Was Scott Thompson the Right Choice for Yahoo?

 | Jan 04, 2012 | 12:36 PM EST
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Former eBay (EBAY) PayPal President Scott Thompson wasn't on anyone's short-list of possible next CEOs for Yahoo! (YHOO).  The stock immediately traded down this morning on the news and then further declined during the conference call introducing him when Chairman Roy Bostock clumsily announced there would be no way that Yahoo! would be taken private.

From the early days after Bartz was let go in September, I was calling out Marc Andreessen and Peter Chernin as great next CEOs for the company. I still think both men would dramatically remake the company.

But both Andreessen and Chernin had a big problem: they were both tied to private equity firms. Andreessen was with Silver Lake and Chernin was with his own firm that was also tied to Providence Equity Partners (whose name hasn't been mentioned much in the last few months).

For Yahoo!'s board, getting either of these men on board would have likely meant a sweetheart deal for PE that by definition would have screwed Yahoo! shareholders. Over the past month, Yahoo!'s largest shareholders have expressed their lack of interest in such a deal, hence the fast push into the cash-rich split that would help monetize the Asian assets and bring back $4-5 billion in "other assets" to Yahoo!'s core business.

Why hire a CEO now? Well, Yahoo! hadn't had one since September. Many shareholders hoped a lack of CEO meant the company would be sold quickly.  It hasn't and it's got to continue to push ahead growing its business, especially with signs of weakness in the core in the last couple of quarters.

And it would be strange if Yahoo!'s board had quarterbacked the cash-rich split including what assets they would get back, without consulting the CEO who would then run the business. Now, Thompson has a seat at the table to decide exactly what valuable assets he'll get back in order to remake the company.

Would there have been a better CEO choice? Let's review the names that were out there, according to Kara Swisher:

-        Ex-Microsoft (MSFT) and GM (GM) CFO Chris Liddell

-        Hulu's Jason Kilar

-        Juniper's (JNPR) CEO Kevin Johnson

-        Yahoo! Board Member David Kenny

-        Microsoft exec Brian McAndrews

-        CEO of Starcom MediaVest Laura Desmond

-        Former DoubleClick CEO David Rosenblatt

None of them is perfect. With some, they have ad experience but no tech or product experience. Some are too young. Some are bean-counters. Some are just dull.

Of all those names mentioned above, I would argue that Thompson had the most to lose by giving up his position at PayPal and going to Yahoo! Kilar wants out of Hulu. Liddell, Kenny and Rosenblatt are on the beach. McAndrews and Johnson are languishing.  Desmond, I just don't know here and I suspect most Yahoo! shareholders don't either.

Current Google (GOOG) head of sales Nikesh Arora's name had been floated a few times. I personally think Arora's overrated in that job the way that Tim Armstrong, current head of AOL (AOL), was. I don't think there's much there with Arora. But he's a big name from a big company and I could have envisioned the Street getting excited about his appointment and some saying that he'd left a great gig at Google to go to Yahoo! in the manner Thompson has.

But I still think Thompson took the biggest risk of all those people including Arora, had he gone.

Thompson was sitting on a juggernaut at PayPal. The payments service is massive and just going to explode in the coming years. We also know that it will eventually be spun off and Thompson was sitting in the catbird's seat as the president for a big pay day and lots of power and prestige as its new CEO.

Why would you give that up to go to Yahoo! and work under a guy like Roy Bostock?  Isn't Yahoo! just a laughing stock?

Analyst Trip Chowdhry had an interesting take this morning after the hiring of Thompson. He speculated that the hiring signaled that Yahoo! was going to get into the payments space in a big way. Trip said that such an aggressive move would help take advantage of Yahoo!'s massive traffic and get it away from its boring/dying business (search/ads/portals) and into a much faster growing and exciting new business. Trip said such a move could vault Yahoo!'s stock to $100.

As a Yahoo! long holder, I hope he's right. It's an interesting theory and would indeed be exciting if true. But it's a long way from here to there.

The first clue of the new Yahoo! core business under Thompson could come when the cash-rich split is announced and we see what $4-5 billion in "other assets" will be coming back to Yahoo! If they are in the payments-related space, that could be very interesting.

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