO Tim Armstrong has been meeting with top shareholders to push the idea of a sale to Yahoo!. Like Yahoo!, AOL is struggling to generate display ad revenue in the face of stiff competition from Google ( GOOG) and Facebook. New York-based AOL reported a loss of $11.8 million in its most recent quarter, and the company's stock is down more than 41% this year.

For these reasons, Armstrong would be an unpopular choice for Yahoo!'s hot seat, even if he clinches a merger, according to an analyst. "I think that, in general, investors want to see that he can turn around his own company before he can turn around Yahoo!," explained an Internet analyst, who asked not to be named.

Yahoo! has not yet responded to TheStreet's request for comment on this story.

Yahoo! shares slipped 16 cents, or 1.04%, to 15.77% on Friday.

-- Written by James Rogers in New York.

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