It is hard to blame the market reaction on Mr Thompson’s CV. As president, he
grew Ebay’s PayPal payments division very well and his background in
technology rather than media meets some, though not all, of Yahoo’s needs.
It is more plausible that the drop reflects fading hopes that the core
business will be the target of a premium private equity or strategic bid.
The hiring of a new boss seems to reduce that possibility.
That the market was uninspired by the appointment of a new leader for Yahoo’s
core internet advertising business, which badly needed one – Carol Bartz,
the last chief, was fired in September – also shows how little of Yahoo’s
current value is attributed to that business, as opposed to its ownership of
stakes in China’s Alibaba and Yahoo Japan.
The core is still very profitable but is in clear decline, both in its share
of the display advertising market and in the amount of time users spend on
its sites. And scepticism about a turnround is warranted if for no other
reason than that it is hard to recall a case of a declining internet
business being successfully revived. (Interestingly, Ebay might be an
exception.)
The bar for success, in any case, has been set low for Mr Thompson, which he
should welcome. He is likely to face a defining challenge early on. If
Yahoo’s board is, as reported, near an agreement to dispense with the Asian
assets, he will find himself in charge of a very substantial cash position.
A decision will have to be taken about what should be returned to shareholders
and what reinvested in the company. What Mr Thompson decides to do then will
move Yahoo’s shares much more than did his appointment.
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