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Yahoo names PayPal exec as its CEO

NEW YORK — Yahoo Inc. has named Scott Thompson, president of eBay Inc.’s PayPal division, as its CEO, the fourth one in less than five years for the struggling Internet company.

Scott Thompson

Yahoo, which announced its choice Wednesday, has been without a permanent CEO since early September. It fired Carol Bartz after losing patience with her attempts to turn around the company during her 2 ½ years on the job. Tim Morse, Yahoo’s chief financial officer, has been interim CEO since Bartz’s ouster.

Thompson has served as president of PayPal, eBay’s online payment service, since January 2008. He previously served as PayPal’s senior vice president and chief technology officer.

Yahoo said Thompson’s new job starts on Jan. 9. Morse will return to his CFO post.

Yahoo Chairman Roy Bostock said Thompson’s track record of building on existing resources “to reignite innovation and drive growth” is “precisely the formula we need at Yahoo.”

It will be a big task. Yahoo, which is based in Sunnyvale, Calif., has been losing ground in the fast-growing Internet advertising market to Google Inc. and Facebook Inc. for years. Mainly for this reason, its stock price has not topped $20 for the past three years.

Yahoo’s board has been reviewing a possible sale of all or part of the company since Bartz’s ouster last fall. There are several potential suitors, including China’s Alibaba Group, which may partner with private equity firms in a joint bid. Wednesday’s announcement signals that Yahoo is not looking to sell the entire company.

Bartz, too, was hired to help turn Yahoo around but she had no experience in Internet advertising — Yahoo’s main revenue source. This immediately raised doubts about her qualifications.

‘Payments and ads not the same thing’

Thompson, 54, also lacks any background in media or online advertising. He was PayPal’s chief technology officer before he became the payment service’s president four years ago. Under Thompson’s leadership, PayPal’s revenue more than doubled, rising from $1.9 billion in 2008 to an estimated $4.4 billion last year.

But Thomson will be grappling with a much different business at Yahoo, said BGC Partners analyst Colin Gillis. “Payments and ads are not the same thing,” he said.

While PayPal was extending its lead in online payment processing, Yahoo’s revenue has been dwindling at a time when advertisers have been funneling more money into the Internet. Analysts estimate Yahoo’s revenue totaled $5 billion last year, down from $7 billion in 2007. Thanks largely to cost-cutting measures imposed by Bartz, Yahoo has become more profitable. Analysts estimate Yahoo earned nearly $1.1 billion last year, up from $660 million in 2007.

But the lack of revenue growth has disappointed investors, a letdown that has been aggravated by Yahoo’s squandered opportunity to sell the entire company to Microsoft Corp. for $47.5 billion, or $33 per share, in May 2008. Microsoft withdrew that offer when Yahoo balked, and Yahoo shares haven’t traded above $20 in more than three years. Yahoo stock price stood at $15.85, down 44 cents in Wednesday’s afternoon trading.

Despite his misgivings about Thomson’s online advertising inexperience, Gillis applauded the executive for a “a good run” at PayPal.

“He’s certainly going to have an opportunity to prove himself,” he said, adding that it “remains to be seen how desirable this job was.

“Whoever steps in this role is not going to have an easy time,” Gillis said.

Yahoo’s stock fell 38 cents, or 2.3 percent, to $15.91 in morning trading following the announcement.

Shares of eBay, meanwhile, dropped $1.21, or 3.9 percent, to $30.13. Gillis, though, said Thompson’s departure won’t hurt eBay.

“PayPal is much bigger than any one individual,” he said. “Some new blood may even help reinvigorate it.”