Executive Change at Yahoo Suggests Thirst for Acquisitions

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SAN FRANCISCO -- As Yahoo's newly installed chief executive, Marissa Mayer has given employees free cafeteria food, replaced their BlackBerry phones with iPhone and Android smartphones and closed a long-awaited deal with Alibaba that gives Yahoo $625 million.

But two months in, she has yet to do the one thing that shareholders, analysts and advertisers so desperately seek: articulate a clear vision for the flailing Internet company, whose revenue has flattened and stock price has dropped by half over the last five years. She spoke to employees on Tuesday, roughly outlining her plans. The company, however, did not disclose any details.

An executive hiring, announced Tuesday, may offer a hint to her thinking: Ms. Mayer announced that she would replace Tim Morse, Yahoo's chief financial officer, with Ken Goldman, the current chief financial officer of Fortinet, a public computer security company.

Analysts said the ouster of Mr. Morse, who had a history of cost-cutting, suggests Yahoo is ready to expand through renewed investments and acquisitions.

"Tim Morse was 'Mr. Margin Expansion,' " said Colin Gillis, an Internet analyst at BGC Partners. "To turn the company around and compete with the big boys, Yahoo will need to spend, spend, spend."

With 700 million users each month, Yahoo remains one of the most visited sites on the Web, but it has been ceding its share of the online display ad market to rivals like Facebook and Google.

To lure back advertisers, Ms. Mayer said she would focus on user experience and on mobile, where Yahoo has yet to dip a toe. She told employees to expect "acqui-hires" -- Silicon Valley-speak for acquisitions made for talent rather than technology.

Ms. Mayer is expected to have a baby in the next few weeks, but has said she expects to return to work quickly. Previous chiefs -- four in the last five years, plus two interim chiefs -- have failed to carry out their own long-term plans, largely because they have been unable to articulate what it is that Yahoo actually does.

Yahoo made its name in search but lost that market to Google and then proceeded to miss the boat on every big Internet trend since. It was too focused on reinventing itself as a multimedia company to notice people were migrating to social networks and mobile devices as gateways for information and entertainment. Yahoo's home page remains cluttered and sorely lacking a brand of its own.

Board members hope Ms. Mayer will restore some life to the moribund brand. She came from Google, where she was hired as one of its first engineers. She recently closed a $7.6 billion deal with Alibaba that gives Yahoo, after taxes and paybacks to shareholders, $625 million. She indicated Tuesday that employees should expect acquisitions, said one Yahoo employee who spoke on the condition of anonymity.

But Yahoo has had a difficult time persuading entrepreneurs to join. In 2009, Google's bid to acquire Yelp fell apart at the last minute after Yahoo offered to pay 50 percent more than Google. According to one person close to the talks, both deals fell apart because Yelp's management team refused to work at Yahoo and Yelp's board refused Google's terms.

More recently, the founder of a start-up, who refused to be named for fear it would jeopardize a business relationship with Yahoo, said Yahoo recently inquired about a potential acquisition.

The person, who has also been courted by Facebook and Google, agreed to a meeting but said the company was turned off by Yahoo executives' failure to do basic due diligence.

"At Facebook and Google, they know your underwear size before you walk in the door," this person said. "At Yahoo, it was clear they hadn't even Googled me."

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This article originally appeared in The New York Times.


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