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New Yahoo CEO arrives: why his company isn't dead yet

As former eBay executive, Scott Thompson takes the helm at Yahoo the company confronts some big strategic hurdles, but it hasn't been wiped off the Internet map just yet.

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Paul Sakuma/AP
The company logo is displayed at Yahoo headquarters in Sunnyvale, Calif., Wednesday, Jan. 4, 2012. Yahoo Inc., confirmed Wednesday, Jan. 4, 2012, it has picked PayPal chief Scott Thompson as its next CEO.
  • By Mark Trumbull Staff writer

Yahoo Inc. named a new chief executive officer Wednesday, a long-awaited step in an effort by the Internet firm to find a strategy for success in the era of Google and Facebook.
 
Scott Thompson, the incoming CEO, is moving from eBay Inc., where he headed the PayPal division for processing online payments by consumers.
 
No one thinks he'll have an easy job.

Yahoo was one of the most successful Internet firms of the 1990s, helping to redefine the word "portal" as a place where people checked e-mail, shopped, read news, and shared information online. Yahoo still does all that. The problem is that millions of people have moved on to spend more time in other parts of the Web, from Facebook to smaller niche sites.

Although Yahoo confronts some big strategic hurdles, it hasn't been wiped off the Internet map just yet. To paraphrase Mark Twain, rumors of the company's death under former CEO Carol Bartz (who was fired in September) have been exaggerated.
Here are some indicators of the state of play as Mr. Thompson takes the helm.

  • The company is still one of the largest publicly traded Internet firms around, with a $20 billion market value that puts it behind Google and eBay but ahead of AOL or the social network LinkedIn. You can look that up on a handy site called Yahoo. (But also on the site of a pesky rival named Google.) 
  • Sales have fallen since 2008, as less ad revenue rolls in from the Web traffic of Yahoo users. But the firm has found ways to boost its profit margins, so earnings haven't fallen as sharply as sales. Over the past 12 months, Yahoo has earned more than it did in any of the past five calendar years, with the exception of 2010.
  • Investors are valuing the stock at nearly 20 times earnings per share. For comparison, that "price-to-earnings ratio" is not much different from what investors have given stocks like Google and eBay.

This surely doesn't mean all is rosy. The excitement in the tech world is all about Facebook's planned initial public offering (IPO) this year. For Yahoo, many stock analysts say the best move would be to sell off the firm's various pieces (including foreign operations).

But as Thompson and Yahoo's board prepare to make vital decisions, the company can point to some progress.

In a conference call with investment analysts last fall, interim CEO Tim Morse (the chief financial officer) said Yahoo is seeking to balance "cost productivity" and "growth opportunities."

He said a revamped e-mail service has been "gaining some pretty wide acceptance," prompting users to spend more time on that activity. In essence, that's time they don't spend on Facebook or Google.

"We can still do a lot to drive page views with new and better content," Mr. Morse added.

Thompson may face a steep learning curve, since industry observers say he's not an expert on the ad-revenue business. Yahoo's stock has risen since Ms. Bartz exited last September, but was down slightly Wednesday on the news of Thompson's arrival.

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