Yahoo names PayPal executive as new CEO

Yahoo named PayPal President Scott Thompson as its chief executive on Wednesday, hoping the well-regarded Internet technology and e-commerce expert will replicate his success at eBay Inc and turn around the struggling company.

Mr. Thompson, credited with driving growth at eBay’s online payments division PayPal, joins Yahoo during a period of turmoil, as the company plows ahead with a strategic review in which discussions have included the possibility of being sold, taken private or broken up.

Thompson, a former Visa payments software platform designer,

joins the company five months after the firing of previous CEO Carol Bartz as the one-time Web powerhouse Yahoo struggles to compete with newer heavyweights Google and Facebook.

“I’m from Boston, we’re the underdogs since the beginning of time. Hopefully that spirit has held through. I like doing complicated, very difficult, very challenging things,” Thompson said in an interview.

Mr. Thompson, who takes over on January 9, will also join Yahoo’s board. He ran eBay’s PayPal since early 2008, and was previously its chief technology officer. Under his leadership Yahoo said PayPal increased its user base from 50 million to more than 104 million active users. PayPal processed US$29-billion in payments in the third quarter of 2011.

Chairman Roy Bostock told analysts on a joint conference call with Thompson, that Yahoo has no intention of being taken private.

Yahoo’s shares were down about 2% in mid-morning trading Wednesday and eBay’s shares fell 3.5% as analysts said the online retailer would miss the respected Internet executive.

“It’s probably a slight negative for Yahoo, because it makes the sale of the entire company to someone like Microsoft less likely,” said Brett Harriss, an analyst at Gabelli & Co, which owns Yahoo shares. “He’s certainly a competent manager and he’s certainly been successful at PayPal.”

EBay Chief Executive John Donahoe told staff in an internal memo that Mr. Thompson’s move was a “shock.”

“Scott informed me Tuesday afternoon, saying that despite his passion for PayPal, this was an opportunity he felt he had to take,” Mr. Donahoe said.

Other analysts expressed skepticism about Mr. Thompson due to his lack of experience in Yahoo’s core business of online media advertising.

“I am not convinced that a payments executive is the right choice for a leading online media company, but it is notable that Thompson has a strong Internet and technology background, which could help Yahoo in its uphill battle to compete against stronger technology-focused enterprises,” said Colin Sebastian, an analyst at RW Baird.

Thompson said in an interview that Yahoo was in a strong position with its large user base of more than 700 million people.

“The traffic itself that these sites generate is a very big number, the collection of assets that sit below this core business I think are not well understood and clearly have tremendous opportunity to be leveraged as we look forward to the future.

Yahoo recently has been discussing slashing its stakes in China’s Alibaba Group and its Japanese affiliate as part of a share deal worth about US$17-billion, according to sources familiar with the situation.

Alibaba has also hired a Washington lobbying firm in a sign that the Chinese e-commerce company would be willing to make a bid for all of Yahoo in the event that talks to unwind their Asian partnership fail.

Analysts said one of the first tasks for a new Yahoo CEO would likely be to oversee the sale of its Asian assets.

“A CEO who’s respected in the Internet industry taking control and giving it a unified vision will be very helpful,” said Jordan Rohan, an analyst at Stifel Nicolaus. “The sale of the Asian assets is what happens first and what happens afterwards is just a question of how they deploy the cash they get from the sale.”

Yahoo Chairman Bostock said Mr. Thompson would not be distracted by decisions related to the Asian assets.

Yahoo, whose services include mail, search, news and photo-sharing, was a Web pioneer that grew rapidly in the 1990s but has been struggling to maintain its relevance and advertising revenue in the face of competition from newer rivals.

In 2008, Yahoo rejected an unsolicited takeover bid from Microsoft worth about US$44-billion. Its share price was subsequently pummeled during the global financial crisis and its current market value is about US$20-billion.

Co-founder Jerry Yang stepped down in late 2008 after being severely criticized by investors for his handling of the bid. The company cut thousands of jobs and later agreed to an advertising and search partnership with Microsoft.

© Thomson Reuters 2011

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