Yahoo’s new CEO, board members face old problem

By Michael J. de la Merced

 |  NEW YORK TIMES   

  MAY 15, 2012

As Yahoo’s latest chief executive and newest board members settle into their roles, they will be confronted with the same problem that has bedeviled their predecessors: how to fix one of Silicon Valley’s most crisis-plagued companies.

The turnaround effort at Yahoo will be led
for now by Ross B. Levinsohn, whose roots lie in media,
 advertising, and deal-making.

The turnaround effort will be led for now by Ross B. Levinsohn, whose roots lie in media, advertising, and deal-making.

Among the highest priorities for Levinsohn and the new board members is closing a deal to sell some of Yahoo’s stake in the Alibaba Group of China back to that company, in a deal that could reap billions of dollars. A deal could be signed within weeks, according to people briefed on the matter, but talks may slow a bit as Yahoo’s new directors are briefed on the status of the negotiations.

The selection of Levinsohn as interim chief executive stands in stark contrast to the hiring earlier this year of Scott Thompson, who stepped down over the weekend after weeks of controversy over his embellished academic record. Unlike his predecessor, who sought to transform Yahoo into more of a technology company, Levinsohn is expected to steer Yahoo to its core strengths in display and search advertising.

The move is likely to please Third Point, the hedge fund that sought Thompson’s ouster. Yahoo on Monday announced the terms of its settlement with Third Point, including disclosing the board committees that the hedge fund’s three director candidates would join.

The Wall Street Journal reported Monday that Thompson had told the board last week that he has thyroid cancer. The diagnosis contributed to his decision to step down, according to the newspaper’s unidentified sources.

Yahoo isn’t paying Thompson a severance package, according to a document it filed Monday. The contract he signed in January entitled him to severance if he was terminated “without cause.’’

Investors also appeared happy about the management shake-up. Shares of Yahoo closed up 2 percent Monday, to $15.50.

Levinsohn’s ascent ends yet another period of tumult for Yahoo, which for years has grasped for a new identity in an age when central Web hubs are increasingly irrelevant. Among Yahoo’s biggest rivals now is Facebook, whose initial public offering this week looms large over Silicon Valley.

Investors like Daniel S. Loeb of Third Point have argued that the key to a Yahoo turnaround is a focus on advertising, which remains the biggest source of the company’s revenues. With connections to Madison Avenue, Levinsohn is expected to make that his central initiative.

Before joining Yahoo, he was president of News Corp.’s Fox Interactive Media unit, where he was in charge of strategy and deals. He oversaw News Corp.’s $580 million takeover of Myspace, which later signed a $900 million search advertising deal with Google. (The agreement ultimately proved less lucrative than expected, because of declining visitor traffic to the social network.)

He was brought to Yahoo in late 2010 by the company’s chief executive at the time, Carol A. Bartz, to head its Americas operations. Before becoming chief executive, Levinsohn served as the company’s global head of media, overseeing Yahoo’s advertising business.

Thompson will receive the $1.5 million cash bonus he received upon arriving at Yahoo, to help compensate him for payouts he forfeited by leaving his post as president of eBay’s PayPal unit. For the next five years, Thompson will be bound by a nondisparagement agreement as well. A special panel led by Fred Amoroso, Yahoo’s new chairman, is continuing to investigate how Thompson was hired.