Yahoo’s Stock Jumps After Dumping CEO Carol Bartz

Yahoo Inc. (NASDAQ:YHOO) Chairman Roy Bostock fired CEO Carol Bartz on Tuesday. Bartz will be temporarily replaced by CFO Tim Morse while the company searches for a new permanent leader who can help them grow their online advertising business to compete with Google (NASDAQ:GOOG),  IAC/InterActiveCorp (NASDAQ:IACI), AOL (NYSE:AOL), and Facebook.

The news came after markets closed yesterday, and had Yahoo (NASDAQ:YHOO) shares up 6% in after-hours trading, climbing from $12.90/share to $13.70/share, just slightly higher than the stock’s share price in January 2009, when Bartz was first appointed the company’s chief executive officer in hopes of reviving stalled growth and competing more successful rivals. But in her more than two years at Yahoo, the company has shown no real improvement, and revenue growth has been flat. Few were surprised when the outspoken CEO announced, in an email to employees, that she had just been fired over the phone by Bostock.

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Unable to compete with Google in the advertising and content markets, Yahoo handed over its search operations to Microsoft (NASDAQ:MSFT) during Bartz’s reign in a deal that left Microsoft to handle search for Yahoo’s websites and keep a portion of the ad revenue. The company’s board hopes a new executive will help support “a comprehensive strategic review” to position the company for growth. Though Yahoo is still one of the most popular destinations on the Internet, Google has a market value of $170 billion, roughly 10 times that of Yahoo.

Yahoo’s (NASDAQ:YHOO) eight independent directors voted unanimously last week to fire Bartz, who is also on the board along with co-founder Jerry Yang, though neither of them participated in the vote. Though Yahoo has not yet hired investment banking advisers, it will likely meet with various firms in the coming weeks. Many are questioning what will be the next step for Yahoo, and whether the company might be ripe for a takeover.

Yahoo (NASDAQ:YHOO) is worth roughly $16 billion, of which 40% is its stake in China’s Alibaba. Yahoo also owns a stake in Yahoo Japan. Overall, analysts estimate that Yahoo’s Asian assets are worth roughly $7-$9 of Yahoo’s $13 share price. However, relations between Yahoo and Alibaba have been strained since Bartz took office, with Alibaba founder Jack Ma trying to buy out its Yahoo’s stake in the company, though he ultimately failed. While Bartz has been blamed for the souring of Yahoo’s relationship with Alibaba, a senior official at Alibaba Group said her departure is unlikely to improve the relationship, though they will wait to see how they work with the new CEO. The relationship between the two companies began to crack when Alibaba abruptly handed over Alipay, China’s answer to PayPal, to a company controlled by Ma, without Yahoo’s knowledge.

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