SAN FRANCISCO — Yahoo’s stock price rose more than 5 percent on Wednesday after the company fired its CEO following more than 2½ years of financial lethargy.
Tuesday’s ouster came as investors were convinced that Carol Bartz couldn’t steer the Internet company to a long-promised turnaround.
To fill the void, Yahoo’s board named Tim Morse, its chief financial officer, as interim CEO. Bartz, who became CEO in 2009, lured Morse away from computer chip maker Altera Corp. two years ago to help her cuts costs. Yahoo said it is looking for a permanent replacement.
Yahoo Chairman Roy Bostock, also a target of shareholder frustration, informed Bartz about the move over the phone, according to an e-mail the outgoing CEO sent from her iPad that was obtained by the All Things D technology blog. The blog first reported Bartz’s ouster.
Yahoo didn’t return requests for comment Tuesday and Wednesday.
Bartz’s rude dismissal “made you feel a little bit like you were watching some reality TV show,” Forrester Research analyst Shar VanBoskirk said Wednesday.
Macquarie Securities analyst Ben Schachter said the handling of Bartz’s departure was unseemly and a sign of even more drama to come at Yahoo.
In a research note late Tuesday, Schachter predicted there will be a wide range of conjecture about Yahoo’s future, with the most likely speculation centering on Yahoo as a takeover target during a vulnerable time.
Alternatively, Yahoo could make a bold move itself by trying to buy the online video site Hulu.com, which is already talking to suitors, or trying to sell its 43 percent stake in the Alibaba Group, one of China’s most prized Internet companies. Bartz’s tense relationship with Alibaba CEO Jack Ma had fed investor dissatisfaction about her leadership.
Youssef Squali at Jefferies & Co. said that the Internet company’s challenges, and the fact that Bartz was Yahoo’s third CEO in four years, will make it tough for the board to find an “A player” for the job.
Squali said Yahoo could be sold to a large media company like News Corp. or be bought by some sort of consortium that could feature Microsoft Corp. or AOL Inc.
“In all, we believe that it is more likely that the board reaches an agreement to sell the company or parts of the company before a new CEO is found,” Squali wrote Wednesday.
In a statement Tuesday, Yahoo said it is undergoing a “comprehensive strategic review” in its latest effort to give investors a reason to buy its stock, but the company didn’t offer details.
Bartz, 63, led an austerity campaign helped boost Yahoo’s earnings, but the company didn’t increase its revenue even as the Internet ad market grew at a rapid clip.
The financial funk, along with recent setbacks in Yahoo’s online search partnership with Microsoft Corp. and the Alibaba investment, proved to be Bartz’s downfall. Her ouster comes with 16 months left on a four-year contract that she signed in January 2009.
That contract entitles her to severance payments that could be two to three times her annual salary and bonus, along with stock incentives she received during her tenure. Bartz received a $2.2 million bonus to supplement her $1 million salary last year.
Yahoo has now replaced three CEOs in a little over four years. During that time, Yahoo has lost ground in the Internet ad race to online search leader Google Inc. and Facebook even though its website remains among the world’s most popular.
Known for her no-nonsense leadership and sometimes gruff language, Bartz arrived at Yahoo as a respected Silicon Valley executive who had won praise for turning around business software maker Autodesk Inc. But she had no experience in Internet advertising, the main way Yahoo makes money.
That hole in her resume immediately raised questions whether she was qualified for the job, and those doubts only escalated as Yahoo’s revenue continued to sag.
At first, Bartz blamed bad timing; she started the job during some of the bleakest months of the Great Recession. Later, she would say that she inherited such as mess from her two predecessors, Yahoo co-founder Jerry Yang and former movie studio boss Terry Semel, and that it would take time to get Yahoo back on the right track.
At one point, she even compared her challenge to those that faced Steve Jobs when he returned to Apple Inc. as CEO in 1997.
Unlike Jobs, Bartz never was able to articulate a strategy to win over investors.
“She focused on plugging holes in the ship instead of turning it around,” said Gartner Inc. analyst Ray Valdes.
The disappointing performance was reflected in Yahoo’s stock price, which closed Tuesday at $12.91. That’s 81 cents, or 7 percent, higher than where Yahoo shares stood when Bartz was hired as CEO. During the same period, Google’s stock price has risen by more than $200, or 66 percent, and the technology-driven Nasdaq composite index has climbed by 60 percent. A group of investors led by Goldman Sachs Group concluded privately held Facebook is worth $50 billion in an appraisal done earlier this year. That’s triple Yahoo’s current market value.
Bartz never hit any of the price targets that the board set for her when she was hired. That means none of the 5 million stock options that she received upon signing her contract had vested by the time she was ushered out the door.
Investors seemed happy to see Bartz go. On Wednesday, the Sunnyvale-based company’s stock rose 70 cents to close at $13.61.