Yahoo Looks for Magical CEO

Help wanted: seasoned turnaround artist, possibly with an advertising or technology background, who has expanded and diversified an international company through tough economic times.

That, in a nutshell, is what Yahoo Inc. (YHOO) should be looking for in a new CEO as it embarks on what may be the most pivotal executive search in its short six-year life.

Finding a replacement for Tim Koogle will not be easy. Koogle announced last week that he will step down as chief executive but remain as chairman when his replacement is found. His successor will be joining a foundering company whose stock price and advertising revenues have been battered recently. Among the major tasks at hand: shifting Yahoo's ad base from dot-coms to traditional companies and finding new sources of revenue at a company that has offered consumers everything for free. All of this must be done amid a corporate culture that doesn't take kindly to outsiders.

Who is Yahoo hoping to woo? The company is expected to keep its list of candidates a closely guarded secret, and is probably still too busy refining a detailed job description to have settled on a preliminary list of suitors. Yahoo is likely to look toward mature companies that are flush with experienced executives. Barry Diller, chairman and CEO of USA Networks (USAI) , and Mel Karmazin, president and COO of Viacom (VIA) , would be ideal, but it's a very long shot that they'd leave their comfortable perches to take a job at Yahoo. "I'm sure it's going to be somebody you don't expect," said Gordon Hodge, an analyst with Thomas Weisel Partners.

Serious candidates are likely to have lost control at their companies through no fault of their own. Prime targets are executives who have been kicked upstairs by a merger, such as that between America Online and Time (AOL) Warner or between Viacom and CBS. Take Terry McGuirk, who was chairman and CEO of Turner Broadcasting. Just last week, AOL Time Warner Inc. announced that he will give up his post but remain as vice-chairman. McGuirk's experience is exactly what Yahoo should be looking for: He played a key role in the launch of each Turner network since 1973, set up the company's international sales operation, brought the Olympics to cable television, and was responsible for all domestic and international news and entertainment advertising and distribution in his most recent position.

Steve Heyer, who recently left his spot as COO at AOL TW's Turner Broadcasting System to take a position at Coca-Cola Co. (KO) , and Tom Johnson, chairman and CEO at AOL TW's CNN News Group, might be appealing because of their experience building the network from a scrappy upstart into the top TV news outlet with more than 1 billion viewers.

But ultimately, Yahoo is more committed to finding a boss with strong management leadership and a track record of results than someone with experience in online media, said Jeff Christian, CEO of Christian & Timbers, a firm that has placed CEOs for Hewlett-Packard (HWP) and ABC, among others. "I'd probably take any one of [General Electric (GE) CEO] Jack Welch's black belts, even if they built jet engines."

The new CEO must be someone who has not only weathered past economic slowdowns, but also turned around other faltering companies. That means making tough decisions, such as lopping off divisions so the business as a whole could survive. Co-founders are frequently too emotionally attached to their company to make such drastic moves.

By all accounts, however, Koogle did a remarkable job building Yahoo from a startup into a company with annual revenues in excess of US$1 billion. Koogle said he wants someone who can expand Yahoo into a $5 billion company - at a time when the advertising market is softening. Yahoo's crippling dependence on advertising for 90 percent of its revenues is one major problem the new CEO will have to quickly tackle. To that end, the company needs someone who can beef up the company's revenues from subscription and business services.

More daunting still may be Yahoo's xenophobic corporate culture. Koogle and COO Jeff Mallet have been calling the shots since the company's early days, with help from other founders such as Jerry Yang. "They're entering an organization that has a very distinct culture and a lot of people who have been around for a while and at the very senior level who have made a lot of money," said Lowell Singer, a senior analyst at Robertson Stephens. "There's no question this person is going to be perceived as an outsider."

Regardless of those challenges ahead, Yahoo seems confident it will hire a new chief within the next few months. The company recently postponed its analyst conference from the spring to fall, indicating that it hopes to have a new CEO in place before then. Of course, that CEO will have to start doing some searching - for solutions to Yahoo's problems.

- Courtesy The Industry Standard

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