New Yahoo CEO Welcomed with Mixed Reviews
Yahoo! Stock Declined
The stock market responded to the Thompson hire by sending Yahoo’s stock down 2 percent in early morning trading. The stock was down, as of Wednesday, 14 percent from its 52-week high in May but it has recovered from its $11 per share August low, according to The Wall Street Journal. By Friday, the stock had finished the week at $15.52.
Analysts Were Not So Kind
Wall Street’s analysts weren’t really showing their love toward the Thompson selection.
“We view this as a slight negative, as it likely rules out a sale of the entire company,” Gabelli said in a note before the official announcement. Says one analyst on a conference call on the news: “Scott, to a large degree, is more of a technologist, not more of a media or turnaround expert, which is what we thought Yahoo needed at this point.”
Stifel Nicolaus seemed positive:
Shares may fade a bit today if investors believe that the hiring of Thompson may indicate that the evaluation of strategic alternatives is not going forward. We believe that would be a buying opportunity. We believe the process continues, now with Thompson as a guiding force.
This hiring may be a signal that a private equity injection into Yahoo! is less likely now — we believe that with a solid CEO like Thompson, a private-equity led investment is less necessary.
Piper Jaffray’s sees challenges ahead for Thompson:
We believe the hire is a slight positive to Yahoo! as Thompson is likely to refocus employees who had lacked a permanent CEO for months; however, we note that Yahoo! has deteriorated meaningfully during the absence of a permanent CEO as evidenced by our daily ad checks (62% guaranteed in December vs. 91% last December). We believe the appointment of a CEO suggests that a private equity minority investment in YHOO is unlikely, but does not impact the potential and timing of an Asian asset sale, echoed by Chairman Roy Bostock.
We remain Overweight due to the possible revaluation of shares through a potential Alibaba/Yahoo! Japan deal as a deal could result in excess cash that Yahoo! could use to buy back shares.
And Citi, coming in the middle, gave Yahoo’s stock a “Netural” rating:
We believe Mr. Thompson has strong technical and organizational skills (like Carol Bartz) and should bring that rigor to Yahoo!. His track record at PayPal was excellent. However, we are somewhat concerned that he does not have strong media/advertising experience, which we believe Yahoo! needs, given the structural issues surrounding the company’s Search and Display initiatives. And by selecting Mr. Thompson, Yahoo! is explicitly pursuing a Growth strategy, whereas we believe a Value strategy might be more appropriate.
Exec Are Not So Impressed
Coming from the inside, an unnamed Yahoo executive had this to say about the Thompson selection, according to Business Insider:
“He sounds like a nice guy. It’s so not what we need. We need a fucking animal to come in and change this company.
One former PayPal colleague of Thompson responded,
“He is from Visa. That is why PayPal stopped innovating. It hired a bunch of bank execs.”
Now that a new CEO is in place, it may be a changing of the guard for Yahoo’s board of directors. On Friday, news come out that Yahoo is looking for new board candidates to replace potential outgoing ones, such as Chairman Roy Bostock, according to the Wall Street Journal.
To assist with the search, the company hired executive search firm Heidrick & Struggles International Inc. to find a possible replacement for Bostock and directors who may hand in their resignation letters.