Yahoo's future up in air after Bartz ouster

Updated at 12:12 p.m. ET, Wednesday

Shares of Yahoo (YHOO) jumped 4.3% to $13.46 Wednesday on news that the company had sacked CEO Carol Bartz.

The firing looks to have set off renewed speculation that the company will be sold or broken up. Yahoo insisted it plans to continue as a stand-alone company.

The news on Bartz was first reported on All Things Digital website and later confirmed by the company. Bartz had sent an email to her staff saying she'd been fired and wished the company well. The company confirmed her ouster and said Tim Morse, the company's chief financial officer, had been named acting CEO.

The company said in a news release that it plans to do a search for a permanent CEO as well as a strategic review "to position the company for future growth." The review will include what to do with the company's Asian assets.

In a statement, Chairman Roy Bostock said the board intends to "return the company to a path of robust growth and industry-leading innovation."

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But specific plans were not included in the statement.

A new executive team was named, and the company said co-founders Jerry Yang and David Filo will also be involved.

There was speculation, according to All Things D, that a number of players in Silicon Valley might be interested in acquiring all or part of the company.
 
Bartz, 63, had come to Yahoo in January 2009 from Autodesk (ADSK) and vowed to make sure Yahoo got "some friggin' breathing room" so the company could "kick some butt."

Investors had become dissatisfied with the stagnant growth and indirection under Yang.

Bartz's hiring was initially met with optimism by Wall Street, which saw her as a tough-talking savior who could whip the company into shape.

At the time, Yahoo had just spent a gut-wrenching year cutting jobs and fending off a takeover bid from Microsoft (MSFT). (Microsoft owns and publishes MSN Money.)

Despite her efforts, the company has continued to struggle. While the stock was up 37.5% in 2009, it fell 1% in 2010 and, with Tuesday's close of $12.91, was down 22.4% for 2011.

Yahoo has struggled in an intensely competitive advertising market against Google (GOOG), Microsoft and others. Revenue peaked at $7.2 billion in 2008 and fell in 2009 and 2010.

But online advertising revenue remains flat in an ad market that is growing quickly.

It has had problems with the performance of its display ad business. A deal to turn over its search platform to Microsoft has not been as profitable as either company had hoped. A brain drain that was ongoing before the Microsoft bid in early 2008 has continued.

Unhappiness with Bartz has been growing all year, in part because she couldn't get along with Yang. News reports said she was informed she'd been fired over the phone while traveling from Maine to New York. Yang and Bostock were reportedly getting more involved in day-to-day operations.

In addition, employees overall had become disenchanted. According to the glassdoor.com blog, Bartz's approval rate among employees was 33% this quarter and was at 24% in the second quarter. Her cumulative approval rate -- from when she started until her leaving -- was 54%. Glassdoor says the average CEO rating is 64%.

Yahoo will pay Bartz a $10.4 million severance, Bloomberg News reported.

Yahoo draws one of the largest audiences anywhere on the Web -- more than 600 million unique visitors to all its services, including its search page and media sites like news, finance and sports, The New York Times noted.

But it has been unable to significantly increase its advertising revenue. Using estimates from digital marketing firm eMarket, The Times said that Yahoo’s share of display advertising in the United States, supposedly the company’s strength, is expected to decline to 13.1% this year from 14.4% in 2010.  Meanwhile, Facebook is expected to gain market share.

Yahoo does have considerable assets. It is still the third-biggest Web portal. It has a stake in Chinese Internet business Alibaba that many believe should be sold, with the cash reinvested here at home.

But the stake in Alibaba has its own controversy. Alibaba spun off its lucrative online payments business Alipay without telling anyone, including Bartz and Yahoo. So, Bartz had to scramble to reassure investors that Yahoo would recover its investment in Alibaba.

But perhaps the most galling problem for the company has nothing to do with Bartz. It has to be that it rejected Microsoft's offer of $31 a share, or $44 billion, for the company. The stock reached as high as $29.98 in February 2008 while the talks were ongoing. Yahoo rejected the offer as too low. The stock has come nowhere near that level since.